United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
 
[  ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended: June 30, 20152016
 
OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR

[  ] 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report ___
 
For the transition period from ___ to___
 
Commission file number: 001-29190
 
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, 23 Floor,
(C1091AAQ) City of Buenos Aires, Argentina
(Address of principal executive offices)
 
Matías Gaivironsky
Chief Financial and Administrative Officer
Tel +(5411) 4323-7449 – finanzas@cresud.com.ar
Moreno 877, 24 Floor,
(C1091AAQ) City of Buenos Aires, Argentina
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 

 

 
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class    Name of each exchange on which registered
   
American Depositary Shares, each representing
ten shares of Common Stock
    
Nasdaq National Market of the
Nasdaq Stock Market
   
Common Stock, par value one Peso per share    
Nasdaq National Market of the
Nasdaq Stock Market*
 
 

 
*Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
 
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None


Cresud S.A.C.I.F. y A.
(THE “COMPANY”)
 

The number of outstanding shares of the issuer’s common stock as of June 30, 20152016 was 501,642,804.
 
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act:
 
£     Yes                      S           No
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.
 
S     Yes                      £           No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
S     Yes                      £           No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
£     Yes                      S           No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):
 
Large accelerated filer £                                                        Accelerated filer S                                           Non-accelerated filer £
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
     
U.S. GAAP  £
International Financial Reporting Standards as issued by the International Accounting Standards BoardS
Other  £
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 
£     Item 17                                £           Item 18
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
£     Yes                      S           No


 

TABLE OF CONTENTS

Cresud

 
 Page No.
  Page number
 2iii
 2iii
 2iii
 3iv
 4
1
Item 1 4
1
Item 2 4
1
Item 3 41
 41
 86
 86
 8
6
Item 4 3436
 3436
 4942
 92103
 93
104
Item 4 A 95
107
Item 5 95107
 95107
 149175
 156181
 156181
 158183
 158184
 158
184
Item 6 158184
 158184
B. Compensation 161187
 162188
D. Employees 163188
 164
189
Item 77. Major shareholders and related party transactions
A. Major Shareholders and190
B. Related Party Transactions 164191
 164
 165
 169
194
Item 8 169194
 169194
 172
199
Item 9 172199
 172199
 173200
C. Markets 173200
 174202
E. Dilution 174202
 174
202
Item 10 174202
 174202
 175202
 178206
D. EXCHANGE CONTROLS 178206
E. Taxation 183208
 188213
 188213
 188213
 188
213
Item 11 188
213
Item 12 188213
 188
 188
 188
 189
 189
214
Item 13 189
214
Item 14 189
214
Item 15 189214
 189214
 189214
 190214
 190
214
Item 1616. 190214
 190214
 190215
 190215
 191215
 191215
 192216
 192216
 193
 194
Item 17 194
Item 18 194
Item 19 195218
 

 i
1

 

 
Part III218
Item 17. Financial Statements218
Item 18. Financial Statements218
Item 19. Exhibits218
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
 
The U.S. Private Securities Litigation Reform Act of 1995 provides a “Safe Harbor”“safe harbor” for forward lookingforward-looking statements.
 
This annual report containsincludes forward-looking statements, principally under the captions “Summary”, “Item 3.D. Risk Factors”, “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects”. We have based these forward-looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:
·  

changes in general economic, business, political, legal, social or incorporates by reference statementsother conditions in Argentina or elsewhere in Latin America or in Israel or changes in developed or emerging markets
·  
changes in capital markets in general that constitute “forward-looking statements,” regardingmay affect policies or attitudes toward lending to Argentina or Argentine companies;
·  
inflation and deflation;
·  
fluctuations in prevailing interest rates;
·  
current and future government regulation;
·  
adverse legal or regulatory disputes or proceedings;
·  
fluctuations and declines in the intent, beliefvalue of Argentine public debt;
·  
political events, civil strife and armed conflicts;
·  
government intervention in the private sector, including through nationalization, expropriation, labor regulation or current expectationsother actions;
·  
restrictions on transfer of foreign currencies;
·  
competition in the shopping center sector, office or other commercial properties and related industries;
·  
potential loss of significant tenants at our directorsshopping centers, offices or other commercial properties;
·  
our ability to timely transact in the real estate market in Argentina or Israel;
·  
our ability to meet our debt obligations;
·  
shifts in consumer purchasing habits and officers with respecttrends;
·  
technological changes and our potential inability to implement new technologies;
·  
deterioration in regional, national or global businesses and economic conditions;
·  
fluctuations and declines in the exchange rate of the Peso and the NIS against other currencies;
·  
risks related to our future operating performance. Suchinvestment in Israel; and
·  
the risk factors discussed under “Item 3.D. Risk Factors”.
The words “believe”, “may”, “will”, “aim”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “forecast”, “foresee”, “understand” and similar other words identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forecasts, projections and descriptionsforward-looking statements after we distribute this annual report because of anticipated cost savingsnew information, future events or other synergies. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” variationsfactors. In light of such words,the risks and similar expressions are intended to identify suchuncertainties described above, the forward-looking statements. You should be aware that any such forward-looking statementsevents and circumstances discussed in this annual report might not occur and are not guarantees of future performance and may involve risks and uncertainties, and that actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, without limitations, the actions of competitors, future global economic conditions, market conditions, foreign exchange rates, and operating and financial risks related to managing growth and integrating acquired businesses), many of which are beyond our control. The occurrence of any such factors not currently expected by us would significantly alter the results set forth in these statements.performance.
 
Factors that could cause actual resultsAs of June 30, 2016, the Company has established two operations centers to differ materiallymanage its global business, “Operations Center in Argentina” and adversely include, but are not limited to:
changes in general economic, business or political or other conditions in Argentina or changes in general economic or business conditions in latin america; and other countries in which we have direct and/or indirect operations and/or investments.
changes in capital markets in general that may affect policies or attitudes toward lending to Argentina or Argentine companies;
inflation, changes in exchange rates or regulations applicable to currency exchanges or transfers;
our ability to integrate our business with companies and/or assets we may acquire;
unexpected developments in certain existing litigation;
current and future laws and governmental regulations applicable to our business;
increased costs;
fluctuations and reductions on the value of Argentina’s public debt;
unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms;
force majeure; and
the risk factors discussed under Item 3 (d) Risk Factors.
“Operations Center in Israel.
 
You should not place undue reliance on such statements which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we mightmay issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements after filing of this Form to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
 
CERTAIN MEASURES AND TERMS
 
As used throughout this annual report, the terms “Cresud”, “Company”, “we”, “us”, and “our” refer to Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria, together with our consolidated subsidiaries, except where we make clear that such terms refer only to the parent company.
 
References to “Tons”, “tons” or “Tns.” are to metric tons, to “kgs” are to kilograms, to “ltrs” are to liters, “Hct” are to hectares, “m2” and “square meters” are to square meters, while in the United States and certain other jurisdictions, the standard measure of area is the square foot (sq.ft). A metric ton is equal to 1,000 kilograms. A kilogram is equal to approximately 2.2 pounds. A metric ton of wheat is equal to approximately 36.74 bushels. A metric ton of corn is equal to approximately 39.37 bushels. A square meter is equal to 10.77 sq. ft. A metric ton of soybean is equal to approximately 36.74 bushels. A square meter is equal to 10.77 sq. ft. One gallon is equal to 3.7854 liter.liters. One hectare is equal to approximately 2.47 acres and 10,000 square meters. One square meter is equal to approximately 10.764 square feet. One kilogram of live weight cattle is equal to approximately 0.5 to 0.6 kilogram of carcass (meat and bones).
 
As used herein: “GLA or gross leasable area”, in the case of shopping centers, refers to the total leasable area of the property, regardless of our ownership interest in such property (excluding common areas and parking and space occupied by supermarkets, hypermarkets, gas stations and co-owners, except where specifically stated).
 
PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
 
FINANCIAL STATEMENTS
 
This annual report contains our Audited Consolidated Financial Statements as of June 30, 2016 and 2015 and 2014 and for theour fiscal years ended June 30, 2016, 2015 2014 and 20132014 (our “Audited Consolidated Financial Statements”). Our Audited Consolidated Financial Statements included elsewhere herein have been audited by Price Waterhouse & Co.Co S.R.L. City of Buenos Aires, Argentina, a member firm of PricewaterhouseCoopersPriceWaterhouseCoopers International Limited, an independent registered public accounting firm (“Price Waterhouse & Co.”), whose report is included herein.
 
iii
Pursuant to Resolution No.562/N° 562/09 issued by the Argentine Comisión Nacional de Valores(“CNV”), as subsequently amended by Resolution No. 576/10, textand further amended and restated by Resolution No. 622/13 (the “Rules of the CNV”“CNV Rules”), all listed companies in Argentina with certain exceptions (i.e. financial institutions and insurance entities) arewere required to present their Audited Consolidated Financial Statementsconsolidated financial statements for accounting periods beginning on or after January 1, 2012 in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Therefore, in 2013 we have prepared for the first time our Audited Consolidated Financial Statements under IFRS for the first time for our fiscalfinancial year ended June 30, 2013, which included comparative financial information for the year ended June 30, 2012. All IFRS issued by the IASB effective at the time of preparing the Audited Consolidated Financial Statements have been applied. The opening IFRS statement of financial position was prepared as of our transition date of July 1, 2011. All IFRS
On October 11, 2015, the Company, through its subsidiaries, obtained control of IDB Development Corporation (“IDBD”). IDBD’s fiscal year ends on December 31 each year and the Company’s fiscal year ends on June 30. IDBD’s quarterly and annual reporting follows the guidelines of Israeli accounting standards, issuedwhich means that the information is only available to IRSA after the applicable statutory periods expire. Therefore, the Company has started to consolidate IDBD’s results of operations with a three-month lag, adjusted for the effects of material transactions that may have taken place during the reported period. Hence, IDBD’s results of operations for the period beginning on October 11, 2015 (the date the Company obtained control of IDBD) through March 31, 2016, are included in the Company’s consolidated statement of comprehensive income for the fiscal year ended June 30, 2016, adjusted by such material transactions that occurred between April 1 and June 30, 2016, mainly due to the IASB effective atdecrease of the timemarket price of preparingClal’s shares and the Audited Consolidated Financial Statementsimpact of such decrease in our registration of the investment in Clal.
Given the materiality of IDBD’s results on the Company’s consolidated results, the Company had to make changes on the presentation format of its financial information for ease of analysis. The most significant change is in line with the new organizational structure, which was split into two large operations centers in Argentina and Israel. In this regard, changes have been applied.made to certain notes and tables and their respective order, classification and content, on a geographic basis and taking into consideration the significance of the Company’s global operations following IDBD’s consolidation.
 

2




As of June 30, 2016, IRSA has established two Operations Centers to manage its global business, mainly through the following companies:
 
MARKET DATA
 
Market data used throughout this annual report was derived from reports prepared by unaffiliated third-party sources. Such reports generally state that the information contained therein has been obtained from sources believed by such sources to be reliable. Certain market data which appearappears herein (including percentage amounts) may not sum due to rounding.
 
In this annual report where we refer to “Peso”, “Pesos”, or “Ps.” we mean Argentine Pesos, the lawful currency in Argentina; when we refer to “U.S. Dollars”, or “US$” we mean United States Dollars, the lawful currency of the United States of America; when we refer to “Real”, “Reals”, “Rs.” or “R$” we mean Brazilian Real, the lawful currency in the Federative Republic of Brazil; when we refer to “NIS”, we mean New Israeli Shekels, the lawful currency of Israel; and when we refer to “Central Bank” we mean the ArgentineBanco Central Bank.de la República Argentina (Argentine Central Bank).
 
Solely for the convenience of the reader, we have translated certain Peso amounts into U.S. Dollars at the offer exchange rate quoted by Banco de la Nación Argentina for June 30, 2015,2016, which was Ps. 9.08815.04 = US$ 1.00. We have also translated certain NIS amounts into U.S. dollars at the offer exchange rate for June 30, 2016 which was NIS 3.8575= US$ 1.00. We make no representation that the Peso, NIS or U.S. Dollardollar amounts actually represent or could have been or could be converted into U.S. Dollarsdollars at the rates indicated, at any particular rate or at all.
 

 

 
iv
3

 

 
Item 1.                      Identity of Directors, Senior Management and Advisers
 
This item is not applicable.
 
Item 2.                      Offer Statistics and Expected Timetable
 
This item is not applicable.
 
Item 3.                      Key Information
 
 
The following selected consolidated financial data has been derived from our Audited Consolidated Financial Statements as of the dates and for each of the periods indicated below. This information should also be read in conjunction with our Audited Consolidated Financial Statements included under Item 8. “Financial Information”, and the discussion in Item 5. “Operating and Financial Review and Prospects”.
 
The selected consolidated statements of (operations)/income and comprehensive (loss)/income data for the years ended June 30, 2016, 2015 2014, 2013 and 20122014 and the selected consolidated statements of financial position data as of June 30, 20152016 and 20142015 have been derived from our Audited Consolidated Financial Statements included in this annual report which have been audited by Price Waterhouse & Co S.R.L. City of Buenos Aires, Argentina, member of PriceWaterhouseCoopers International Limited, an independent registered public accountants’accounting firm.
 
The selectedOn October 11, 2015, we acquired, through our subsidiary IRSA, control of IDBD. In conformity with IFRS 3, IDBD’s information is included in our financial statements since the acquisition date, without affecting the information from previous years. Therefore, the consolidated statementsfinancial information for periods after the acquisition date is not comparable to previous periods. For more information see Item 5. “Operating and Financial Review and Prospects-Factors Affecting Comparability of income and comprehensive income data for the year ended June 30, 2012 and the selected consolidated statements of financial position data as of June 30, 2013, 2012 and July 1, 2011 have been derived from our Audited Consolidated Financial Statements as of June, 30, 2013 which have been audited by Price Waterhouse & Co S.R.L. and are not included herein.Results.”
 IFRS
 For the fiscal year ended June 30,
 
2016(1)
20162015201420132012
 (in millions of US$)(in millions of Ps.)
Consolidated Statements of (Operations)/Income      
       
Revenues2,35335,3845,6524,604        3,529        2,860
Costs(1,735)(26,090)(4,770)  (3,913)      (3,121)      (2,464)
Initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest1101,6601,3241,152           887           701
Changes in net realizable value of agricultural produce after harvest14208(34)       (18)             12               3
Gross Profit74211,1622,1721,825        1,307        1,100
       
Gain from disposal of investment properties731,1011,150231           178           117
Gain from disposal of farmlands-(2)55091           150             45
General and administrative expenses(149)(2,244)(618)     (533)         (346)         (321)
Selling expenses(417)(6,279)(474)     (354)         (280)         (201)
Other operating results, net(3)(44)12       (75)             98           (93)
Profit from operations2463,6942,7921,185        1,107           647
       
Share of (loss)/profit of associates and joint ventures31473(1,025)     (409)             (10)               3
Profit from operations before financing and taxation2774,1671,767776        1,097           650
       
Finance income1311,974241288           201           139
Finance cost(513)(7,719)(1,685)  (2,852)      (1,125)         (757)
Other Financial results(34)(510)155(10)             15             49
Financial results, net(416)(6,255)(1,289)(2,574)         (909)         (569)
(Loss)/Profit before income tax(139)(2,088)478  (1,798)           188             81
Income tax (expense)/benefit13197(303)389           (34)           (22)
(Loss)/Profit for the year(126)(1,891)175  (1,409)           154             59
Attributable to:      
Equity holders of the parent(69)(1,038)(250)     (1,068)           (27)           (21)
Non-controlling interest(57)(853)425     (341)           181             80
       
1
 
 
  IFRS
  For the fiscal year ended June 30,
 
2016(1)
20162015201420132012
 (in millions of US$)(in millions of Ps.)
Consolidated Statements of Comprehensive (Operations)/Income      
       
(Loss)/Profit for the year(126)(1,891)175  (1,409)           154             58
Other comprehensive income:    
Items that may be reclassified subsequently to profit or loss:      
Currency translation adjustment337(521)1,285181         (231)
Share of currency translation adjustment of joint ventures and associates accounted for using the equity method3204,81882(17)2             (3)
Share of change in the fair value of hedging instruments of associates and joint ventures accounted for using the equity method(6)(93)----
Items that may not be reclassified subsequently to profit or loss, net of income tax:      
Actuarial loss from defined benefit plans net of income taxes(3)(42)----
Other comprehensive income/(loss) for the year3144,720(439)1,268183         (234)
Total comprehensive income/(loss) for the year1882,829(264)(141)337         (176)
Attributable to:      
Equity holders of the parent(43)(646)(440)(437)66         (103)
Non-controlling interest2313,475176296271           (73)
       
  IFRS
  For the fiscal year ended June 30,
 
2016(1)
20162015201420132012
 (in millions of US$)(in millions  of Ps.)
CASH FLOW DATA      
Net cash generated from operating activities2704,055494883           648           668
Net cash generated from/(used in) investing activities5758,652872(886)           (93)         (354)
Net cash used in financing activities(299)(4,495)(1,776)(446)           (17)         (479)
 IFRS
 As of fiscal year ended June 30,
 
2016(1)
20162015201420132012
 (in millions of US$)(in millions of Ps.)
Consolidated Statements of Financial Position      
ASSETS      
Non-Current Assets      
Investment properties3,30949,7663,4753,4554,1713,455
Property, plant and equipment1,74926,3001,9772,3821,8411,873
Trading properties2974,4721301329887
Intangible assets78611,814176175219168
Biological assets45677459445303278
Investments in associates and joint ventures1,09916,5342,3892,3751,4871,501
Deferred income tax assets1101,65865385317981
Income tax credit12173160178199157
Restricted assets912945155-
Trade and other receivables2513,773427475291297
Assets held for sale2223,346----
Investment in financial assets1482,226623275254626
Derivative financial instruments18208-2518
Employee benefits-4----
Total Non-Current Assets8,038120,88010,68110,7969,1228,541
Current Assets      
Trading properties16241341211
Biological assets304551201969885
Inventories2593,900511440252253
Restricted assets50748607-1-
Income tax credit365413120529
Assets held for sale841,256-1,358--
Trade and other receivables94114,1581,7721,4381,480859
Investment in financial assets6439,67350449638672
Derivative financial instruments453303373
Cash and cash equivalents93714,0966341,0031,048472
Total Current Assets3,00045,1214,2124,9883,2891,784
       
TOTAL ASSETS11,038166,00114,89315,78412,41110,325

 
 
 As of fiscal year ended June 30,
 
2016(1)
20162015201420132012
 (in millions of US$)(in millions of Ps.) 
SHAREHOLDERS’ EQUITY      
       
Capital and Reserves Attributable to Equity Holders of the Parent     
Share capital33495495491497497
Treasury shares-771155
Inflation adjustment of share capital465646465165
Inflation adjustment of treasury shares---111
Share premium44659659773773773
Additional paid-in capital from treasury shares11613---
Cost of treasury shares--(32)(55)--
Share warrants---106106106
Cumulative translation adjustment------
Equity-settled compensation------
Changes in non-controlling interest------
Other reserve721,086548688(12)(87)
Legal reserve683-824743
Reserve for new developments---17337389
Special reserve---634696-
Reserve for the repurchase of securities--32200--
(Accumalated deficit) / Retained Earnings(90)(1,390)(806)(1,066)(27)667
Equity Attributable to equity holders of the parent701,0219801,9462,4882,559
Non-controlling interest94514,2112,5392,4892,2312,133
TOTAL SHAREHOLDERS’ EQUITY1,01515,2323,5194,4354,7194,692
       
LIABILITIES      
Non-current liabilities      
Trade and other payables1021,528264217228169
Borrowings6,23793,8085,8335,3154,1902,770
Deferred income tax liabilities5097,662151470530630
Derivative financial instruments8121270321323
Payroll and social security liabilities1215541
Provisions891,3413872217222
Employee benefits46689----
Total non-current liabilities6,992105,1706,9106,5495,0273,615
Current Liabilities      
Trade and other payables1,22618,4431,3071,004900587
Income tax liabilities416241427392118
Payroll and social security liabilities1231,856230203121104
Borrowings1,56223,4882,4672,6391,5271,187
Derivative financial instruments1014726353918
Provisions691,0415521164
Liabilities directly associated with assets classified as held for sale---807--
Total current liabilities3,03145,5994,4644,8002,6652,018
TOTAL LIABILITIES10,023150,76911,37411,3497,6925,633
       
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES11,038166,00114,89315,78412,41110,325
       
  IFRS 
  For the fiscal year ended June 30, 
  
2015(1)
  2015  2014  2013  2012 
  (in thousands of US$)  (in thousands of Ps.) 
Consolidated Statements of Income               
                
Revenues  621,898   5,651,805   4,604,011   3,528,551   2,859,849 
Costs  (524,837)  (4,769,715)  (3,914,592)  (3,120,495)  (2,464,219)
Initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest  145,703   1,324,152   1,152,653   886,744   700,946 
Changes in net realizable value of agricultural produce after harvest  (3,793)  (34,471)  (17,447)  11,756   2,720 
Gross Profit  238,971   2,171,771   1,824,625   1,306,556   1,099,296 
                     
Gain from disposal of investment properties  126,566   1,150,230   230,918   177,999   116,689 
Gain from disposal of farmlands  60,570   550,462   91,356   149,584   45,490 
General and administrative expenses  (67,982)  (617,820)  (533,939)  (346,383)  (320,677)
Selling expenses  (52,174)  (474,158)  (352,726)  (279,463)  (200,461)
Other operating results, net  1,343   12,209   (75,008)  98,068   (93,381)
Profit from operations  307,294   2,792,694   1,185,226   1,106,361   646,956 
                     
Share of (loss)/profit of associates and joint ventures  (112,783)  (1,024,972)  (408,651)  (9,818)  2,796 
Profit from operations before financing and taxation  194,511   1,767,722   776,575   1,096,543   649,752 
                     
Finance income  26,530   241,109   288,188   200,857   139,491 
Finance cost  (185,335)  (1,684,328)  (2,852,000)  (1,124,746)  (757,497)
Other Financial results  17,062   155,058   (10,586)  15,128   48,691 
Financial results, net  (141,743)  (1,288,161)  (2,574,398)  (908,761)  (569,315)
Profit/(Loss) before income tax  52,768   479,561   (1,797,823)  187,782   80,437 
Income tax (expense)/benefit  (33,379)  (303,350)  389,415   (33,519)  (21,956)
Profit/(Loss) for the year  19,329   176,211   (1,408,408)  154,263   58,481 
Attributable to:                    
Equity holders of the parent  (27,468  (249,619  (1,067,880)  (26,907)  (21,329)
Non-controlling interest  46,856   425,830   (340,528)  181,170   79,810 
                     

 
  
IFRS
 As of fiscal year ended June 30,
 
2016(1)
20162015201420132012
Other Financial Data(in US$, except for percentages, ratios and number of shares)(in Ps, except for percentages, ratios, number of shares, per share and per ADS data)
       
 
Basic net income per share (2)
(0.00)(2.83)0.23(2.15)(0.05)(0.04)
 
Diluted net income per share (3)
 (0.00)(2.83)0.21(2.15)(0.05)(0.04)
 
Basic net income per ADS (2)(4)
 (0.00)(28.30)2.30(21.50)(0.54)(0.43)
 
Diluted net income per ADS (3)(4)
(0.00)(28.30)2.10(21.50)(0.54)(0.43)
 Capital stock    33502502502502502
 Number of common shares501,642,804501,642,804501,642,804501,562,730501,562,730501,562,534
 Weighted – average number of common shares outstanding494,991,778494,991,778492,020,463496,132,488496,561,931496,561,780
 
Diluted weighted – average number of common shares (5)  
554,375,631554,375,631554,375,631558,487,656558,917,099558,916,948
 
Dividends paid (6)
 ----120120
4


 
  IFRS 
  For the fiscal year ended June 30, 
  
2015(1)
  2015  2014  2013  2012 
  (in thousands of US$)  (in thousands of Ps.) 
Consolidated Statements of Comprehensive Income               
                
Profit/(Loss) for the year  19,389   176,211   (1,408,408)  154,263   58,481 
Other comprehensive income:           
Items that may be reclassified subsequently to profit or loss:                    
Currency translation adjustment  (57,382)  (521,489)  1,284,550   180,908   (231,288)
Currency translation adjustment from associates and joint ventures  8,980   81,606   (17,409)  1,715   (3,530)
Other comprehensive (loss)/income for the year  (48,402)  (439,883)  1,267,141   182,623   (234,818)
Total comprehensive income/(loss) for the year  29,013   (263,672  (141,267)  336,886   (176,337)
Attributable to:                    
Equity holders of the parent  (48,430)  (440,130)  (436,557)  65,647   (103,268)
Non-controlling interest  19,416   176,458   295,290   271,239   (73,069)
 Dividends per share ------
 
Dividends per ADS (4)
 ------
 Depreciation and amortization 1842,769259297280233
 Capital expenditure1632,4584884361,048243
 Working capital(32)(478)(252)188624(234)
 
Gross margin (7)
0.300.300.310.320.300.31
 
Operating margin (8)
0.100.100.400.210.250.18
 
Net margin (9)
(0.05)(0.05)0.03(0.24)0.030.02
 
Ratio of current assets to current liabilities (10)
0.990.990.941.041.230.88
 
Ratio of shareholders’ equity to total liabilities (11)
0.100.100.310.390.610.83
 
Ratio of non current assets to total assets (12)
0.730.730.730.680.730.83
 
Ratio of “Return on Equity” – ROE (13)
(0.19)(0.19)0.17(0.31)0.030.01
 
  IFRS 
  As of fiscal year ended June 30, 
   2015(1)   2015   2014   2013   2012 
  (in thousands of US$)  (in thousands of Ps.) 
CASH FLOW DATA                    
Net cash generated from operating activities  54,414   494,514   883,163   648,519   668,411 
Net cash generated from/(used in) investing activities  96,161   873,910   (885,945)  (93,012)  (353,920)
Net cash used in financing activities  (195,669)  (1,778,241)  (446,249)  (17,160)  (478,941)

  IFRS 
  For the fiscal year ended June 30,  July 1, 
  
2015(1)
  2015  2014  2013  2012  2011 
  (in thousands of US$)  (in thousands of Ps.) 
Consolidated Statements of Financial Position                  
ASSETS                  
Non-Current Assets                  
Investment properties  382,368   3,474,959   3,454,616   4,171,401   3,454,677   3,544,383 
Property, plant and equipment  217,561   1,977,195   2,381,956   1,841,454   1,872,920   1,976,970 
Trading properties  14,267   129,654   132,555   97,828   86,511   74,058 
Intangible assets  19,340   175,763   175,007   218,537   168,302   173,682 
Biological assets  50,493   458,879   444,853   303,128   278,208   325,864 
Investments in associates and joint ventures  305,093   2,772,685   2,375,339   1,486,862   1,500,560   1,438,855 
Deferred income tax assets  71,763   652,186   852,642   179,228   80,674   23,914 
Income tax credit  17,656   160,457   177,547   198,871   156,892   123,854 
Restricted assets  473   4,301   50,897   54,631   -   - 
Trade and other receivables  46,960   426,777   475,349   291,430   297,169   236,787 
Investment in financial assets  68,535   622,845   275,012   253,742   626,683   426,152 
Derivative financial instruments  22,844   207,602   233   25,377   18,434   60,442 
Total Non-Current Assets  1,217,353   11,063,303   10,796,006   9,122,489   8,541,030   8,404,961 
Current Assets                        
Trading properties  363   3,300   4,596   11,689   10,529   28,443 
Biological assets  13,204   119,998   195,830   97,564   85,251   107,239 
Inventories  56,267   511,350   439,771   252,376   253,447   371,268 
Restricted assets  66,794   607,021   -   1,022   -   - 
Income tax credit  3,383   30,749   19,694   4,779   28,762   76,116 
Assets held for sale  -   -   1,357,866   -   -   - 
Trade and other receivables  195,023   1,772,373   1,438,408   1,480,314   859,302   679,426 
Investment in financial assets  55,469   504,102   495,633   385,585   72,069   62,465 
Derivative financial instruments  3,252   29,554   32,897   7,321   2,578   18,966 
Cash and cash equivalents  69,729   633,693   1,002,987   1,047,586   471,922   694,552 
Total Current Assets  463,484   4,212,140   4,987,682   3,288,236   1,783,860   2,038,475 
                         
TOTAL ASSETS  1,680,837   15,275,443   15,783,688   12,410,725   10,324,890   10,443,436 


5



                   
  IFRS 
   As of fiscal year ended June 30,  July 1, 
  
2015(1)
  2015  2014  2013  2012  2011 
  (in thousands of US$)  (in thousands of Ps.)    
SHAREHOLDERS’ EQUITY                  
                   
Capital and Reserves Attributable to Equity Holders of the Parent                
Share capital  54,443   494,777   490,997   496,562   496,562   496,562 
Treasury stock  756   6,866   10,566   5,001   5,001   5,001 
Inflation adjustment of share capital  7,101   64,530   64,047   64,773   164,561   164,561 
Inflation adjustment of treasury stock  98   895   1,378   652   1,657   1,657 
Share premium  72,564   659,464   773,079   773,079   773,079   773,079 
Additional paid-in capital from treasury stock  1,395   12,678   -   -   -   - 
Cost of treasury stock  (3,543)  (32,198)  (54,876)  -   -   - 
Share warrants  -   -   106,264   106,264   106,263   106,263 
Cumulative translation adjustment  48,756   443,096   633,607   2,284   (6,889)  - 
Equity-settled compensation  9,022   81,988   70,028   8,345   (81,939)  - 
Changes in non-controlling interest  5,921   53,806   (15,429)  (21,996)  1,833   1,012 
Legal reserve  -   -   81,616   46,835   42,922   32,293 
Reserve for new developments  -   -   17,065   337,065   389,202   320,064 
Special reserve  -   -   633,940   695,628   -   - 
Reserve for the acquisition of securities issued by the company  3,543   32,198   200,000   -   -   - 
(Accumulated deficit) / Retained Earnings  (27,076  (246,069  (1,066,428)  (26,522)  666,611   829,207 
Equity Attributable to equity holders of the parent  172,980   1,572,031   1,945,854   2,487,970   2,558,863   2,729,699 
Non-controlling interest  256,374   2,329,927   2,488,932   2,231,096   2,132,648   2,480,379 
TOTAL SHAREHOLDERS’ EQUITY  429,354   3,901,958   4,434,786   4,719,066   4,691,511   5,210,078 
                         
LIABILITIES                        
Non-current liabilities                        
Trade and other payables  29,055   264,054   216,760   228,267   168,860   155,726 
Borrowings  641,832   5,832,973   5,315,335   4,189,896   2,770,087   2,056,244 
Deferred income tax liabilities  16,581   150,691   470,045   530,263   630,011   769,941 
Derivative financial instruments  29,704   269,949   320,847   2,773   22,859   - 
Payroll and social security liabilities  609   5,539   5,041   3,984   783   635 
Provisions  42,578   386,948   220,489   71,626   22,553   14,939 
Total non-current liabilities  760,359   6,910,154   6,548,517   5,026,809   3,615,153   2,997,485 
Current Liabilities                        
Trade and other payables  143,798   1,306,835   1,004,180   899,542   586,691   580,675 
Income tax liabilities  15,665   142,361   73,429   92,182   118,041   80,242 
Payroll and social security liabilities  25,352   230,400   202,546   120,835   103,919   81,085 
Borrowings  271,350   2,466,030   2,639,491   1,527,390   1,187,082   1,479,803 
Derivative financial instruments  28,910   262,734   53,419   8,691   18,558   8,353 
Provisions  6,049   54,971   20,708   16,210   3,935   5,715 
Liabilities held for sale  -   -   806,612   -   -   - 
Total current liabilities  491,124   4,463,331   4,800,385   2,664,850   2,018,226   2,235,873 
TOTAL LIABILITIES  1,251,483   11,373,485   11,348,902   7,691,659   5,633,379   5,233,358 
                         
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES  1,680,837   15,275,443   15,783,688   12,410,725   10,324,890   10,443,436 

6



  
IFRS
As of fiscal year ended June 30
 
  
2015(1)
  2015  2014  2013  2012 
Other Financial Data (in US$, except for percentages, ratios and number of shares)  (in Ps, except for percentages, ratios, number of shares, per share and per ADS data) 
                
Basic net income per share (2)
  (0.06)  (0.51)  (2.15)  (0.05)  (0.04)
Diluted net income per share (3)
  (0.06)  (0.51)  (2.15)  (0.05)  (0.04)
Basic net income per ADS (2)(4)
  (0.56  (5.07  (21.50)  (0.54)  (0.43)
Diluted net income per ADS (3)(4)
  (0.56)  (4.50  (21.50)  (0.54)  (0.43)
Capital stock  55,199   501,643   501,563   501,563   501,563 
Number of common shares  501,642,804   501,642,804   501,562,730   501,562,730   501,562,534 
Weighted – average number of common shares outstanding  492,020,463   492,020,463   496,132,488   496,561,931   496,561,780 
Diluted weighted – average number of common shares (5)  
  554,375,631   554,375,631   558,487,656   558,917,099   558,916,948 
Dividends paid (6)
  -   -   -   120,000   120,000 
Dividends per share  -   -   -   0.24   0.24 
Dividends per ADS (4)
  -   -   -   2.42   2.42 
Depreciation and amortization  28,369   257,822   296,919   279,738   233,137 
Gross margin (7)
  0.31   0.31   0.32   0.30   0.31 
Operating margin (8)
  0.40   0.40   0.21   0.25   0.18 
Net margin (9)
  0.03   0.03   (0.24)  0.03   0.02 
Ratio of current assets to current liabilities (10)
  0.94   0.94   1.04   1.23   0.88 
Ratio of shareholders’ equity to total liabilities (11)
  0.34   0.34   0.39   0.61   0.83 
Ratio of non current assets to total assets (12)
  0.72   0.72   0.68   0.74   0.83 
Ratio of “Return on Equity” – ROE (13)
  0.04   0.04   (0.31)  0.03   0.01 

(1)Solely for the convenience of the reader, we have translated Peso amounts into U.S. Dollars at the exchange rate quoted by Banco de La Nación Argentina for June 30, 20152016 which was Ps.9.088Ps.15.04 = US$1.00. We make no representation that the Peso or U.S. Dollar amounts actually represent, could have been or could be converted into U.S. Dollars at the rates indicated, at any particular rate or at all.
(2)Basic net income per share is computed by dividing the net income available to common shareholders for the period by the weighted average common shares outstanding during the period.
(3)Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common shares assuming the total conversion of outstanding notes and exercise of outstanding options. Due to the loss for the years 2016, 2015, 2014, 2013 and 2012, there is no diluted effect on this result.
(4)Determined by multiplying per share amounts by ten (one ADS equals ten common shares).
(5)Assuming exercise of all outstanding warrants to purchase our common shares.
(6)The shareholders’ meeting held in October 2013 approved the distribution of a cash dividend for an amount of Ps.120 million for the fiscal year ended June 30, 2013.
(7)Gross profit divided by the sum of revenues and initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest.
(8)Operating income divided by the sum of revenues and initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest.
(9)Net income divided by the sum of revenues and initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest.
(10)
Current assets over current liabilities.
liabilities.
(11)
Shareholders’ equity over total liabilities.
liabilities.
(12)
Non-current assets over total assets.
assets.
(13)
Profitability refers to Income for the year divided by average Shareholders’ equity.
equity.
    
 
Exchange RatesLOCAL EXCHANGE MARKET AND EXCHANGE RATES
 
In addition toDuring 2001 and 2015, Argentine government had established a series of exchange control measures that restricted the above measures, on February 8, 2002, the Argentine Central Bank (the “Central Bank”) issued strong restrictions which required the prior authorization of the Central Bank with respect to transfersfree disposition of funds abroad forand the purposetransfer of servicing principal and/or interest payments on foreign indebtedness.
Since Octoberfunds abroad. In 2011, the Argentine government has expanded the restrictions on access to the foreign exchange market and transfers of foreign currency abroad. Through a combination of foreign exchange and tax regulations, the Argentine authorities havehad significantly curtailed access to foreign exchange by individuals and private sector entities. Current foreign exchange regulations include,entities, making it necessary, among others, the obligationother things, to obtain prior approval byfrom the Central Bank ofto enter into certain foreign exchange transactions such as payments relating to royalties, services or fees payable to related parties of Argentine companies outside Argentina (pursuant to section 3.4Argentina.
With the change of Central Bank Communication “A” 5264, issued January 3, 2012, as amendedgovernment, and supplemented),political color, in December 2015, one of the ability of individuals to purchase foreign currency, subject to the limits set forthfirst measures taken by the Argentine tax authority,government was to lift the principal restrictions that limited access to individuals to foreign exchange market. In this connection, Communication “A” 5850 of the Central Bank admitted again the possibility for legal entitiesindividuals to purchase foreign currencyhave access to create or increase portfolio investments outsidethe local market, however, up to a certain amount of money. As local economy became stable in Argentina, and limitslocal markets reopened to the net position in foreign exchange holdings of financial institutions (pursuant tocommerce, the Central Bank Communication “A” 5611, issued on August 4, 2014).2016 Communication “A” 6037 that lifted all remaining limitations. Nowadays, all individuals have unrestrictive access to the local exchange market, according to the conditions and procedures that are explained in this document.
 
The following table shows the maximum, minimum, average and closing exchange rates for each period applicable to purchases of U.S. Dollars.dollars.
 
Maximum(1)(2)
Minimum(1)(3)
Average(1)(4)
At closing(1)
Fiscal year ended June 30, 20124.50704.12504.30164.5070
Fiscal year ended June 30, 20135.36804.56504.93395.3680
Fiscal year ended June 30, 20148.08305.48506.93338.0830
Fiscal year ended June 30, 20159.03808.16308.57489.0380
Fiscal year ended June 30, 201615.75009.140012.276914.9900
April 201614.740014.000014.336714.2000
May 201614.190013.870014.072013.9410
June 201615.250013.695014.134314.9900
July 201615.100014.51014.841014.9600
August 201615.050014.610014.789914.8800
September 201615.340014.850015.066615.2600
October 2016 (through October 13, 2016)15.160015.020015.115315.0820
Source: Central Bank
(1)
Average between the offer exchange rate and the bid exchange rate according to Banco de la Nación Argentina “foreign currency exchange rate”, against Pesos.
(2)
The maximum exchange rate appearing in the table was the highest end-of-month exchange rate in the year or shorter period, as indicated.
(3)
The minimum exchange rate appearing in the table was the lowest end-of-month exchange rate in the year or shorter period, as indicated.
(4)
Average exchange rates at the end of the month.
 

Although exchange control regulations were lifted on August 2016, certain regulations regarding the registration, disbursement, payment of principal and interest and prepayments, among other exchange control measures related to foreign indebtedness, remain in place, and we cannot give you any assurance that additional exchange control regulations will not be adopted in the future. See “Risk Factors— Risks Relating to Argentina—Exchange controls and restrictions on transfers abroad and capital inflow restrictions have been limited in the past and may limit the availability of international credit.”
Exchange controls regulations currently in effect in Argentina include those described below.
Registration Requirements
A debtor must inform the Central Bank of any foreign indebtedness (financial and commercial) it incurs and must register and validate such indebtedness in accordance with Communication “A” 3602. Compliance with such information with the Central Bank is required in order to enable such debtor to purchase foreign currency in the Argentine foreign exchange market for the purpose of servicing such foreign indebtedness, among others.
In addition, all new foreign indebtedness of Argentine residents, as well as any refinancing of existing foreign debt, must provide that principal repayments thereunder are subject to a 120-day waiting period in which principal cannot be paid.
Disbursements
Pursuant to Communication “A” 5850, Argentine residents are no longer obliged to settle proceeds received from foreign indebtedness through the local exchange market.
According to Communication “A” 6037, Argentine residents will have access to the local exchange money also  at the time of repayment of principal and interests.
Principal and Interest Payments
Foreign currency necessary to pay principal and interest on foreign indebtedness, according to Communication “A” 5850 and Communication “A” 6037 can be purchased in the local exchange market.
Corporate Profits and Dividends
Pursuant to foreign exchange regulations, Argentine companies may freely access the MULC for remittances abroad to pay earnings and dividends in-so-far as they arise from closed and fully audited balance sheets and have satisfied applicable certification requirements.
Restrictions on Foreign Indebtedness
In June 2005, the Argentine government imposed certain additional restrictions on inflows and outflows of foreign currency to the Argentine foreign exchange market through Decree No. 616/2005 as amended and supplemented by Resolution 3/2015, such as:
Minimum Term of Indebtedness
Financial indebtedness incurred by Argentine residents with foreign creditors (including refinancing of existing indebtedness) must be agreed upon and cancelled within terms of no less than 120 calendar days (waiting period), whatever the form of repayment thereof. Additionally, no prepayment of such indebtedness may be made prior to the expiration of such term, irrespective of the payment method and whether or not termination entails the execution of a foreign exchange trade in the local market.
Local Bank Account
The results of inflows in the local exchange market required to be credited in an account opened by a local financial entity, which can be denominated in either local or foreign currency.
No Restrictions on Residents on the Purchase of Foreign Currency
Other Exchange Control Measures
Subject to certain conditions, Central Bank regulations allow the purchase of foreign currency in the Argentine foreign exchange market for purposes of making payments on account of financial derivatives.
The following table shows the maximum, minimum, average and closing exchange rates for each period applicable to purchases of New Israeli Shekels (NIS).
 
Maximum(1)(2)
 
Minimum(1)(3)
 
Average(1)(4)
 
At closing(1)
Fiscal year ended June 30, 20143.6213 3.4320 3.5075 3.4320
Fiscal year ended June 30, 20153.9831 3.4260 3.8064 3.7747
Fiscal year ended June 30, 20163.9604 3.7364 3.8599 3.8596
Month ended April 30, 20163.8139 3.7364 3.7722 3.7364
Month ended May 31, 20163.8869 3.7511 3.8156 3.8526
Month ended June 30, 20163.8905 3.8141 3.8558 3.8596
Month ended July 31, 20163.8875 3.8131 3.8570 3.8131
Month ended August 31, 20163.8362 3.7592 3.7946 3.7768
Month ended September 30, 20163.7853 3.7464 3.7642 3.7464
October 2016 (through October 13, 2016)3.8155 3.7464 3.7901 3.8042
Source: Bloomberg
(1)  
Average between the offer exchange rate and the bid exchange rate of the New Israeli Shekel against the U.S. dollar.
7
(2)  

The maximum exchange rate appearing in the table was the highest end-of-month exchange rate in the year or shorter period, as indicated.
(3)  
The minimum exchange rate appearing in the table was the lowest end-of-month exchange rate in the year or shorter period, as indicated.

(4)  

Average exchange rates at the end of the month.

 

  
Maximum(1)(2)
  
Minimum(1)(3)
  
Average(1)(4)
  
At closing(1)
 
Fiscal year ended June 30, 2011  4.0900   3.9110   3.9810   4.0900 
Fiscal year ended June 30, 2012  4.5070   4.0900   4.2808   4.5070 
Fiscal year ended June 30, 2013  5.3680   4.5050   4.8914   5.3680 
Fiscal year ended June 30, 2014  8.0830   5.3700   6.7657   8.0830 
Fiscal year ended June 30, 2015  9.0380   8.0850   8.5599   9.0380 
July 2015  9.1400   9.0430   9.0934   9.1400 
August 2015  9.2460   9.1450   9.1939   9.2460 
September 2015  9.3720   9.2540   9.3167   9.3720 
October 2015  9.4960   9.3800   9.4407   9.4960 
November 2015 (through Novemeber 12, 2015)  9.5650   9.5050   9.5337   9.5650 
Source: Central Bank
(1)Average between the offer exchange rate and the bid exchange rate according to Banco de la Nación Argentina “foreign currency exchange rate”.
(2)The maximum exchange rate appearing in the table was the highest end-of-month exchange rate in the year or shorter period, as indicated.
(3)The minimum exchange rate appearing in the table was the highest end-of-month exchange rate in the year or shorter period, as indicated.
(4)Average exchange rates at the end of the month.
Increases in Argentine inflation or devaluation and depreciation of the Peso could have a material adverse effect on our results.

 
This section is not applicable.
 
 
This section is not applicable.
 
 
You should carefully consider the risks described below, in addition to the other information contained in this annual report, before making an investment decision. We also may face additional risks and uncertainties that are not presentlycurrently known to us, or thatwhich as of the date of this annual report we currently deem immaterial,might not consider significant, which may adversely affect our business. In general, you take more risk when you invest in the securities of issuers in emerging markets such as Argentina than when you invest in the securities of issuers in the United States.States, and certain other markets. You should understand that an investment in our common shares and American Depositary Shares (“ADSs”) involves a high degree of risk, including the possibility of loss of your entire investment.
 
Operations Center in Argentina
Risks Relating to Argentina.Argentina
 
We depend on macroeconomic and political conditions in Argentina.
 
We are exposed to economic conditions in Argentina, considering that as of the date of this annual report, substantially all of our assets were located in Argentina and all of our activities are conducted in Argentina. The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high and variable levels of inflation and currency devaluation.devaluation, and may experience further volatility in the future.
 
During 2001 and 2002, Argentina experienced a period of severe political, economic and social crisis, which caused a significant economic contraction and led to radical changes in government policies. Among other consequences, the crisis resulted in Argentina defaulting on its foreign debt obligations, introducing emergency measures and numerous changes in economic policies that affected the utility companies and many other sectors of the economy, and suffering a significant devaluation of the Peso, which in turn caused numerous Argentine private sector debtors with foreign currency exposure to default on their outstanding debt. Although the economy has largely recovered from the crisis, during 2014, the Argentine economy has shown signs of slowdown due to the increase in the applicable exchange rates and decreases in commodity prices. The Argentine economy is suffering high inflation and has an increasing need of capital investment, with many sectors, particularly the energy sector, operating near full capacity.
Anongoing economic slowdown suggests uncertainty as to whether the economic growth experienced in the past decade may beis sustainable. This is mainly because economic growth was initially dependent on a significant devaluation of the Argentine Peso, excess production capacity resulting from a long period of deep recession and high commodity prices. Furthermore, the economy has suffered from a sustained erosion of direct investment and capital investment. After the 2001 economic crisis, Argentina recovered with significant increases in gross domestic product (“GDP”) at an average of 8.5% on an annual basis between 2003 and 2008. As a result of the 2008 global financial crisis, Argentina GDP’s growth rate decreased to 0.9% in 2009, though growth rebounded to 9.2% in 2010 and 8.9% in 2011. During 2012, the Argentine economy experienced a slowdown, with GDP increasing at a rate of 1.9%. In March 2014, the Argentine government announced a new method of calculating GDP as requested by the International Monetary Fund (“IMF”) (using 2004 as the base year instead of 1993, which was the base reference year used in the prior method of GDP calculation). Following changes in the methodology used in calculating GDP, the National Institute of Statistics (“Instituto(Instituto Nacional de EstadísticasEstadisticas y Censos”Censos or “INDEC”) as per its acronym in Spanish) reported that Argentina’s GDP’s growth rate for 2013 was 3% and, 0.5% for 2014. This2014, this decrease was principally due to the deceleration of the global economy and prevailing macroeconomic conditions in Argentina during 2014.2014, and 2.3% for 2015. As of July 31, 2015,2016, the Monthly Economic Activity Estimator (Estimador Mensual de Actividad Económica, or the “EMAE”) increased 2.7%decreased 5.9%, relative to the same period in the prior year, according to data published by the INDEC. Argentina’s relative stability since 2002 has been affected by increased social and political tension and government intervention in the economy.
 
Our business depends to a significant extent on macroeconomic and political conditions in Argentina. In early December 2015 Mr. Mauricio Macri, was elected in Argentina. The President is expected, that hindered economic worth to continue promoting legal measures to reverse some of the previous presidential administrations, especially economic policies and exchange control regulations. However, until any changes in laws and regulations are enacted, we are uncertain how any such changes may affect our business and results of operations. Deterioration of the country’s economy would likely have a significant adverse effect on our business, financial condition and results of operations.
 
Continuing inflation may have an adverse effect on the economy.
According to the INDEC, the consumer price index increased 23.9%, 10.9% and 10.8% in 2014, 2013 and 2012, respectively, and for the six months ended June 30, 2015, increased 15.0% relative to the same period in the prior year. Uncertainty surrounding future inflation rates has slowed any potential recovery in the long-term credit market. Private estimates, on average, refer to annual rates of inflation substantially in excess of those published by the INDEC.

8

In the past, inflation has materially undermined the Argentine economy and the government’s ability to foster conditions that would permit stable growth. High inflation may also undermine Argentina’s foreign competitiveness in international markets and adversely affect economic activity and employment, as well as our business and results of operation. In particular, the margin on our services is impacted by the increase in our costs in providing those services, which is influenced by wage inflation in Argentina, as well as other factors. While certain of our tenant leases include provisions that allow us to agree with our tenants to periodical increases of the lease prices, there can be no assurance that these provisions will adequately protected us against rapid inflation.
High inflation would also adversely affect economic activity, employment, real salaries, consumption and interest rates. In addition, the dilution of the positive effects of the Peso devaluation on the export-oriented sectors of the Argentine economy will decrease the level of economic activity in the country. In turn, 5% of the Argentine debt is adjusted by the Reference Stabilization Coefficient (“Coeficiente de Estabilización de Referencia” or “CER” as per its acronym in Spanish), a currency index that is strongly tied to inflation. Therefore, any significant increase in inflation would cause an increase in Argentina’s debt and, consequently, the country’s financial obligations.
The government has taken certain measures in order to control inflation, such as implementing a fair price program, by virtue of which supermarkets have to offer certain products at a government determined price, and sectorial agreements in order to implement salary increases. Additionally, the Argentine government has recently enacted Law No.26,991 (the “Supply Law”), which amends Law No.20,680, and enables the federal government to intervene in certain markets when it considers that any party to such market is trying to impose prices, or supply restrictions over such market. The Supply Law provides among others pecuniary sanctions, suspension, seizure of operations, and confiscation of goods.
If inflation remains high or continues to rise, Argentina’s economy may be negatively impacted and our business could be adversely affected.
There are concerns about the accuracy of Argentina’s official inflation statistics.
 
In January 2007, the INDEC modified its methodology usedbegan to calculate the consumer price index, which was calculated asCPI, based on the monthly average of a weighted basket of consumer goods and services that reflectsto reflect the pattern of consumption of Argentine households. At the time that the INDEC adopted this change in methodology the Argentine government also replaced several key officers at the INDEC, prompting complaints of governmental interference from the technical staff at the INDEC. In addition, the International Monetary Fund (“IMF”)IMF requested toa number of times that INDEC clarify its methodology for measuring inflation rates several times.rates.
 
On November 23, 2010, the Argentine government began consulting with the IMF for technical assistance in order to prepare a new national consumer price indexCPI data with the aim of modernizing the current statistical system. During the first quarter of 2011, a team from the IMF started working in conjunctioncollaborating with the INDEC in order to create such an index. Notwithstanding such efforts, reports published by the IMF stated that its staff also used alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, and such measures have shown inflation rates that are considerably higher than those issuedpublished by the INDEC since 2007. Consequently, the IMF called on Argentina to adopt measures to improve the quality of data used data by the INDEC. InAt a meeting held on February 1, 2013, the Executive Board of the IMF emphasized that the progress in implementing remedial measures since September 2012 has nothad been sufficient.insufficient. As a result, the IMF has issued a declaration of censure against Argentina in connection with the breach of its related obligations to the IMF and called on Argentina to adopt remedial measures to address the inaccuracy of inflation and GDP data without further delay.
 
In order to address the quality of official data, a new consumer price index denominated Urban National Consumer’s Price Index (“Indice(Indice de Precios al Consumidor Nacional urbano, or the “IPCNu”), was enacted on February 13, 2014. For the year ended December 31, 2014, the IPCNu was 23.9%. The IPCNu represents the first national indicator in Argentina to measure changes in prices of household goods for final consumption. While the previous price index only measured inflation in the Greater Buenos Aires area, the IPCNu is calculated by measuring prices of goods across the entire urban population of the 23 provinces of Argentina and the City of Buenos Aires.  The IMF declared that it was going to review later in 2014 Argentina’s reports on progress in revising its inflation and gross domestic product statistics. However, as of the date of this annual report, it is still being reviewed by the IMF. In addition, in February 2014, the INDEC released a new GDP index for 2013, equal to 3.0%, which differs from the GDP index originally released by the INDEC for the same period which was 5.5%. InOn December 15, 2014, the IMF recognized the progress of Argentine authorities to remedy the inaccurate provision of data, but has delayed the definitive evaluation of the new index. If the IMF finds that the methodology of INDEC for calculating a new national consumer price indexmeasure of CPI or GDP is inaccurate, or concludes that its methodology should be adjusted, that could result in financial and economic hazardsconsequences for Argentina, including a lack of access to financing from such organization.IMF. If thesethe IMF adopts any measures that are adopted,adverse to Argentina, the Argentine economy could suffer adverse effects, either by limiting access to international financial markets or increasing the financing cost associated therewith, which in turn would adversely affect our financial condition and results of operations.
On January 8, 2016, as a result of the INDEC’s historical inability to produce reliable statistical data, the Macri administration issued an emergency decree and ceased publication of national statistics. The INDEC suspended all publications of statistical data until the technical reorganization process was completed and the administrative structure of the INDEC was recomposed.

After this process of reorganization and recovery, the INDEC began to gradually publish official data. In this regard, on June 15, 2016, July 13, 2016, August 12, 2016, September 13, 2016 and October 13, 2016 the INDEC published inflation data of the months of in May, June, July, August and September reflecting a monthly increase of 4.2%, 3.1%, 2.0%, 0.2% and 1.1%, respectively; however, at the date hereof, the CPI for the first four months of 2016 has not been published.
In addition, on June 29, 2016, the INDEC recalculated historical GDP data dating back to 2014, and GDP was estimated at 2.3% in 2013, a contraction of 2.6% in 2014, an increase to 2.4% in 2015 and an increase to 0.5% the first six month of 2016. Uncertainty still remains regarding the reliability related to the inaccuracy of the economic indicators remains a factor that negatively affects the economy of Argentina and our business. However, on October 5, 2016, concluded the first IMF audit over the Argentine’s public accounts, saying that the new government has achieved an important progress. As of the date of this annual report, the Argentine government was waiting for the final report of the IMF, which will possibly include the lifting of the censure against Argentina.
 
Notwithstanding these measures to address appropriate inflation statistics, there are private reports implying significantly higher inflation rates than the official reports of the INDEC. Despite the changes adopted by the INDEC to the measurement procedure with the IPCNu, there are still some differences between the figures resulting from this indicator and those recorded by private consultants, the Argentine Congress and the provincial statistic agencies. If it is determined that it is necessary to unfavorably adjust the consumer price index and other INDEC indices, there could be a significant decrease in confidence in the Argentine economy, which could, in turn, have a material adverse effect on us.
 
Argentina’sContinuing high inflation may impact the Argentine economy and adversely affect our results of operations.
Inflation has, in the past, materially undermined the Argentine economy and the government’s ability to obtain financing from international markets is limited, which may impair its abilityfoster conditions that would permit stable growth. In recent years, Argentina has confronted inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors.  According to implement reforms and public policies and foster economic growth.
Argentina’s 2001 default and its failure to fully restructure its sovereign debt and negotiate withdata published by the holdout creditors has limited and may continue to limit Argentina’s ability to access international capital markets. In 2005, Argentina completedINDEC, the restructuringrate of a substantial portion of its indebtedness and settled all of its debt with the IMF. Additionally,inflation reached 10.9% in June 2010, Argentina completed the renegotiation of approximately 67% of the defaulted bonds that were not swapped9.5% in 2011, 10.8% in 2012, 10.9% in 2013, 23.9% in 2014, 11.9% in the 2005 restructuring. As a resultten-month period ended October, 31 2015. In response, the prior Argentine administration implemented programs to control inflation and monitor prices for essential goods and services, including freezing the prices of the 2005key products and 2010 debt swaps, Argentina has restructured approximately 92.4% of its defaulted debt that was eligible for restructuring. Holdout creditors that declined to participate in the exchanges commenced numerous lawsuits against Argentina in several countries, including the United States, Italy, Germany,services, and Japan. Additionally, on May 29, 2014,price support arrangements agreed between the Argentine government and representatives of the Paris Club creditors reached an agreement to clear Argentina’s debt due to the Paris Club creditors,private sector companies in arrears, in the total amount of US$9.7 billion as of April 30, 2014.several industries and markets.
 
In related cases brought beforeNovember 2015, the U.S. District Court forINDEC suspended the Southern Districtpublication of New York (the “District Court”), the plaintiffs argued that allowing Argentina to make payments under the new bonds issued pursuantCPI. According to the most recent publicly available information based on data from the Province of San Luis, the CPI grew by 31.6% in 2015 and the inflation rate was 6.5%, 4.2%, 2.7%, 3.0% and 3.4% in December 2015 and January, February, March and April 2016, respectively. According to the most recent publicly available information based on data from the City of Buenos Aires, the CPI grew by 26.9% in 2015 and the inflation rate was 3.9%, 4.1%, 4.0%, 3.3% and 6.5% in December 2015 and January, February, March and April 2016, respectively. After implementing certain methodological reforms and adjusting certain macroeconomic statistics on the basis of these reforms, in June 2016 the INDEC resumed its CPI publications. According to the INDEC, Argentina’s rate of inflation rate was 4.2%, 3.1%, 2.0%, 0.2% and 1.1% in May, June, July, August and September 2016, respectively.
A high inflation environment would undermine Argentina’s foreign competitiveness by diluting the effects of a peso devaluation, negatively impact the level of economic activity and employment and undermine confidence in Argentina’s banking system, which could further limit the availability of domestic and international credit to businesses. In turn, a portion of the Argentine debt swaps while it remainedis adjusted by the Stabilization Coefficient (“Coeficiente de Estabilización de Referencia”, or “CER”), a currency index, that is strongly related to inflation. Therefore, any significant increase in default on its pre-2002 bonds violates the pari passu clauseinflation would cause an increase in the original bondsArgentine external debt and entitlesconsequently in Argentina’s financial obligations, which could exacerbate the plaintiffs to injunctive relief barring Argentina from making paymentsstress on the new bonds without making comparable payments onArgentine economy. A high level of uncertainty and a general lack of stability in terms of inflation could also lead to shortened contractual terms and affect the original bonds. In late October 2012,ability to plan and make decisions.
Inflation rates could escalate in the U.S. Court of Appeals forfuture, and there is uncertainty regarding the Second Circuit in New York affirmed the District Court’s rulingeffects that the pari passu clausemeasures adopted, or that may be adopted in the pre-2002 bonds prevents Argentina from making payments unless it makes ratable payments to the holdout creditors at the same time. On November 21, 2012, the District Court specified that ratable payments to the holdout creditors would be the full amount owed on the bonds (including interest) and ordered Argentina to pay approximately US$1.3 billion plus interest owed to the holdout creditors’ party to such proceedings.

9

On appeal, the U.S. Court of Appeals for the Second Circuit ordered Argentina to submit a payment plan proposal for the holdout creditors, which Argentina did on March 29, 2013. On August 23, 2013, the U.S. Court of Appeals for the Second Circuit rejected Argentina’s payment proposal and affirmed the District Court’s November 21, 2012 injunctions (the “Injunction”). However, in the same ruling, the U.S. Court of Appeals for the Second Circuit stayed the enforcement of the injunctions pending the resolution by the U.S. Supreme Court of any timely petition for a writ of certiorari. In this regard, Argentina filed a petition for a writ of certiorari on June 24, 2013, which was denied as premature. Later, on February 18, 2014, Argentina and certain holders of the new bonds timely filed petitions for a writ of certiorari. On June 16, 2014, the U.S. Supreme Court denied Argentina’s petition for a writ of certiorari in connection therewith and, subsequently, on June 18, 2014, the U.S. Court of Appeals for the Second Circuit lifted its stay on the District Court’s Injunction. Separately, on June 16, 2014, the U.S. Supreme Court affirmed a District Court ruling to compel discovery from certain financial institutions concerning, among other things, Argentina’s assets.
On June 23, 2014, the District Court appointed a special master to mediate settlement negotiations between Argentina and the litigating bondholders. On June 26, 2014, the District Court denied Argentina’s request for a further stay of the Injunction. In addition, on or about June 27, 2014, Argentina transferred to The Bank of New York Mellon, in its capacity as trustee, amounts due June 30, 2014 in respect of certain of its restructured bonds. The District Court, however, prohibited such payment and ordered Argentina and the holders of its non-restructured bonds to agree on a payment schedule. Following negotiations between Argentina and the litigating bondholders, Argentina and such bondholders failed to reach an agreement in respect of its defaulted debt. By July 30, 2014, the end of the grace period provided under Argentina’s relevant restructured bonds for the payment of debt service thereunder, Argentina and the holdout creditors had not arrived on an agreement and The Bank of New York Mellon complied with the order of the District Court to not deliver the funds previously deposited by Argentina for payment to the holders of the restructured bonds under foreign law. While Argentina asserted that it complied with its obligation to the holders of the restructured bonds by making such deposit, and that the indenture trustee had the obligation to deliver such payment, on such date Standard & Poor’s Rating Services downgraded Argentina’s foreign currency credit rating to “selective default”, or “SD”, while on July 31, 2014, Fitch Ratings Inc. downgraded Argentina’s foreign currency issuer default rating to “restricted default”, or “RD”.
On September 11, 2014, the Argentine Congress enacted Law No.26,984, with the purpose of implementing legal mechanisms to allow restructured bondholders to collect payments under such bonds. Law No.26,984 established a new account in the name of Nación Fideicomisos S.A. with the Central Bank in order to make payments to restructured bondholders. Furthermore, Law No.26,984 set forth that the executive branch could implement an exchange of restructured bonds for Argentine law-governed bonds and for French law-governed bonds. As of the date of this annual report, no such mechanism has been implemented by the Argentine government. Separately, during August 2014 the Central Bank revoked The Bank of New York Mellon’s authorization to operate in Argentina. In connection with these and other actions takenfuture, by the Argentine government the District Court held Argentina in contempt on September 29, 2014.to control inflation may have. If inflation remains high or continues to rise, Argentina’s economy may be negatively impacted and our results of operations could be materially affected.
 
The District Court authorized limited exceptions to the Injunction allowing certain custodiansForeign shareholders of Argentine law-governed bonds to process paymentscompanies operating in August 2014, September 2014 and December 2014. Payments on the remaining restructured bondsArgentina have not been processed as a consequence of the Injunction and various restructured bondholdersinitiated investment arbitration proceedings against Argentina that have been seeking the release of such payments in court. As of the date of this annual report, the District Court has not authorized any other such releases or payments.
On January 2, 2015, Argentina deposited, for the benefit of the restructured bondholders, approximately US$1,000 million corresponding to the payment dated December 31, 2014. In addition, the Argentine government deposited US$539 million in Nación Fideicomisos S.A. to service interest of certain restructured bonds under foreign legislation and another amount reserved for payment to the holdouts, frozen as of the date of this annual report, as ordered by the District Court, in the accounts of Bank of New York in the Central Bank. At the date of this annual report, the consequences of the passage of the new sovereign payments law or the development and the effects of the NML Capital case could have on our business and operations are not clear.
The Argentine government successfully appealed such decision and on August 10, 2015, the U.S. Court of Appeals for the Second Circuit stated that the District Court had improperly expanded a class of bondholders who were seeking repayment following the 2002 default, stating thatthe District Court must return to a narrower definition of class, limited to those who have continuously held the eight series of bonds in question and to hold a hearing to determine the proper amount of damages.
In addition, the District Court stated in another ruling that it considers all Argentine government assets in the United States, except for diplomatic and military, as commercial assets which NML Capital could try to seize. The decision have allowed the found to request for the attachment of these assets, which have fallen specially on the Central Bank, Banco de la Nación Argentina, bank accounts of certain embassies, the Aquarius SAC-D satellite and the Frigate Libertad, among other assets. Meanwhile, Argentina’s lawyers and officials believe and argue that there are only diplomatic assets protected by sovereign immunity. In this context, the District Court ordered Argentina to provide information about assets in the United States within ten days and said that if the country holds assets which have no diplomatic or military purposes; they can be attached being considered “commercial use”.
On August 31, 2015 the Argentine government won an appeals court ruling. Such ruling denied a motion to dismiss for lack of subject matter jurisdiction filed by the Central Bank, stating that the District Court erred in: (1) imputing the Argentine government’s waiver of sovereign immunity to the Central Bank based on an alterego theory; and (2) applying the commercialactivity exception to Central Bank’s use of its account with the Federal Reserve Bank of New York. Accordingly, the U.S. Court of Appeals for the Second Circuit reversed the District Court’s order of September 26, 2013, and remands the cause with instructions to dismiss the complaint on sovereign immunity grounds.
Also, on September 16, 2015, the Argentine government won an additional appeals court ruling, which noted that defining a precise class to which Argentina owes damages for refusing to pay bondholders and calculating those damages have been "exasperating tasks," stating that “Judge Thomas P. Griesa was making it too easy for some plaintiffs by creating a class including bondholders who were not the original purchasers of the bonds”, while objective criteria may be necessary to define an ascertainable class, it cannot be the case that any objective criterion will do."
The continuation and outcome of this litigation may continue to prevent Argentina from obtaining favorable terms or interest rates when accessing international capital markets. Litigation initiated by holdout creditors or other parties may result in material judgments against the Argentine governmentresulted and could result in attachments of, or injunctions relating to, Argentina’s assets, which could have a material adverse effect on the country’s economy and affect our ability to access international financing. In addition, litigation initiated by holdouts could eventually bring Argentina to be considered in default of its obligations and cause acceleration of the existing exchange debt due to cross default clauses which could have a material adverse effect on the on the country’s economy, and consequently, our business, financial condition and results of operations.

10

Argentina is subject to litigation by foreign shareholders of Argentine companies and holders of Argentina’s defaulted bonds, which have resulted and may result in adverse judgments arbitral awards and/or injunctions against Argentina’sArgentina and its assets and, in turn, limit its financial resources.
 
Foreign shareholdersIn response to the emergency measures implemented by the Argentine government during the 2001-2002 economic crisis, a number of several Argentine companies, including public utilities, and bondholders that did not participate in the exchange offers described above, haveclaims were filed claims in excess of US$20 billion in the aggregate withbefore the International Centre for Settlement of Investment Disputes (the “ICSID”) allegingagainst Argentina. Claimants allege that the emergency measures adopted bywere inconsistent with the government differ from the justfair and equalequitable treatment standards set forth in severalvarious bilateral investment treaties toby which Argentina is a party. During 2013, Argentina agreed to settle five separate investment treaty arbitration claimswas bound at a cost of around US$500 million. the time.
As of December 31, 2014,the date of this annual report, there wereare four final awards issued by ICSID judgments outstandingtribunals against Argentina for approximatelyan aggregate total amount of US$64470.66 million plus interest and expenses. On April 9, 2015,Argentina is seeking the annulment of four additional awards for an aggregate total amount of US$831.73 million. There are six ongoing cases against Argentina before ICSID with claims totaling US$2.15 billion (including two cases with claims for amounts that are currently undetermined), and in three of these cases (with aggregate claims for US$2.08 billion) the ICSID heldtribunal has already ruled that it has jurisdiction. There are eight additional cases with claims totaling US$6.17 billion in which the parties agreed to suspend the proceedings pending settlement discussions (including the proceedings initiated by Task Force Argentina, an Italian bondholder association known as “TFA”). A successful completion of these negotiations could lead additional ICSID claimants to withdraw their claims, although Argentina can offer no assurance to this effect.
It is not certain that Argentina must paywill prevail in having any or all of those cases dismissed, or that if awards in favor of the plaintiffs are granted, that it will succeed in having those awards annulled.
Claimants have also filed claims before arbitral tribunals under the rules of the United Nations Commission on International Trade Law (“UNCITRAL”) and under the rules of the International Chamber of Commerce (“ICC”). As of the date of this annual report, there are three final awards against Argentina for an aggregate total amount of US$405246.27 million and Argentina is seeking the annulment of an additional award for US$96,509 million. There are three ongoing cases against Argentina before UNCITRAL and ICC tribunals with claims totaling US$625.08 million, including one case with a US$507.80 million claim in which the tribunal has already ruled that it has jurisdiction. There is one additional case with a claim of US$168.69 million in damages for prejudices sufferedwhich the parties agreed to suspend the proceedings pending settlement discussions.
We cannot give any assurance that Argentina will prevail in relation to the terminationhaving any or all of those cases dismissed, or that if awards in favor of the Aguas Argentinas S.A. waterplaintiffs are granted, that it will succeed in having those awards annulled.
Ongoing claims before the ICSID tribunal and waste water management concession contract in the Buenos Aires metropolitan area. Litigation, as well as ICSID and UNCITRAL claimsother arbitral tribunals could lead to new awards against the Argentine government, have resulted in material judgments and may result in new material judgments against the government, and could result in attachments of or injunctions relating to assets of Argentina, that the government intended for other uses. As a result, the Argentine government may not have all the necessary financial resources to honor its obligations, implement reforms and foster growth, which could have a material adverse effect on the country’s economy, and consequently, our business, financial condition and results of operations.capacity to access to international credit.
 
The amendment of the Central Bank’s Charter and the Convertibility Law may adversely affect the Argentine economy.
On March 22, 2012, the Argentine Congress passed Law No.26,739, which amended the charter of the Central Bank and Law No.23,298 (the “Convertibility Law”). See “Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth” above. This new law amends the objectives of the Central Bank (established in its charter) and removes certain provisions previously in force. Pursuant to the amendment, the Central Bank focuses on promoting monetary and financial stability as well as development with social equity.
A key component of the amendment of the Central Bank charter relates to the use of international reserves. Pursuant to this amendment, the Central Bank reserves may be made available to the government for the repayment of debt or to finance public expenses. During 2013, the currency reserves in U.S. Dollars held by the Argentine government in the Central Bank decreased significantly, from US$43.3 billion in 2012 to US$30.6 billion in 2013, while during 2014 the reserves increased slightly to US$31.4 billion as of December 31, 2014. The Central Bank’s stock of foreign currency reserves was US$33.9 billion as of June 30, 2015 and after the payment of the sovereign bond, BODEN 15, on October 3, 2015, the stock of foreign currency reserves was US$ 27.7 billion. This use of the Central Bank reserves for expanded purposes by the Argentine government may result in Argentina being more vulnerable to inflation or external shocks, affecting the country’s capacity to overcome the effects of an external crisis.
 
Significant fluctuation in the value of the Peso may adversely affect the Argentine economy as well as our financial performance.
The devaluation of the Peso has had a negative impact on the ability of Argentine businesses to honor their foreign currency-denominated debt, initially led to very high inflation, significantly reduced real wages, had a negative impact on businesses whose success is dependent on domestic market demand, such as utilities and the financial industry, and adversely affected the government’s ability to honor its foreign debt obligations.
 
Since the strengthening of exchange controls began in late 2011, and upon the introduction of measures that have limited access to foreign currency by private companies and individuals (such as requiring an authorization of tax authorities to access the foreign currency exchange market), the implied exchange rate, as reflected in the quotations for Argentine securities that trade in foreign markets compared to the corresponding quotations in the local market, has increased significantly over the official exchange rate. These measures were lifted on December 16, 2015. However, any reenactment of these measures may prevent or limit us from offsetting the risk derived from our exposure to the U.S. Dollardollar and, if so, we cannot predict the impact of these changes on our financial condition and results of operations.
 
If the Peso continues to devalue,depreciate, all of the negative effects on the Argentine economy related to such devaluation could reappear, with adverse consequences on our business. Moreover, it would likely result in a material adverse effect in our business as a result of the exposure to financial commitments denominated in U.S. Dollar. While certain of our office space leases are denominated in U.S. Dollars,dollars, we are only partially protected against depreciation of the Peso devaluation as payment is fixed in Pesos and there can be no assurance we will be able to maintain our U.S. Dollar-denominated leases.
 
On the other hand, a substantial increase in the value of the Peso against the U.S. Dollar also presents risks for the Argentine economy. The appreciation of the Peso against the U.S. Dollar negatively impacts the financial condition of entities whose foreign currency denominated assets exceed their foreign currency-denominated liabilities, such as us. In addition, in the short term, a significant real appreciation of the Peso would adversely affect exports. This could have a negative effect on GDP growth and employment as well as reduce the Argentine public sector’s revenues by reducing tax collection in real terms, given its current heavy reliance on taxes on exports. The appreciation of the Peso against the U.S. Dollar could have an adverse effect on the Argentine economy and our business.
 
Certain measures that may be taken by the Argentine government may adversely affect the Argentine economy and, as a result, our business and results of operations.
 
During recent years,In the past, the Argentine government has increased its direct intervention in the economy through the implementation or change of laws and regulations, such as:as, nationalizations or expropriations, among others;expropriations; restrictions on production, imports and exports; exchange and/or transfer restrictions; direct and indirect price controls; tax increases, changes in the interpretation or application of tax laws and other retroactive tax claims or challenges; cancellation of contract rights; or delays or denials of governmental approvals, among others.approvals.
 
In November 2008, the Argentine government enacted Law No.26,425No. 26,425 which provided for the nationalization of the Administradoras de Fondos de Jubilaciones y Pensiones (the “AFJPs”).Pensiones. More recently, beginning in April 2012, the Argentine government provided for the nationalization of YPF S.A. and imposed major changes to the system under which oil companies operate, principally through the enactment of Law No.26,741No. 26,741 and Decree No.1277/No. 1277/2012. In February 2014, the Argentine government and Repsol S.A. (the former principal shareholder of YPF S.A.) announced that they had reached agreement on the terms of the compensation payable to Repsol S.A. for the expropriation of the YPF S.A. shares. Such compensation totaled US$5 billion, payable by delivery of Argentine sovereign bonds with various maturities. In April 23, 2014, the agreement with Repsol S.A. was approved by the Argentine Congress and accordingly, in May 8, 2014, Repsol, S.A. received the relevant Argentine government bonds.
 
Additionally, on December 19, 2012, the Argentine government issued Decree N° 2552/No.2552/12, which, ordered the expropriation of the “Predio Rural de Palermo.” However, on January 4, 2013, the Federal Civil and Commercial Chamber granted an injunction that momentarily blocked the enforceability of Decree N° 2,552/2012; notwithstanding the foregoing on June 1, 2015, the injunction was released. On June 2, 2015, this decision was appealed, and as a result the aforementioned injunction is still effective and the effects of the Decree N° 2552/No.2552/12 remain blocked as of the date hereof. The Argentine government filed a motion to revoke the injuction which was rejected by the Federal Civil and Commercial Chamber and as a consequence the Argentine government filed an extraordinary motion with the Supreme Court, which was rejected and therefore the injunction remains effective. as of the date of this annual report the Argentine government has answered the claim and requested the registration of the litis. The court granted the registration of the litis and ordered to notify the plaintiff of the answer of the claim filed by the Argentine Government however the notification has not been resolved.received by the plaintiff. The Decree N° 2552/No.2552/12 may indirectly affect IRSA’s investment in Entertainment Holding S.A. (“EHSA”).
 
Furthermore, on May 18, 2015, IRSA waswe were notified that the Agencia de Administración de Bienes del Estado (“AABE”), revoked the concession agreement granted to itsour subsidiary Arcos del Gourmet S.A, through Resolution N° 170/No.170/2014. On June 2, 2015, IRSAwe filed before the AABE a request to declare the notification void, as certain formal proceedings required under Argentine law have not been complied by the AABE. Furthermore, IRSA intends to file shortlywe filed an administrative appeal in order to requestrequesting the dismissal of the revocation of the agreement.agreement and a lawsuit seeking to declare the Resolution No. 170/2014 void. IRSA also filed a lawsuit in order to judicially pay the monthly rental fees of the property. As of the date of this annual report, the “Distrito Arcos” shopping center continues to operate normally.

11

 
There are other recent examples of government intervention. In December 2012 and August 2013, the Argentine Congress established new regulations relating to domestic capital markets. The new regulations generally provide for increased intervention in the capital markets by the government, authorizing, for example, the CNV to appoint observers with the ability to veto the decisions of the board of directors of companies admitted to the public offering regime under certain circumstances and suspend the board of directors for a period of up to 180 days. Notwithstanding, the new government is working on an amendment to the Capital Markets Law, which will, among other things, take off the CNV the authorization to appoint observers mentioned before.
 
We cannot assure you that these or other measures that may be adopted by the Argentine government, such as expropriation, nationalization, forced renegotiation or modification of existing contracts, new taxation policies, changes in laws, regulations and policies affecting foreign trade, investment, etc., will not have a material adverse effect on the Argentine economy and, as a consequence, adversely affect our financial condition, our results of operations and the market value of our securities.
 
The Argentine presidential, congressional and certain municipal and state government elections are to bethat were held in October 2015. Uncertainty resulting from the election campaigns regarding the results of the elections, or as a result ofand November 2015 generated political uncertainty as to whether the new Argentine government, willwhich took office on December 10, 2015, would implement changes in policy or regulation maythat could adversely affect the Argentine economy. As of the date of this annual report, the Argentine government has adopted a series of economic actions and foreign exchange regulations whose effects will be seen in the coming months. The President of Argentina and itsthe Congress each have considerable power to determine governmental policies and actions that relate to the Argentine economy and, consequently, may affect our results of operations or financial condition. We can offer no assurances that the policies that may be implemented by the new Argentine government after such elections will not adversely affect our business, results of operations or financial condition.
 
The Argentine government may order salary increases to be paid to employees in the private sector, which would increase our operating costs.
 
In the past, the Argentine government has passed laws, regulations and decrees requiring companies in the private sector to maintain minimum wage levels and provide specified benefits to employees and may do so again in the future. In the aftermath of the Argentine economic crisis, employers both in the public and private sectors experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. In August 2012, the Argentine government established a 25% increase in minimum monthly salary to Ps.2,875, effective as of February 2013. The Argentine government increased the minimum monthly salary to Ps.3,300 in August 2013, to Ps.3,600 in January 2014, to Ps.4,400 in September 2014, to Ps.4,716 in January 2015, to Ps.5,588 in August 2015 and to Ps.6,060 from January 2016. Due to ongoing high levels of inflation, employers in both the public and private sectors continue to experience significant pressure from unions and their employees to increase salaries. During the first months of the year ended December 31, 2014,2016, various unions have agreed with employers’ associations on salary increases between 25%30% and 30%35%. It is possible that
In the Argentinefuture, the government could adopttake new measures mandatingrequiring salary increases and/or additional benefits for workers, and the provisionlabor force and labor unions may apply pressure for such measures. As of additional employee benefitsthe date of this annual report, the government and labor representatives were engaged in the future.negotiations to set national guidelines for salary increases during 2016. Any such measuresincrease in wage or worker benefit could have a materialresult in added costs and adverse effect on our business,reduced results of operations and financial condition.for Argentine companies, including us.
 

Property values in Argentina could decline significantly.
 
Property values are influenced by multiple factors that are beyond our control, such as a decrease in the demand for real estate properties due to a deterioration of macroeconomic conditions or an increase in supply of real estate properties that could adversely affect our current prices.the value of real estate properties. We cannot assure you that property values will increase or that they will not be reduced. Most of the properties we own are located in Argentina. As a result, a reduction in the value of properties in Argentina could materially affect our business.
 
Restrictions on transfers of foreign currency and the repatriation of capital from Argentina may impair our ability to pay dividends and distributions.
 
According to current Argentine practices the Argentine government may impose restrictions on the exchange of Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from investments in Argentina in circumstances where a serious imbalance develops in Argentina’s balance of payments or where there are reasons to foresee such an imbalance. Beginning in December 2001, the Argentine government implemented a number of monetary and foreign exchange control measures that included restrictions on the free disposition of funds deposited with banks and on the transfer of funds abroad without prior approval by the Central Bank, some of which are still in effect. AmongWith the administration of President Macri, many of the ongoing restrictions that are still in effect are those relating to the repatriation of certain funds collected in Argentina by non-Argentine residents.were lifted.
 
On January 7, 2003, the Central Bank issued communication “A” 3859, which is still in force and pursuant to which there are no limitations on company’scompanies’ ability to purchase foreign currency and transfer it outside Argentina to pay dividends, provided that those dividends arise from net earnings corresponding to approved and audited financial statements.
Although the The transfer of funds abroad by local companies in order to pay annual dividends only to foreign shareholders, based on approved and fully audited financial statements, does not require formal approval by the Central Bank,Bank.
Notwithstanding the recentabove, for many years, and as a consequence of a decrease in availability of U.S. Dollarsdollars in Argentina, has led the previous Argentine government to imposeimposed informal restrictions on certain local companies and individuals for purchasing foreign currency. These restrictions on foreign currency purchases started in October 2011 and tightened thereafter through the date of this annual report. As a result of these informal restrictions, local residents and companies may be prevented from purchasing foreign currency through the foreign exchange market (“Mercado Único y Libre de CambiosCambios” or “MULC”“Exchange Market”) for the purpose of making payments abroad, such as dividends, capital reductions, and payment for importation of goods and services. For example, local banks may request, even when not expressly required by any regulation,
Together with the prior opinionnew government administration, such restrictions and other foreign exchange control measures were lifted, towards opening Argentina’s foreign exchange market. In this sense, on December 17, 2015, Communication “A” 5850 of the Central Bank before executing any specificreestablished the possibility for non-Argentinean residents to repatriate their investment capital and, recently, Communication “A” 6037 of the Central Bank defined the new regulations that apply to the acquisition of foreign exchange transaction. In addition, other exchange controls could impair or prevent the conversion of anticipated dividends, distributions or the proceeds from any sale of equity holdings in Argentina, as the case may be, from Argentine Pesos into U.S. Dollarscurrency and the remittanceelimination of all other restrictions that impair residents and non-residents to have access to the U.S. Dollars abroad.FX market.
 
InHowever, in the future, the Argentine government or the Central Bank may impose formal restrictions to the payment of dividends abroad and established additional requirements. Any restrictions on transferring funds abroad imposed by the government could undermine our ability to pay dividends on our GDSsADSs in U.S. Dollars.
 
Also, if payments cannot be made in U.S. Dollars abroad, the repatriation of any funds collected by foreign investors in Argentine Pesos in Argentina may be subject to restrictions. From October 28, 2011, in order for a non-Argentine investor to be granted access to the MULC to purchase foreign currency with Argentine Pesos received in Argentina as a result of a stock sale, capital reduction or liquidation of an Argentine company, it is a requirement that the funds originally used for such investment, disbursement or capital contribution, as applicable, were settled through the MULC. This requirement applies only to capital contributions to local companies or foreign currency purchases of the stock of an Argentine company made from October 28, 2011 that qualify as “foreign direct investments” (i.e., represent at least 10% of the Argentine company’s capital stock). In the case of equity positions below the 10% threshold, repatriation is subject to a monthly threshold of US$0.5 million. Transfers in excess of that monthly threshold are subject to prior approval by the Central Bank. The Argentine government could adopt further restrictive measures in the future. If that were the case, a foreign shareholder, such as ourselves, may be prevented from converting the Argentine Pesos it receives in Argentina into U.S. Dollars. If the exchange rate fluctuates significantly during a time when we cannot convert the foreign currency, we may lose some or all of the value of the dividend distribution or sale proceeds.
These restrictions and requirements could adversely affect our financial condition and the results of our operations.

12

The Rural Land Law and its application.
 
On December 22, 2011, the Argentine Congress passed the Rural Land Law in order to protect the ownership and sovereignty of certain rural areas of Argentina (the “Rural Land Law”). The Rural Land Law sets limits on the ownership of rural land by foreign individuals or legal entities acting in Argentina ("Foreign Persons"), setting a maximum allowable percentage ownership for foreigners of 20%. Additionally, only 30% of the aforementioned 20% may be held by Foreign Persons of the same nationality, and from the date of enactment of the Rural Land Act, a Foreign Person may not own more than 1,000 hectares of rural land in total throughout Argentine territory. The Rural Land Law states that it will not affect any rights previously acquired by Foreign Persons.
 
For the purposes of the Rural Land Law, the definition of Foreign Person includes Argentine companies in which a percentage higher than 51% of the outstanding capital stock is owned by foreign individuals or legal entities, or lower rates if the entity meets the proportions necessary to form the social will. The following also falls within the definition of Foreign Person (among others): (a) entities controlled by a percentage greater than 25% by a foreign company, or regardless of participation when such company holds enough votes to form the social will of that company; (b) companies that issued convertible notes, where a Foreign Person may exert over 25% of the voting power necessary to form the social will; (c) transfers for trusts whose beneficiaries are Foreign Persons in a percentage higher than 25%, (d) joint ventures, holding companies and any other legal persons present or in the future, and (e) foreign legal persons under public law.
 
On February 29, 2012, Executive Branch Decree No. 274/12 was published regulating the Rural Land Law. The aforementioned decree established a deadline of 60 days to the provinces to report the total area of their departments, municipalities or political divisions equivalent discriminating rural and urban land and rural properties subject to the Rural Land Law and consequently owned by Foreign Persons. Additionally, provinces should report the complete list of foreign companies registered in their respective jurisdictions. The decree also provides that foreign holders must report their holdings within 180 days from the date of enactment of regulations in the national register of rural land.
 
In addition, on June 30, 2016, Executive Branch Decree No. 820/16 was published modifying the Executive Branch Decree No. 274/12. For the purpose of determining the ownership of the rural land, the Decree No. 820/16 defines how to compute the acquisition of rural land, when they occur as a result of transfers of share packages and how soon transfer; and solves how to estimate equivalence with respect to the core area, depending on the limits for each type of exploitation, municipality, department and province.
We cannot assure you that these or other measures, that may be adopted by the Argentine government in the future,  such as further restrictions or regulations, will not have a material adverse effect on our operations, if our access to the acquisition or holding of our actual or future properties is limited.
Exchange controls and restrictions on transfers abroad and capital inflow restrictions have been limited in the past and can be expected to continue tomay limit the availability of international credit.
 
In 2001Until December 2015, many foreign exchange restrictions and 2002, Argentinacontrols imposed exchange controls and transfer restrictions substantially limitingby the Argentine government had limited the ability of companies and individuals to retain foreign currency or make payments abroad. In June 2005,access the governmentExchange Market. On December 16, 2015, the new authorities issued Decree No.616/2005, which established additional controls on capital inflow, includingCommunication “A” 5850 of the requirement that, subjectCentral Bank, lifting most of the restrictions then in place. Among these measures, free access to limited exemptions, 30% of all funds remitted to Argentina remain deposited in a domestic financial institution for one year without earning any interest. In October 2011, new exchange controls measures that restrict foreign exchange inflows and outflows of capital were implemented, including, establishing as a requirementthe Exchange Market was granted for the repatriation of the direct investment of non-residents (purchase of shares of local companies and real estate), the inflowpurchase of foreign currency intended for general purposes, without the need for the Central Bank’s or AFIP’s previous consent, and its settlement in the MULC). This measure increases the costrequirement to deposit 30% of obtaining foreign fundscertain capital inflows into Argentina was eliminated, subsequently extended by Communication “A” 5963 and limits access to such financing.
Additionally,5964. Also, on July 12, 2012,August 8, 2016, the Central Bank issued Communication “A” 5318,6037, in which among others suspended the accessexchange regulations, including the obligation was removed substantially redefined to MULC for residents for external assets withoutjustify with documentation each change operation, the daily and monthly to operate caps were removed to internet banking and exchange freely chosen schedule to operate and Communication a specific purpose.“4805” limiting repealed was allowed conducting derivative transactions with foreign countries, risks denying coverage to many companies, especially small- and medium-seized enterprises.
 
Through resolution No.3210/2011 of
Although these recent changes in the AFIP and the Communications “A” 5239, 5240, 5242 and 5245 and its amendments of the Central Bank, the “Consultation of Exchange Operations Programme”, was established, a system by which an assessment is made at the time of each transaction, in orderforeign exchange policies tend to allow for acquiring U.S. Dollars for tourism purposes. The system analyzesfree access by companies and individuals to the transaction for consistency with each currency buyer’s tax information, and validates or invalidatesExchange Market, certain limitations remain in effect including the transaction.following:
 
In January 2014, the Central Bank established by Communication ”A” 5526 that resident individuals in the country will be able to access the local exchange market for purchases made in line with the ”buy for the possession
·  
The proceeds of foreign currency sales in the country” concept according to their income declared toExchange Market exceeding the AFIP and other quantitative parameters establishedpeso equivalent of US$2,500 per month must be credited in the framework of exchange rate policy. In this sense, the AFIP established through its General Resolution No. 3583/2014pesos in a parameter of 20% of the monthly income of the taxpayer validating the exchange transaction,checking or savings account with a minimum amount of monthly income of two minimum mobile wage and a monthly cap of US$2,000. The purchase amount that individuals can access under this provision can be found through the “Exchange Operations Consultation Program”, available on the corporate website of the AFIP.local financial institution;
 
Additionally, on May 21,
·  
It is no longer necessary that the proceeds of external indebtedness be entered or settled in the local foreign exchange market;
·  
Any external indebtedness incurred or renewed after December 17, 2015 pursuant to Communication “A” 5757,must remain in Argentina for a period of at least 120 calendar days from the Central Bank amended Communication “A” 5526, which regulates residents’ access todate the MULC forproceeds were transferred into Argentina; and
·  
Capital inflows into the acquisition oflocal foreign currency for their application to specific uses and/or purposesexchange market must be credited in local assets. The amendment permits simultaneous access to the MULC for the acquisition of foreign currency for its deposit inan account opened with a local financial institutions up to an amount agreed withinstitution.
Notwithstanding the MULC for a term no higher than 270 calendar days, deriving from the issuance of new debt securities with public offering issued by local governments and/or residents of the non-financial private sector. Such funds can only be allocated for their deposit in local financial institutions as a fixed-term deposit, or in a special account in foreign currency, which can be withdrawn only for its settlement through the MULC. These funds are exempt from the mandatory deposit of 30% imposed by Decree No.616/2005. At least 80% of residents’ foreign currency demands of residents must be coveredmeasures adopted by the funds obtained from this mechanism for specific purposes in local assets.
The Argentine government may,Macri administration, which lifted certain exchange and capital controls, in the future the Argentine government could impose additionalfurther exchange controls or restrictions on the foreign exchange market and onmovement of capital flows from and into Argentina,and/or take other measures in response to capital flight or a significant depreciation of the Peso. These restrictions may have a negative effect onpeso, which could limit our ability to access the international capital markets. Such measures could lead to political and social tensions and undermine the Argentine government’s public finances, as has occurred in the past, which could adversely affect Argentina’s economy and on our business if imposed in anprospects for economic environment where access to local capital is constrained.growth. For more information, please see "Exchange Rates“Local Exchange Market and Exchange Controls”.

13

Rates.”
 
The Argentine economy could be adversely affected by political and economic developments in other global markets.
 
FinancialArgentina’s economy is vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina’s major trading partners (including Brazil, the European Union, China and the United States) could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth. In 2015, there were declines in exports of 14% with Chile, 26% with MERCOSUR (Brazil) and 16% with NAFTA (the United States, Mexico and Canada), each as compared to 2014. Declining demand for Argentine exports could have a material adverse effect on Argentina’s economic growth. For example, the recent significant depreciation of the Brazilian and Chinese currencies and the current slowdown of their respective economies may negatively affect the Argentine economy. Moreover, the political and social instability in Brazil, which includes the recent removal of the President Dilma Rousseff from office following an impeachment vote in the Senate, may have an adversely impact on Argentine’s economy.
In addition, financial and securities markets in Argentina arehave been influenced to varying degrees, by economic and market conditions in other markets worldwide. Such was the case in 2008, when the global markets. The international scenario shows contradictory signals of global growth, as well as high financial and exchange uncertainty. Most emerging economies have been affectedeconomic crisis led to a sudden economic decline in Argentina in 2009, accompanied by the change in the U.S. monetary policy, resulting in the sharp unwinding of speculative asset positions, depreciations and increased volatility in the value of their currencies and higher interest rates. The general appreciationinflationary pressures, depreciation of the U.S. Dollar resulting frompeso and a more restrictive U.S. monetary policy contributed to the fall of the international price of raw materials, increasing the difficulties of emerging countries which are exporters of these products. There is global uncertainty about the degree of economic recoverydrop in the United States, with no substantial positive signals from other developed countriesconsumer and an increased risk of a general deceleration in developing countries, specifically China.
Moreover, the recent challenges faced by the European Union to stabilize certain of its member economies, such as Greece, have had international implications affecting the stability of global financial markets, which has hindered economies worldwide.  The Eurozone finance ministers, at a meeting held in August 2015, agreed a third bailout deal for Greece, which required the approval of several countries such as Germany, one of its main creditors.
investor confidence. Although economic conditions vary from country to country, investors’ perception of the events occurring in one country may substantially affect capital flows into other countries. International investors’ reactions to events occurring in one market sometimes demonstrate a “contagion” effect in which an entire region or class of investment is disfavored by international investors. Argentina could be adversely affected by negative economic or financial developments in other countries, which in turn may have an adverse effect on our financial condition and results of operations. Lower capital inflows and declining securities prices negatively affect the real economy of a country through higher interest rates or currency volatility. The Argentine economy was adversely impacted by the political and economic events that occurred in several emerging economies in the 1990s, including those in Mexico in 1994, the collapse of several Asian economies between 1997 and 1998, the economic crisis in Russia in 1998 and the Brazilian devaluation in January 1999.
In addition, Argentina is also affected by the economic conditions of its major trade partner, Brazil, which started to devaluate its currency in early February 2015. The Real devalued against the U.S. Dollars by approximately 46% from January 2015 to September 2015, causing the Real to suffer the steepest depreciation in over a decade in its attempt to increase exports. In addition, during September 2015, Standard & Poor’s downgraded Brazil’s credit rating to BB-plus and during October 2015, Fitch Ratings downgraded Brazil’s credit rating to 'BBB'. Moreover, Argentina may also be affected by other countries that have influence over world economic cycles, suchcycles.
The international economy is showing contradictory signals of global growth, leading to significant financial uncertainty. There is growing concern about the deceleration of growth in China in particular as well as the United States or China. Particularly, China has recently devaluatedsignificant decline in global commodity prices, particularly oil and gas. In addition, emerging market economies have been affected by the Yuan, which has adversely affected companies with a substantial exposure to that country.
recent change in the U.S. monetary policy, resulting in the unwinding of investments and increased volatility in the value of their currencies. If interest rates rise significantly in developed economies, including the United States, Argentina and other emerging market economies, including Argentina, could find it more difficult and expensive to borrow capital and refinance existing debt, which would negatively affect their economic growth. In addition, if these developing countries,There is also global uncertainty about the degree of economic recovery in the United States, with no substantial positive signals from other developed countries. Moreover, the recent challenges faced by the European Union to stabilize certain of its member economies, such as Greece, have had and may continue to have international implications affecting the stability of global financial markets, which are also Argentina’s trade partners, fall into a recession; the Argentine economy would be affected by a decrease in exports. All of these factors would have a negative impact on us, our business, operations, financial condition and prospects.has hindered economies worldwide.
 
The effecteffects of globalthe United Kingdom’s vote to exit from the European Union and its impact on economic conditions in Latin America and Argentina and, particularly, on Argentina could cause a reductionour  business, financial condition, results of operations, prospects and trading of our notes are uncertain.
On June 23, 2016, the United Kingdom voted in exportsfavor of the United Kingdom exiting the European Union.  As of the date of this annual report, the actions that the United Kingdom will take to effectively exit from the European Union or the length of such process are uncertain.  The results of the United Kingdom’s referendum have caused, and foreign direct investment, and a declineare anticipated to continue causing, volatility in national tax revenues and the inability to access to the international capitalfinancial markets, which could adversely affectmay in turn have a material adverse effect on our business, financial condition and results of operations.
 
A decline in the international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth and on our business.
 
High commodity prices have contributed significantly to the increase in Argentine exports since the third quarter of 2002 as well as in governmental revenues from export taxes (withholdings). However, this reliance on the export of certain commodities, such as soy, has made the Argentine economy more vulnerable to fluctuations in their prices. In December 2015, the new Argentine administration announced a plan to gradually reduce the exports tax payable by soy growers from January 2018 to December 2019 and eliminated export taxes on wheat, corn, sorghum and sunflower, in an attempt to encourage exports.
 
If international commodity prices decline, the Argentine government’s revenues would decrease significantly affecting Argentina’s economic activity. Accordingly, a decline in international commodity prices could adversely affect Argentina’s economy, which in turn would produce a negative impact on our financial condition and results of operations.
 
In addition, adverse weather conditions can affect the production of commodities by the agricultural sector, which account for a significant portion of Argentina’s export revenues. These circumstances would have a negative impact on the levels of government revenues, availability of foreign exchange and the government’s ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the government’s reaction. Either of these results would adversely impact Argentina’s economy growth and, therefore, our business, financial condition and results of operations.
 

Restrictions on the supply of energy could negatively affect Argentina’s economy.
 
As a result of prolonged recession, and the forced conversion into Pesos and subsequent freeze of natural gas and electricity tariffs in Argentina, there has been a lack of investment in natural gas and electricity supply and transport capacity in Argentina in recent years. At the same time, domestic demand for natural gas and electricity has increased substantially, driven by a recovery in economic conditions and the implementation of price constraints, which has prompted the government to adopt a series of measures that have resulted in industry shortages and/or costs increase. In particular, Argentina has been importing natural gas in order to compensate thefor shortages in local production. In order to pay for natural gas imports, the Argentine government has frequently used the Central Bank reserves due to the absence of incoming currencies from investment. If the government is unable to pay for the natural gas imported in order to produce electricity, business and industries may be adversely affected.
 
The Argentine government has been taking a number of measures to alleviate the short-term impact of energy shortages on residential and industrial users. If these measures prove to be insufficient, or if the investment that is required to increase natural gas production, transportation capacity and energy generation over the medium-and long-term fails to materialize on a timely basis, economic activity in Argentina could be curtailed which may have a significant adverse effect on our business.
 
As a first step of these measures, subsidies on energy tariffs were withdrawn tofrom industries and high income consumers. Additionally, since 2011, a series of rate increases and the reduction of subsidies mainly among industries and high-income consumers were implemented. In February 2016, the Argentine government revised the tariff schedule for electricity and gas rates and eliminated the subsidies for these utilities, (except for tariffs for certain economically vulnerable sectors). As a result, energy costs are expected to increase by 500% or more. By correcting tariffs, modifying the regulatory framework and reducing the federal government’s role as an active market participant, the new administration aims to correct distortions in the energy sector and stimulate investment. In July 2016, a federal court in the city of La Plata suspended the increase in gas tariffs across the Province of Buenos Aires. In addition, on August 3, 2016, a federal court in San Martin suspended the increase in gas tariffs across the country until a public hearing to discuss the electricity tariffs increase is set. The case was brought before the Supreme Court of Argentina, and on August 18, 2016, the Supreme Court of Argentina upheld the suspension of gas tariffs increase to residential customers, arguing that a tariffs increase could not be established without public hearings. A public hearing on the increase was held on September 16, 2016 and as result, the increase in gas tariffs will be increased significantly, which could substantiallyby approximately 203% in October 2016, with semi-annual increases until 2019. In relation to other services (water, transport and adversely affectelectricity), the Argentine economy, as well as our business operations and results of our transaction.government announced that other public meetings will be held in mid-October.
 
High public expenditure could result in long- lastinglong-lasting adverse consequences for the Argentine economy.
 
DuringOver the last fewseveral years, the Argentine government has substantially increased public expenditures. In 2014, public sector expenditures increased by 43% year over yearyear-over-year and the government reported a primary fiscal deficit of 0.9%. During recent years, the Argentine government has resorted to the Central Bank and to the Administración Nacional de la Seguridad Social (Federal Social Security Agency, or “ANSES”, as per its acronym in Spanish) to source part of its funding requirements.

14

In 2015, this trend continued as the primary fiscal balance showed a deficit of 5.4% as of December 31, 2015.
 
Recently, the Argentine government has begun adjusting its subsidy policies, particularly those related to energy, electricity and gas, water and public transportation. Changes in these policies could materially and adversely impact consumer purchase capacity and economic activity and may lead to an increase in prices.
 
Moreover, the primary fiscal balance could be negatively affected in the future if public expenditures continue to increase at a rate higher than revenues due toas a result of subsidies to lower-income sectors, social security benefits, financial assistance to provinces with financial problems, increased spending on public works and subsidies to the energy and transportation sectors. A further deterioration in fiscal accounts could negatively affect the government’s ability to access the long-term financial markets and could in turn result in more limited access to such markets by Argentine companies.
 
Risks Relating to Brazil
 
The Brazilian government has exercised and continues to exercise significant influence over the Brazilian economy, which combined with Brazil’s political and economic conditions may adversely affect us.
 
Our business is dependent to a large extent on the economic conditions in Brazil. From June 30, 2011 we consolidate our financial statements with our subsidiary Brasilagro-Companhia Brasileira de Propiedades Agricolas (“Brasilagro”).
 
We may be adversely affected by the following factors, as well as the Brazilian federal government'sgovernment’s response to these factors:
 
·  
economic and social instability;
economic and social instability;
·  increase in interest rates;
 
·  
·  exchange controls and restrictions on remittances abroad;
increase in interest rates;
 
·  restrictions and taxes on agricultural exports;
·  
exchange controls and restrictions on remittances abroad;
 
·  exchange rate fluctuations;
·  
restrictions and taxes on agricultural exports;
 
·  inflation;
·  
exchange rate fluctuations;
 
·  volatility and liquidity in domestic capital and credit markets;
·  
inflation;
 
·  expansion or contraction of the Brazilian economy, as measured by GDP growth rates;
·  
volatility and liquidity in domestic capital and credit markets;
 
·  allegations of corruption against political parties, elected officials or other public officials, including allegations made in relation to the Lava Jato investigation;
·  
expansion or contraction of the Brazilian economy, as measured by GDP growth rates;
 
·  government policies related to our sector;
·  
allegations of corruption against political parties, elected officials or other public officials, including allegations made in relation to the Lava Jato investigation;
 
·  
fiscal or monetary policy and amendments to tax legislation; and
government policies related to our sector;
·  other political, social and economic developments in or affecting Brazil.
 
·  
fiscal or monetary policy and amendments to tax legislation; and
·  
other political, diplomatic, social or economic developments in or affecting Brazil.
Historically, the Brazilian government has frequently intervened in the Brazilian economy and has occasionally made significant changes in economic policies and regulations, including, among others, the imposition of a tax on foreign capital entering Brazil (IOF tax), changes in monetary, fiscal and tax policies, currency devaluations, capital controls and limits on imports. The administration is currently facing domestic pressure to retreat from the current macroeconomic policies in an attempt to achieve higher rates of economic growth. In addition, the federal government is proposing the creation of a tax on financial transactions, including wire transfers, (the so-called “CPMF”) in order to improve the fiscal situation of the country. Weimports.We cannot predict which policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or our business or financial performance.
 

The Brazilian economy has been experiencing a slowdown – GDP growth rates were 7.5%, 3.9%, 1.8%, 2.7%, and 0.1%, in 2010, 2011, 2012, 2013, and 2014, respectively, and GDP decreased 1.9%decrease 3.8% in 2015, and 4.6% in the first six months of 2015. Inflation,2016. In addition, inflation, unemployment and interest rates have increased more recently and the Brazilian Real has weakened significantly in comparison to the U.S. Dollar. The market expectations for the years 2015 and 2016 is that the Brazilian economy will continue to slow down and GDP will decrease.recently. Our results of operations and financial condition may be adversely affected by the economic conditions in Brazil.
 
In addition to the recent economic crisis, protests, strikes and corruption scandals, including the “Lava Jato” investigation, has led to a fall in confidence and a political crisis. There is strong popular pressureAs a result of the Lava Jato, a number of senior politicians, including congressmen, and several legalexecutive officers of some of the major state-owned companies in Brazil have resigned or been arrested while others are being investigated for allegations of unethical and administrative proceedings forillegal conduct. The matters that have come, and may continue to come, to light as a result of, or in connection with, the Lava Jato operation and other similar operations have adversely affected, and we expect that they will continue to adversely affect, the Brazilian economy, markets and trading prices of securities issued by Brazilian issuers in the near future.
On August 31, 2016, the Senate approved the impeachment of Dilma Rousseff, and the Brazilian President and/or revocation ofVice-President Michel Temer took office. On September 12, 2016, the mandates or resignation of the Brazilian President and/or the Headformer Speaker of the House of Representatives, Eduardo Cunha, had his mandate revoked the House and lost his political rights for eight years. The new President intends to implement some reforms, including in the labor laws and social security systems, and some other measures to achieve higher rates of economic growth and employment. We cannot predict which have led to uncertainties. The political crisis could worsenpolicies will be adopted by the economic conditionsBrazilian government and whether these policies will negatively affect the economy or Brasilagro’s business or results of its operations. In addition, we cannot predict whether the new government may become involved in Brazil,corruption scandals or may face an increasing lack of support from Brazilian citizens, both of which may adversely affectmake it more difficult to implement new policies and increase the political and economic instability in Brazil. Such increase in instability or the new policies to be implemented by the new government (or the failure to implement them) may have an adverse effect in the Brazilian economy and in our results of operations and financial conditions.performance.
 
The economic and political crisis have resulted in the downgrading of the country’s long-term credit rating from Standard & Poor's rating agency from BBB + to BBB-, placing Brazil back to speculative investment grade level ("junk"). Moody's downgraded Brazil from "Baa2" to "Baa3" and changed the negative perspective to stable, while Fitch Ratings downgraded Brazil from BBB to BBB- and changed the perspective from stable to negative. Both Moody’s and Fitch still consider Brazil investment grade. Further downgrading of Brazil’s ratings by any of these agencies may adversely affect us and the stock price of our securities.
 
Inflation, coupled with the Brazilian government’s measures to fight inflation, may hinder Brazilian economic growth and increase interest rates, which could have a material adverse effect on us.
 
Brazil has in the past experienced significantly high rates of inflation. As a result, the Brazilian government adopted monetary policies that resulted in Brazilian interest rates being among the highest in the world. The Brazilian Central Bank’s Monetary Policy Committee (Comitê de Política Monetária do Banco Central, or “COPOM”, as per its acronym in Portuguese), establishes an official interest rate target for the Brazilian financial system based on the level of economic growth, inflation rate and other economic indicators in Brazil. Between 2004 and 2010, the official Brazilian interest rate varied from 19.75% to 8.75% per year. In response to an increase in inflation in 2010, the Brazilian government increased the official Brazilian interest rate, the SELIC rate, which was 10.75% per year on December 31, 2010. The SELIC rate has increased since then and, as of June 30, 2015,2016, it was 13.75%14.15% per year. The inflation rates, as measured by the General Market Price Index (Índice Geral de Preços-Mercado or “IGP-M”, as per its acronym in Portuguese), and calculated by Fundação Getúlio Vargas, or “FGV”, were 7.8% in 2012, 5.5% in 2013, and 3.67% in 2014.2014 and 10,54% in 2015. Cumulative inflation in the first six months of 2015,2016, calculated by the same index, was 4.33%5.91%.
 
Inflation and the government measures to fight inflation have had and may continue to have significant effects on the Brazilian economy and our business. In addition, the Brazilian government’s measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and slowing economic growth. On the other hand, an easing of monetary policies of the Brazilian government may trigger increases in inflation. In the event of an increase in inflation, we may not be able to adjust our daily rates to offset the effects of inflation on our cost structure, which may materially and adversely affect us.
 
An increase in interest rates may have a significant adverse effect on us. In addition, as of June 30, 2015,2016, certain of our loans were subject to interest rate fluctuations such as the Brazilian long-term interest rate (Taxa de Juros de Longo Prazo or “TJLP”, as per its acronym in Portuguese), and the interbank deposit rate (Certificados de Depósitos Interbancários or “CDI”, as per its acronym in Portuguese). In the event of an abrupt increase in interest rates, our ability to comply with our financial obligations may be materially and adversely affected.
 

15

The Brazilian Real is subject to depreciation and exchange rate volatility which could adversely affect Brasilagro’s and our financial condition and results of operations.
 
Brazil’s rate of inflation and the government’s actions to combat inflation have also affected the exchange rate between the Real and the U.S. Dollar. As a result of inflationary pressures, the Brazilian currency has been devalued periodically during the last four decades. Throughout this period, the Brazilian federal government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic devaluations (during which the frequency of adjustments has ranged from daily to monthly), floating exchange rate systems, exchange controls and dual exchange rate markets. During 2009 and 2010 the Real appreciated 24.9% and 4.6%, respectively, against the U.S. Dollar. As a contrast, during 2012 and 2013 the Real depreciated 13.3%, 9.6% and 15.5%, respectively, against the U.S. Dollar. In February, 2014, Brazilian Government started to devaluate its currency, causing the Real to suffer the steepest depreciation in over a decade in its attempt to increase exports. Between January 20152016 and September 2015August  2016 the Real depreciated 46% appreciated 19.8%%.There can be no assurance that the rate of exchange between the Real and the U.S. Dollar will not fluctuate significantly in the future. In the event of a devaluation of the Real,, the financial condition and results of operations of our Brazilian subsidiary could be adversely affected. In addition, during September 2015, Standard & Poor’s downgraded Brazil’s credit rating to BB-plus and during October 2015, Fitch Ratings downgraded Brazil’s credit rating to ‘BBB-BBB-, which triggers funds that target investment-grade countries to sell its holdings in Brazil. As of October 2015,August 2016, the Bovespa has dropped 40%increased 71,25% in U.S. Dollars terms during the year.
 
Depreciation of the Real relative to the U.S. Dollar may increase the cost of servicing foreign currency-denominated debt that our subsidiary may incur in the future, which could adversely affect our financial condition and results of operations. In addition, depreciation of the Real creates additional inflationary pressures in Brazil that may adversely affect our results of operations. Depreciation generally curtails access to international capital markets and may prompt government intervention. It also reduces the U.S. Dollar value of Brasilagro’s revenues, distributions and dividends, and the U.S. Dollar equivalent of the market price of our common shares. On the other hand, the appreciation of the Real against the U.S. Dollar may lead to the deterioration of Brazil’s public accounts and balance of payments, as well as to lower economic growth from exports, which could impact the results of our subsidiary Brasilagro.

A deterioration in general economic and market conditions or in perceptions of risk in other countries, principally in emerging countries or the United States, may have a negative impact on the Brazilian economy and us.
 
Economic and market conditions in other countries, including United States, Latin American and other emerging market countries, may affect the Brazilian economy and the market for securities issued by Brazilian companies. Although economic conditions in these countries may differ significantly from those in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crises in other emerging market countries could dampen investor enthusiasm for securities of Brazilian issuers, including ours, which could adversely affect the market price of our common shares. In the past, the adverse development of economic conditions in emerging markets resulted in a significant flow of funds out of the country and a decrease in the quantity of foreign capital invested in Brazil. Changes in the prices of securities of public companies, lack of available credit, reductions in spending, general slowdown of the global economy, exchange rate instability and inflationary pressure may adversely affect, directly or indirectly, the Brazilian economy and securities market. The recent global economic downturn and related instability in the international financial system have had, and may continue to have, a negative effect on economic growth in Brazil. The ongoing global economic downturn has reduced the availability of liquidity and credit to fund the continuation and expansion of business operations worldwide. The recent substantial losses in worldwide equity markets, including in Brazil, could lead to an extended worldwide economic recession or depression.
 
In addition, the Brazilian economy is affected by international economic and market conditions generally, especially economic conditions in the United States. Share prices on BM&FBOVESPA, for example, have historically been sensitive to fluctuations in U.S. interest rates and the behavior of the major U.S. stock indexes. An increase in the interest rates in other countries, especially the United States, may reduce global liquidity and investors’ interest in the Brazilian capital markets, adversely affecting the price of our common shares.
 
The Brazilian government imposes certain restrictions on currency conversions and remittances abroad which could affect the timing and amount of any dividend or other payment we receive.
 
Brazilian law guarantees foreign shareholders of Brazilian companies the right to repatriate their invested capital and to receive all dividends in foreign currency provided that their investment is registered with the Banco Central do Brazil. We registered our investment in Brasilagro with the Brazilian Central Bank on April 28, 2006. Although dividend payments related to profits obtained subsequent to January 1, 1996 are not subject to income tax, if the sum of repatriated capital and invested capital exceeds the investment amount registered with the Brazilian Central Bank, repatriated capital is subject to a capital gains tax of 15%. There can be no assurance that the Brazilian government will not impose additional restrictions or modify existing regulations that would have an adverse effect on an investor’s ability to repatriate funds from Brazil nor can there be any assurance of the timing or duration of such restrictions, if imposed in the future.
 
Widespread uncertainties, corruption and fraud relating to ownership of real estate may adversely affect our business.
 
There are widespread uncertainties, corruption and fraud relating to title ownership of real estate assets in Brazil. In Brazil, ownership of real property is conveyed through filing of deeds before the relevant land registry. In certain cases, land registry recording errors, including duplicate and/or fraudulent entries, and deed challenges frequently occur, leading to judicial actions. Disputes over title ownership of real estate assets are frequent, and, as a result, there is a risk that errors, fraud or challenges could adversely affect us, causing the loss of all or substantially all of our properties.
 
In addition, our land may be subject to expropriation by the Brazilian government. An expropriation could materially impair the normal use of our lands or have a material adverse effect on our results of operations. In addition, social movements, such as Movimento dos Trabalhadores Rurais Sem Terra and Comissão Pastoral da Terraand the Argentinean Rural Land Law, among others, are active in Brazil. Such movements advocate land reform and mandatory property redistribution by the government. Land invasions and occupations of rural areas by a large number of individuals is common practice for these movements, and, in certain areas, including some of those in which we are likely to invest, police protection and effective eviction proceedings are not available to land owners. As a result, we cannot give you any assurance that Brasilagro properties will not be subject to invasion or occupation by these groups. A land invasion or occupation could materially impair the normal use of Brasilagro lands or have a material adverse effect on us or the value of our common shares or ADSs.
 
The lack of efficient transportation, and adequate storage or handling facilities in certain of the regions in which Brasilagro operates may have a material adverse effect on our business.
 
One of the principal disadvantages of the agriculture industry in some of the regions where Brasilagro operates is that they are located far from major ports (in some cases, up to 1,500 kilometers). Efficient access to transportation infrastructure and ports is critical to profitability in the agricultural industry. However, as part of our business strategy, we intend to acquire and develop land in specific areas where existing transportation is poor. A substantial portion of agricultural production in certain of the regions where we operate is currently transported by truck, a means of transportation significantly more expensive than the rail transportation available to the U.S. and other foreign countries. As a result, we may be unable to provide cost-efficient production to our potential most important markets, and this could have an adverse effect on our business and results of our operations.
 
Risks Relating to Our Region
 
Our business is dependent on economic conditions in the countries where we operate or intend to operate.
 
We have made investments in farmland in Argentina, Brazil, Paraguay and Bolivia and we may possibly make investments in other countries in and outside Latin America. Owing that demand for livestock and agricultural products is usually correlated to economic conditions prevailing in the local market, which in turn is dependent on the macroeconomic condition of the country in which the market is located, our financial condition and results of operations are, to a considerable extent, dependent upon political and economic conditions prevailing from time to time in the countries where we operate. Latin American countries have historically experienced uneven periods of economic growth, as well as recession, periods of high inflation and economic instability. Certain countries have experienced severe economic crises, which may still have future effects. As a result, governments may not have the necessary financial resources to implement reforms and foster growth. Any of these adverse economic conditions could have a material adverse effect on our business.
 
We face the risk of political and economic crises, instability, terrorism, civil strife, expropriation and other risks of doing business in emerging markets.
 
In addition to Argentina and Brazil, we conduct or intend to conduct our operations in other Latin-American countries such as, Paraguay and Bolivia, among others. Economic and political developments in the countries in which we operate, including future economic changes or crisis (such as inflation or recession), government deadlock, political instability, terrorism, civil strife, changes in laws and regulations, expropriation or nationalization of property, and exchange controls could adversely affect our business, financial condition and results of operations.
 

16

Although economic conditions in one country may differ significantly from another country, we cannot assure that events in one only country will not adversely affect our business or the market value of, or market for, our common shares and/or ADSs.

 
Governments in the countries where we operate or intend to operate exercise significant influence over their economies.
 
Emerging market governments, including governments in the countries where we operate, frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations. Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition, results of operations and prospects may be adversely affected by changes in government policies or regulations, including factors, such as:
 
exchange rates and exchange control policies;
inflation rates;
interest rates;
tariff and inflation control policies;
import duties on information technology equipment;
liquidity of domestic capital and lending markets;
electricity rationing;
tax policies; and
other political, diplomatic, social and economic developments in or affecting the countries where we intend to operate.
 
An eventual reduction of foreign investment in any of the countries where we operate may have a negative impact on such country’s economy, affecting interest rates and the ability of companies to access financial markets.
 
Local currencies used in the conduct of our business are subject to exchange rate volatility and exchange controls.
 
The currencies of many Latin American countries have experienced substantial volatility in recent years. Currency movements, as well as higher interest rates, have materially and adversely affected the economies of many Latin American countries, including countries in which account for or are expected to account for a significant portion of our revenues. The depreciation of local currencies creates inflationary pressures that may have an adverse effect on us generally, and may restrict access to international capital markets. On the other hand, the appreciation of local currencies against the U.S. Dollar may lead to deterioration in the balance of payments of the countries where we operate, as well as to a lower economic growth.
 
In addition, we may be subject to exchange control regulations in these Latin American countries which might restrict our ability to convert local currencies into U.S. Dollars.
 
Inflation and certain government measures to curb inflation may have adverse effects on the economies of the countries where we operate or intend to operate our business and our operations.
 
Most countries where we operate or intend to operate, historically, experienced high inflation rates. Inflation and some measures implemented to curb inflation have had significant negative effects on the economies of latin american countries. Governmental actions taken in an effort to curb inflation, coupled with speculation about possible future actions, have contributed to economic uncertainty at times in most latin american countries. The countries where we operate or intend to operate may experience high levels of inflation in the future that could lead to further government intervention in the economy, including the introduction of government policies that could adversely affect our results of operations. In addition, if any of these countries experience high rates of inflation, we may not be able to adjust the price of our services sufficiently to offset the effects of inflation on our cost structures. A high inflation environment would also have negative effects on the level of economic activity and employment and adversely affect our business and results of operations.
 
Developments in other markets may affect the Latin American countries where we operate or intend to operate, and as a result our financial condition and results of operations may be adversely affected.
 
The market value of securities of companies such as us may be, to varying degrees, affected by economic and market conditions in other global markets. Although economic conditions vary from country to country, investors’ perception of the events occurring in one country may substantially affect capital flows into and securities from issuers in other countries, including latin american countries. Various Latin American economies have been adversely impacted by the political and economic events that occurred in several emerging economies in recent times. Furthermore, Latin American economies may be affected by events in developed economies which are trading partners or that impact the global economy and adversely affect our activities and the results of our operations.
 
Land in Latin American countries may be subject to expropriation or occupation.
 
Our land may be subject to expropriation by the governments of the countries where we operate and intend to operate. An expropriation could materially impair the normal use of our lands or have a material adverse effect on our results of operations. In addition, social movements, such as Movimento dos Trabalhadores Rurais Sem Terra and Comissão Pastoral da Terra in Brazil, are active in certain countries where we operate or intend to operate. Such movements advocate land reform and mandatory property redistribution by governments. Invasions and occupations of rural areas by a large number of individuals is common practice for these movements, and, in certain areas, including some of those in which we are likely to invest, police protection and effective eviction proceedings are not available to land owners. As a result, we cannot assure you that our properties will not be subject to invasion or occupation. A land invasion or occupation could materially affect the normal use of our properties or have a material adverse effect on us or the value of our common shares and our ADSs.
 
We may invest in countries other than Argentina and Brazil and cannot give you any assurance as to the countries in which we will ultimately invest, and we could fail to list all risk factors for each possible country.
 
We have a broad and opportunistic business strategy therefore we may invest in countries other than Argentina and Brazil including countries in other emerging markets outside latin america (e.g., Africa). As a result, it is not possible at this time to identify all risk factors that may affect our future operations and the value of our common shares and ADSs.
 

17


Risks Relating to Our Business.Business
 
Fluctuation in market prices for our agriculture products could adversely affect our financial condition and results of operations.
 
Prices for cereals, oilseeds and by-products, like those of other commodities, can be expected to fluctuate significantly. The prices that we are able to obtain for our agriculture products depend on many factors beyond our control, including:
 
prevailing world prices, which historically have been subject to significant fluctuations over relatively short periods of time, depending on worldwide demand and supply;
changes in the agricultural subsidy levels in certain important countries (mainly the United States and countries in the European Union) and the adoption of other government policies affecting industry market conditions and prices; and
demand for and supply of competing commodities and substitutes.
 
Our financial condition and results of operations could be materially and adversely affected if the prices of our agricultural products decline.
 
Unpredictable weather conditions may have an adverse impact on our crop yields and cattle production.
 
The occurrence of severe adverse weather conditions, especially droughts, hail, or floods, is unpredictable and may have a potentially devastating impact upon our crop production and, to a lesser extent, our cattle and wool production. The occurrence of severe adverse weather conditions may reduce yields on our farmlands or require us to increase our level of investment to maintain yields.
 
According to the United States Department of Agriculture (“USDA”) estimates, Argentina’s crops output (wheat, corn and soybean) for the 2015/20162016/2017 season areis expected to dropincrese by 8,312.3%, reaching a production of 108 million tons, as compared to the previous cycle. TheyThe forecast a reductionshows mainly an increase in the planted area, with a focus on wheat and corn, which is additionally enhanced by a general decrease in theslightly better expected yieldsyield in comparison with the 2014/2015 campaign, which shown all-time high yields for corn and soybean.2015/2016 campaign. The estimated production of soybean is supposed to reach 57 million tons, the wheat production 10.514.4 million tons and the corn production 2436.5 million tons.
 
We cannot assure you that the current and future severe adverse weather conditions will not adversely affect our operating results and financial condition.
 
Diseases may strike our crops without warning potentially destroying some or all of our yields.
 
The occurrence and effect of crop disease and pestilence can be unpredictable and devastating to crops, potentially destroying all or a substantial portion of the affected harvests. Even when only a portion of the crop is damaged, our results of operations could be adversely affected because all or a substantial portion of the production costs for the entire crop have been duly incurred. Although some crop diseases are treatable, the cost of treatment is high, and we cannot assure that such events in the future will not adversely affect our operating results and financial condition.
 
Our cattle are subject to diseases.
 
Diseases among our cattle herds, such as tuberculosis, brucellosis and foot-and-mouth disease, can have an adverse effect on milk production and fattening, rendering cows unable to produce milk or meat for human consumption. Outbreaks of cattle diseases may also result in the closure of certain important markets, such as the United States, to our cattle products. Although we abide by national veterinary health guidelines, which include laboratory analyses and vaccination, to control diseases among the herds, especially foot-and-mouth disease, we cannot assure that future outbreaks of cattle diseases will not occur. A future outbreak of diseases among our cattle herds may adversely affect our cattle and milk sales which could adversely affect our operating results and financial condition.
 
We may be exposed to material losses due to volatile crop prices since a significant portion of our production is not hedged, and exposed to crop price risk.
 
Due to the fact that we do not have all of our crops hedged, we are unable to have minimum price guarantees for all of our production and are therefore exposed to significant risks associated with the level and volatility of crop prices. We are subject to fluctuations in crop prices which could result in receiving a lower price for our crops than our production cost. We are also subject to exchange rate risks related to our crops that are hedged, because our futures and options positions are valued in U.S. Dollars, and thus are subject to exchange rate risk.
 
In addition, if severe weather or any other disaster generates a lower crop production than the position already sold in the market, we may suffer material losses in the repurchase of the sold contracts.
 
The creation of new export taxes may have an adverse impact on our sales and results of operations.
 
In order to prevent inflation and variations in the exchange rate from adversely affecting prices of primary and manufactured products (including agricultural products), and to increase tax collections and reduce Argentina’s fiscal deficit, the Argentine government has imposed new taxes on exports. Pursuant to Resolution No. 11/02 of the Ministry of Economy and Production, as amended by Resolution No. 35/02, No. 160/2002, No. 307/2002 and No. 530/2002, effective as of March 5, 2002, the Argentine government imposed a 20%, 10% and 5% export tax on primary and manufactured products. On November 12, 2005, pursuant to Resolution No. 653/2005, the Ministry of Economy and Production increased the tax on cattle exports from 5% to 10%, and on January 2007 increased the tax on soybean exports from 23.5% to 27.5%. Pursuant to Resolutions No. 368/07 and No. 369/07 both dated November 12, 2007, the Ministry of Economy and Production further increased the tax on soybean exports from 27.5% to 35.0% and also the tax on wheat and corn exports from 20.0% to 28.0% and from 20.0% to 25.0%, respectively. In early March 2008, the Argentine government introduced a regime of sliding –scale export tariffs for oilseed, grains and by-products, where the withholding rate (in percentage) would increase to the same extent as the crops’ price. Therefore, it imposed an average tax for soybean exports of 46%, compared to the previous fixed rate of 35%. In addition, the tax on exports of wheat was increased, from a fixed rate of 28% to an average variable rate of 38%, and the tax on exports of corn changed from a fixed rate of 25% to an average variable rate of 36%. This tariff regime, which according to farmers effectively sets a maximum price for their crops, sparked widespread strikes and protests by farmers whose exports have been one of the principal driving forces behind Argentina’s recent growth. In April 2008, as a result of the export tariff regime, farmers staged a 21-day strike in which, among other things, roadblocks were set up throughout the country, triggering Argentina’s most significant political crisis in five years. These protests disrupted transport and economic activity, which led to food shortages, a surge in inflation and a drop in export registrations. Finally, the federal executive branch decided to send the new regime of sliding-scale export tariffs to the federal congress for its approval. The project was approved in the lower chamber of the national congress but rejected by the Senate. Subsequently, the federal government abrogated the regime of sliding-scale export tariffs and reinstated the previous scheme of fixed withholdings.
 

18

In December 2015, the government of Mauricio Macri announced the reduction of 35 to 30% of export duties on soybean and the removing of all of the export duties for the rest of the products. To the date, the Argentine government is analyzing the possibility of reducing again the tax for soybean exports.
 
Export taxes may have a material adverse effect on our sales and results of operations. We produce exportable goods and, therefore, an increase in export taxes is likely to result in a decrease in our products’ price, and, therefore, may result in a decrease of our sales. We cannot guarantee the impact of those or any other future measures that might be adopted by the Argentine government on our financial condition and result of operations.
 

An international credit crisis could have a negative impact on our major customers which in turn could materially adversely affect our results of operations and liquidity.
 
The most recent international credit crisis that started in 2008 had a significant negative impact on businesses around the world. Although we believe that available borrowing capacity under the current conditions and proceeds resulting from potential farmland sales will provide us with sufficient liquidity through the current economic environment, the impact of the crisis on our major customers cannot be predicted and may be quite severe. A disruption in the ability of our significant customers to access liquidity could cause serious disruptions or an overall deterioration of their businesses which could lead to a reduction in their future orders of our products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material adverse effect on our results of operations and liquidity.
 
Government intervention in the markets may have a direct impact on our prices.
 
The Argentine government has set certain industry market conditions and prices in the past. In order to prevent a substantial increase in the price of basic products as a result of inflation, the Argentine government is adopting an interventionist policy. In March 2002, the Argentine government fixed the price for milk after a conflict among producers and the government. Since 2005, the Argentine government, in order to increase the domestic availability of beef and reduce domestic prices, adopted several measures: it increased turnover tax and established a minimum average number of animals to be slaughtered. In March 2006, the registries for beef exports were temporarily suspended. This last measure was softened once prices decreased. There can be no assurance that the Argentine government will not interfere in other areas by setting prices or regulating other market conditions. Accordingly, we cannot assure you that we will be able to freely negotiate all our products’ prices in the future or that the prices or other market conditions that the Argentine government could impose will allow us to freely negotiate the price of our products.
 
We do not maintain insurance over all our crop storage facilities; therefore, if a fire or other disaster damages some or all of our harvest, we will not be completely covered.
 
We store a significant portion of our grain production during harvest due to the seasonal drop in prices that normally occurs at that time. Currently, we store a significant portion of our grain production in plastic silos. We do not maintain insurance on our plastic silos. Although our plastic silos are placed in several different locations, and it is unlikely that a natural disaster affects all of them simultaneously, a fire or other natural disaster which damages the stored grain, particularly if such event occurs shortly after harvesting, could have an adverse effect on our operating results and financial condition.
 
Worldwide competition in the markets for our products could adversely affect our business and results of operations.
 
We experience substantial worldwide competition in each of our markets in which we operate, and in many of our product lines. The market for cereals, oil seeds and by-products is highly competitive and also sensitive to changes in industry capacity, producer inventories and cyclical changes in the world’s economies, any of which may significantly affect the selling prices of our products and thereby our profitability. Argentina is more competitive in the oilseed market than in the market for cereals. Due to the fact that many of our products are agricultural commodities, they compete in the international markets almost exclusively on the basis of price. Many other producers of these products are larger than us, and have greater financial and other resources. Moreover, many other producers receive subsidies from their respective countries while we do not receive any such subsidies from the Argentine government. These subsidies may allow producers from other countries to produce at lower costs than us and/or endure periods of low prices and operating losses for longer periods than we can. Any increased competitive pressure with respect to our products could materially and adversely affect our financial condition and results of operations.
 
Social movements may affect the use of our agricultural properties or cause damage to them.
 
Social movements such as the Landless Rural Workers’ Movement (Movimento dos Trabalhadores Rurais Sem Terra) and the Pastoral Land Commission (Comissão Pastoral da Terra) are active in Brazil and advocate land reform and property redistribution by the Brazilian government. Invasion and occupation of agricultural land by large numbers of people is a common practice among the members of such movements and, in certain regions, including those where we currently invest, remedies such as police protection or eviction procedures are inadequate or non-existent. As a result, we cannot assure you that our agricultural properties will not be subject to invasion or occupation by any social movement. Any invasion or occupation may materially impair the use of our lands and adversely affect our business, financial condition, and results of operations.
 
If we are unable to maintain our relationships with our customers, particularly with the single customer who purchases our entire raw milk production each month, our business may be adversely affected.
 
Our cattle sales are diversified, notwithstanding the aforementioned, we are and will continue to be significantly dependent on a number of third party relationships, mainly with our customers for crop and milk sales. During the fiscal year 2015,2016, we sold our products to approximately 300850 customers. Sales of agricultural products to our ten largest customers represented approximately 48%72% of our net sales for the fiscal year ended June 30, 2015.2016. During fiscal year 2015,2016, our biggest three customers were ETH Biotecnología, Mastellone Hnos. S.A.Bunge Argentina S. A., Cargill S.A.C.I. and Molinos Río de la Plata S.A.,Vicentin S.A.I.C. which represented, in the aggregate, approximately 27%31% of our net sales in agricultural products, while the remaining seven customers in the aggregate represented approximately 21%41% of our net sales in the fiscal year 2015.
In addition, we currently sell our entire raw milk production to one customer in Argentina, Mastellone Hnos. S.A. For the year ended June 30, 2015, these sales represented approximately 3% of our agricultural business revenues. We cannot assure you that this customer will continue to purchase our entire raw milk production in the future or that, if it fails to do so, we could enter into satisfactory sale arrangements with new purchasers in the future.2016.
 
We sell our crop production mainly to exporters and manufacturers that process the raw materials to produce meal and oil, products that are sent to the export markets. The Argentine crop market is characterized by a few purchasers and a great number of sellers. Although most of the purchasers are international companies with strong financial conditions, we cannot assure you that this situation will remain the same in the future or this market will not get more concentrated in the future.
 
We may not be able to maintain or form new relationships with customers or others who provide products and services that are important to our business. Accordingly, we cannot assure you that our existing or prospective relationships will result in sustained business or the generation of significant revenues.
 

19

Our business is seasonal, and our revenues may fluctuate significantly depending on the growing cycle.
 
Our agricultural business is highly seasonal due to its nature and cycle. The harvest and sale of crops (corn, soybean and sunflower) generally occurs from February to June. Wheat is harvested from December to January. Our operations and sales are affected by the growing cycle of the crops we process and by decreases during the summer in the price of the cattle we fatten. As a result, our results of operations have varied significantly from period to period, and are likely to continue to vary, due to seasonal factors.

 
The restrictions imposed on our subsidiaries’ dividend payments may adversely affect us.
 
We have subsidiaries, and therefore, dividends in cash and other permitted payments of our subsidiaries constitute a major source of our income. The debt agreements of our subsidiaries contain covenants that may restrict their ability to pay dividends or proceed with other types of distributions. If our subsidiaries are prevented from making payments to us or if they are only allowed to pay limited amounts, we may be unable to pay dividends or to repay our indebtedness.
 
Our principal shareholder has the ability to direct our business and affairs, and its interests could conflict with ours.
 
As of June 30, 2015,2016, Mr. Eduardo S. Elsztain, is the beneficial owner of 37.4%30.88% (on a fully diluted basis) of our common shares. As a result of his significant influence over us, Mr. Elsztain, by virtue of his position in IFISA, has been able to elect a majority of the members of our board of directors, direct our management and determine the result of substantially all resolutions that require shareholders’ approval, including fundamental corporate transactions and our payment of dividends by us.
 
The interests of our principal shareholder and management may differ from, and could conflict with, those of our other shareholders. Pursuant to a consulting agreement we pay a management fee equal to 10% of our annual net income to Consultores Asset Management S.A., formerly known as Dolphin Fund Management S.A. (“Consultores Asset Management”), a company whose capital stock is 85% owned by Mr. Eduardo S. Elsztain and the remaining by Saúl Zang, our vice-chairman. This performance based fee could be viewed as an incentive for Consultores Asset Management to favor riskier or more speculative investments than would otherwise be the case. In addition, as of June 30, 20152016 Mr. Elsztain was the beneficial owner, due to his indirect shareholding through us of 64.3%63.38% of IRSA (without considering treasury shares), an Argentine company that currently owns approximately 95.8%94.61% of the common shares of its subsidiary IRSA Commercial Properties whose chief executive officer is Mr. Alejandro G. Elsztain, Mr. Eduardo S. Elsztain’s brother. We cannot assure you that our principal shareholders will not cause us to forego business opportunities that their affiliates may pursue or to pursue other opportunities that may not be in our interest, all of which may adversely affect our business, results of operations and financial condition and the value of our common shares and the ADSs
We could be adversely affected by our investment in IRSA if its value declines.
Our investment in IRSA is exposed to the common risks generally inherent in investments in the real estate industry, many of which are outside IRSA’s control. Any of these risks could adversely and materially affect IRSA’s businesses, financial position and/or results of operations. Any available returns on capital expenditures associated with real estate are dependent upon sales volumes and/or revenues from leases and the expenses incurred. In addition, there are other factors that may adversely affect the performance and the value of a property, including the local economic conditions prevailing in the area where the property is located, macroeconomic conditions in Argentina and in the rest of the world, competition from other companies engaged in real estate development, IRSA’s ability to find lessees, non-performance by lessees and/or lease terminations, changes in legislation and in governmental regulations (including those governing the use of the properties, urban planning and real estate taxes), variations in interest rates (including the risk of an increase in interest rates causing a reduction in the sales of lots in properties intended for residential development) and the availability of funding. In addition, and given the relative illiquidity of the real estate market, IRSA could be unable to effectively respond to adverse market conditions and/or be compelled to undersell one or more of its properties. Broadly speaking, some significant expenses, such as debt services, real estate taxes and operating and maintenance costs do not fall when there are circumstances that reduce the revenues from an investment.
These factors and/or events could impair IRSA’s ability to respond to adverse changes in the returns on its investments thus causing a significant reduction in its financial position and/or the results of its operations, which could have an adverse effect on our financial position and the results of our operations.ADSs.
 
We could be materially and adversely affected by our investment in Brasilagro.
 
We consolidated our financial statements with our subsidiary Brasilagro. Brasilagro was formed on September 23, 2005 to exploit opportunities in the Brazilian agricultural sector. Brasilagro seeks to acquire and develop future properties to produce a diversified range of agricultural products (which may include sugarcane, grains, cotton, forestry products and livestock). Brasilagro is a startup company that has been operating since 2006. As a result, it has a developing business strategy and limited track record. Brasilagro’s business strategy may not be successful, and if not successful, Brasilagro may be unable to successfully modify its strategy. Brasilagro’s ability to implement its proposed business strategy may be materially and adversely affected by many known and unknown factors. If we were to write-off our investments in Brasilagro, this would likely materially and adversely affect our business. As of June 30, 2015,2016, we owned 39.76% of the outstanding common shares of Brasilagro.
 
We are subject to extensive environmental regulation.
 
Our activities are subject to a wide set of federal, state and local laws and regulations relating to the protection of the environment, which impose various environmental obligations. Obligations include compulsory maintenance of certain preserved areas in our properties, management of pesticides and associated hazardous waste and the acquisition of permits for water use. Our proposed business is likely to involve the handling and use of hazardous materials that may cause the emission of certain regulated substances. In addition, the storage and processing of our products may create hazardous conditions. We could be exposed to criminal and administrative penalties, in addition to the obligation to remedy the adverse effects of our operations on the environment and to indemnify third parties for damages, including the payment of penalties for non-compliance with these laws and regulations. Since environmental laws and their enforcement are becoming more stringent in Argentina, our capital expenditures and expenses for environmental compliance may substantially increase in the future. In addition, due to the possibility of future regulatory or other developments, the amount and timing of environmental-related capital expenditures and expenses may vary substantially from those currently anticipated. The cost of compliance with environmental regulation may result in reductions of other strategic investments which may consequently decrease our profits. Any material unforeseen environmental costs may have a material adverse effect on our business, results of operations, financial condition or prospects.
 
As of June 30, 2015,2016, we owned land reserves extending over more than 352,928365,306 hectares that were purchased at very attractive prices. In addition, we have a concession over 109,014107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farmlands and, therefore, achieve appreciation in the long term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to be used for production purposes.
 
Increased energy prices and fuel shortages could adversely affect our operations.

20

 
We require substantial amounts of fuel oil and other resources for our harvest activities and transport of our agricultural products. We rely upon third parties for our supply of the energy resources consumed in our operations. The prices for and availability of energy resources may be subject to change or curtailment, respectively, due to, among other things, new laws or regulations, imposition of new taxes or tariffs, interruptions in production by suppliers, worldwide price levels and market conditions. The prices of various sources of energy may increase significantly from current levels. An increase in energy prices could materially adversely affect our results of operations and financial condition.
 
We depend on our chairman and senior management.
 
Our success depends, to a significant extent, on the continued employment of Mr. Eduardo S. Elsztain, our chairman, and Alejandro G. Elsztain, our chief executive officer, and second vice-chairman. The loss of their services for any reason could have a material adverse effect on our business. If our current principal shareholders were to lose their influence on the management of our business, our principal executive officers could resign or be removed from office.
 
Our future success also depends in part upon our ability to attract and retain other highly qualified personnel. We cannot assure you that we will be successful in hiring or retaining qualified personnel, or that any of our personnel will remain employed by us.
 
The Investment Company Act may limit our future activities.
 
Under Section 3(a)(3) of the Investment Company Act of 1940, as amended, an investment company is defined in relevant part to include any company that owns or proposes to acquire investment securities that have a value exceeding 40% of such company’s unconsolidated total assets (exclusive of U.S. government securities and cash items). Investments in minority interests of related entities as well as majority interests in consolidated subsidiaries which themselves are investment companies are included within the definition of “investment securities” for purposes of the 40% limit under the Investment Company Act.

 
Companies that are investment companies within the meaning of the Investment Company Act, and that do not qualify for an exemption from the provisions, are required to register with the Securities and Exchange Commission and are subject to substantial regulations with respect to capital structure, operations, transactions with affiliates and other matters. In the event such companies do not register under the Investment Company Act, they may not, among other things, conduct public offerings of their securities in the United States or engage in interstate commerce in the United States. Moreover, even if we desired to register with the Securities and Exchange Commission as an investment company, we could not do so without an order of the Commission because we are a non-U.S. corporation, and it is unlikely that the Securities and Exchange Commission would issue such an order.
 
In recent years we made a significant investment in the capital stock of IRSA. As of June 30, 2015,2016, we owned approximately 64.3%63.38% of IRSA’s outstanding shares. Although we believe we are not an “investment company” for purposes of the Investment Company Act, our belief is subject to substantial uncertainty, and we cannot give you any assurance that we would not be determined to be an “investment company” under the Investment Company Act. As a result, the uncertainty regarding our status under the Investment Company Act may adversely affect our ability to offer and sell securities in the United States or to U.S. persons. The U.S. capital markets have historically been an important source of funding for us, and our ability to obtain financing in the future may be adversely affected by a lack of access to the U.S. markets. If an exemption under the Investment Company Act is unavailable to us in the future and we desire to access the U.S. capital markets, our only recourse would be to file an application to the SEC for an exemption from the provisions of the Investment Company Act which is a lengthy and highly uncertain process.
 
Moreover, if we offer and sell securities in the United States or to U.S. persons and we were deemed to be an investment company under the investment company act and not exempted from the application of the Investment Company Act, contracts we enter into in violation of, or whose performance entails a violation of, the Investment Company Act, including any such securities, may not be enforceable against us.
 
We hold Argentine securities which might be more volatile than U.S. securities and carry a greater risk of default.
 
We currently have and in the past have had certain investments in Argentine government debt securities, corporate debt securities, and equity securities. In particular, we hold a significant interest in IRSA, an Argentine company that has suffered material losses, particularly during the fiscal years 2001 and 2002. Although our holding of these investments, excluding IRSA, tends to be short term, investments in such securities involve certain risks, including:
 
·  market volatility, higher than those typically associated with U.S. government and corporate securities; and
·  
market volatility, higher than those typically associated with U.S. government and corporate securities; and
 
·  loss of principal.
·  
loss of principal.
 
Some of the issuers in which we have invested and may invest, including the Argentine government, have in the past experienced substantial difficulties in servicing their debt obligations, which have led to the restructuring of certain indebtedness. We cannot assure that the issuers in which we have invested or may invest will not be subject to similar or other difficulties in the future which may adversely affect the value of our investments in such issuers. In addition, such issuers and, therefore, such investments, are generally subject to many of the risks that are described in this section with respect to us, and, thus, could have little or no value.
 
Risks relating to our investment in IRSA.
 
We could be adversely affected by our investment in IRSA if its value declines.
Our investment in IRSA is exposed to the common risks generally inherent in investments in the real estate industry, many of which are outside IRSA’s control. Any of these risks could adversely and materially affect IRSA’s businesses, financial position and/or results of operations. Any available returns on capital expenditures associated with real estate are dependent upon sales volumes and/or revenues from leases and the expenses incurred. In addition, there are other factors that may adversely affect the performance and the value of a property, including the local economic conditions prevailing in the area where the property is located, macroeconomic conditions in Argentina and in the rest of the world, competition from other companies engaged in real estate development, IRSA’s ability to find lessees, non-performance by lessees and/or lease terminations, changes in legislation and in governmental regulations (including those governing the use of the properties, urban planning and real estate taxes), variations in interest rates (including the risk of an increase in interest rates causing a reduction in the sales of lots in properties intended for residential development) and the availability of funding. In addition, and given the relative illiquidity of the real estate market, IRSA could be unable to effectively respond to adverse market conditions and/or be compelled to undersell one or more of its properties. Broadly speaking, some significant expenses, such as debt services, real estate taxes and operating and maintenance costs do not fall when there are circumstances that reduce the revenues from an investment.
These factors and/or events could impair IRSA’s ability to respond to adverse changes in the returns on its investments thus causing a significant reduction in its financial position and/or the results of its operations, which could have an adverse effect on our financial position and the results of our operations.
IRSA is subject to risks inherent to the operation of shopping centers that may affect its profitability.
 
IRSA’s shopping centers are subject to various factors that affect their development, administration and profitability, including:
 
·  decline in its lease prices or increases in levels of default by IRSA’s tenants due to recessions,
·  
decline in its lease prices or increases in levels of default by IRSA’s tenants due to economic conditions, increases in interest rates and other factors that IRSA cannot control;
·  the accessibility and the attractiveness of the area where the shopping center is located;
·  the intrinsic attractiveness of the shopping center;
·  the flow of people and the level of sales of each shopping center rental unit;
·  increasing competition from internet sales;
·  the amount of rent collected from each shopping center rental unit;
·  changes in consumer demand and availability of consumer credit (considering the limits impose by the Central Bank to interest rates charged by financial institutions), both of which are highly sensitive to general macroeconomic conditions; and
·  fluctuations in occupancy levels in IRSA’s shopping centers.

21

 
·  
the accessibility and the attractiveness of the area where the shopping center is located;
·  
the intrinsic attractiveness of the shopping center;
·  
the flow of people and the level of sales of each shopping center rental unit;
·  
increasing competition from internet sales;
·  
the amount of rent collected from each shopping center rental unit;
·  
changes in consumer demand and availability of consumer credit (considering the limits impose by the Central Bank to interest rates charged by financial institutions), both of which are highly sensitive to general macroeconomic conditions; and
·  
fluctuations in occupancy levels in IRSA’s shopping centers.
An increase in IRSA’s operating costs, caused by inflation or by other factors, could have a material adverse effect on IRSA if its tenants are unable to pay higher rent due to the increase in expenses. Moreover, the shopping center business is closely related to consumer spending and to  the economy in which customers are located.by prevailing economic conditions that affect potential customers. All of IRSA’s shopping centers and commercial properties, under Operations Center in Argentina, are located in Argentina, and, as a consequence, their business could be seriously affected by a recession in Argentina. For example, during the economic crisis in Argentina, spending decreased significantly, unemployment, political instability and inflation significantly reduced consumer spending in Argentina, lowering tenants’ sales and forcing some tenants to leave IRSA’s shopping centers. Persistently poor economic conditions in Argentina will likely have a material adverse effect on the revenues from shopping center activity and thus on IRSA’s business.
 

Our assets are highly concentrated in certain geographic areas and an economic downturn in such areas could have a material adverse effect on our results of operations and financial condition.
For the fiscal year ended June 30, 2016, 78% of IRSA’s sales from leases and services, for the Operations Center in Argentina, were derived from shopping centers located in the City of Buenos Aires and the Greater Buenos Aires metropolitan area. In addition, all of IRSA’s office buildings are located in the City of Buenos Aires and a substantial portion of IRSA’s revenues in Argentina are derived from such properties. Although IRSA owns properties and may acquire or develop additional properties outside of the City of Buenos Aires and the Greater Buenos Aires, IRSA expects to continue to depend to a large extent on economic conditions affecting those areas and therefore, an economic downturn in those areas could have a material adverse effect on IRSA’s financial condition and results of operations by reducing our rental income may adversely affect its ability to meet their debt obligations.
IRSA’s performance is subject to risks associated with its properties and with the real estate industry.
 
IRSA’s economic performance and the value of its real estate assets are subject to the risk that their properties may not be able to generate sufficient revenues to meet the operating expenses, including debt service and capital expenditures, IRSA’s cash flow and ability to service its debt and to cover other expenses may be adversely affected.
 
Events or conditions beyond IRSA’s control that may adversely affect its operations or the value of its properties include:
 
·  downturns in the national, regional and local economic climate;
·  
downturns in the national, regional and local economic climate;
 
·  volatility and decline in discretionary spending;
·  
volatility and decline in discretionary spending;
 
·  competition from other shopping centers and office, and commercial buildings;
·  
competition from other shopping centers and office, and commercial buildings;
 
·  local real estate market conditions, such as oversupply or reduction in demand for retail, office, or other commercial space;
·  
local real estate market conditions, such as oversupply or reduction in demand for retail, office, or other commercial space;
 
·  decreases in consumption levels;
·  
decreases in consumption levels;
 
·  changes in interest rates and availability of financing;
·  
changes in interest rates and availability of financing;
 
·  the exercise by our tenants of their legal right to early termination of their leases;
·  
the exercise by our tenants of their legal right to early termination of their leases;
 
·  vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;
·  
vacancies, changes in market rental rates and the need to periodically repair, renovate and re-lease space;
 
·  increased operating costs, including insurance expense, salary increases, utilities, real estate taxes, state and local taxes and heightened security costs;
·  
increased operating costs, including insurance expense, salary increases, utilities, real estate taxes, state and local taxes and heightened security costs;
 
·  civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;
·  
civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war which may result in uninsured or underinsured losses;
 
·  significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs which are generally not reduced when circumstances cause a reduction in revenues from a property;
·  
significant expenditures associated with each investment, such as debt service payments, real estate taxes, insurance and maintenance costs;
 
·  declines in the financial condition of our tenants and our ability to collect rents from our tenants;
·  
declines in the financial condition of our tenants and our ability to collect rents from our tenants;
 
·  changes in our ability or our tenants’ ability to provide for adequate maintenance and insurance, possibly decreasing the useful life of and revenue from property;
·  
changes in our ability or our tenants’ ability to provide for adequate maintenance and insurance, possibly decreasing the useful life of and revenue from property;
 
·  changes in law or governmental regulations (such as those governing usage, zoning and real property taxes) or government action such as expropriation, confiscation or revocation of concessions; and
·  
changes in law or governmental regulations (such as those governing usage, zoning and real property taxes) or government action such as expropriation, confiscation or revocation of concessions; and
 
·  interpretation by judges of the New Civil Code (in force from August 1, 2015).
·  
judicial interpretation of the New Civil and Commercial Code (in force from August 1, 2015), which may be adverse to our interests.
 
If any one or more of the foregoing conditions were to affect IRSA’s business, it could have a material adverse effect on our financial condition and results of operations.
 
An adverse economic environment for real estate companies such as a credit crisis may have a significant adverseadversely impact on our results of operations and business prospects.prospects significantly.
 
The success of IRSA’s business and profitability of its operations are dependentdepend on continued investment in the real estate marketssector and access to capital and debt financing. A long term crisis of confidence in real estate investments and lack of credit for acquisitions may tend to constrain our business growth. As part of our business goals, IRSA intends to increase ourits properties portfolio withthough strategic acquisitions of core properties at advantageous prices, where IRSA believes it can bring the necessary expertise to enhance property values.
 
In order to pursue acquisitions, IRSA may need access to equity capital and/or debt financing. Any disruptions in the financial markets, including the bankruptcy and restructuring of major financial institutions, may adversely impact IRSA’s ability to refinance existing debt and the availability and cost of credit in the near future. Any consideration of sales of existing properties or portfolio interests may be tempered by decreasing property values. IRSA’s ability to make scheduled payments or to refinance its obligations with respect to indebtedness depends on its operating and financial performance, which in turn is subject to prevailing economic conditions. If a recurrence of the disruptions in financial markets remains or arises in the future, there can be no assurances that government responses to such disruptions will restore investor confidence, stabilize the markets or increase liquidity and the availability of credit.
 
The loss of significant tenants could adversely affect both the operating revenues and value of IRSA’s properties.
If certain of IRSA’s most important tenants were to experience financial difficulties, including bankruptcy, insolvency or a general downturn of business, or if it simply failed to retain its patronage, IRSA’s business could be adversely affected. IRSA’s shopping centers are typically anchored by significant tenants, such as well-known department stores who generate shopping traffic at the mall. Further, certain tenants are also very important for IRSA’s office buildings. A decision by such significant tenants to cease operations at IRSA’s shopping centers or office buildings, as applicable, could have a material adverse effect on the revenues and profitability of the affected segment and, by extension, on its financial condition and results of operations. In addition, the closing of one or more significant tenants at its shopping centers may induce other major tenants at an affected property to terminate their leases, to seek rent relief and/or cease operating their stores or otherwise adversely affect occupancy at the property. Moreover, key tenants at one or more properties might terminate their leases as a result of mergers, acquisitions, consolidations, dispositions or bankruptcies. The bankruptcy and/or closure of one or more significant tenants, if IRSA is not able to successfully re-lease the affected space, could have a material adverse effect on both the operating revenues and underlying value of the properties involved.

22

 
IRSA may face risks associated with property acquisitions.
 
IRSA has in the past acquired, and intendintends to acquire in the future, properties, including large properties that would increase its size and potentially alter its capital structure. Although, IRSA believes that the acquisitions that it has completed in the past and that it expect to undertake in the future have, and will, enhance its future financial performance, the success of such transactions is subject to a number of uncertainties, including the risk that:
 
·  IRSA may not be able to obtain financing for acquisitions on favorable terms;
·  
IRSA may not be able to obtain financing for acquisitions on favorable terms;
 
·  acquired properties may fail to perform as expected;
·  
acquired properties may fail to perform as expected;
 
·  the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates; and
·  
the actual costs of repositioning or redeveloping acquired properties may be higher than our estimates; and
 
·  acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures.
·  
acquired properties may be located in new markets where we may have limited knowledge and understanding of the local economy, absence of business relationships in the area or unfamiliarity with local governmental and permitting procedures.
 
If IRSA acquires new properties, it may not be able to efficiently integrate acquired properties, particularly portfolios of properties, into IRSA’s organization and to manage new properties in a way that allows it to realize cost savings and synergies, which could impair the results of operations.
 
IRSA’s future acquisitions may be unprofitable.
 
IRSA intends to acquire additional properties to the extent that they manage to acquire them on advantageous terms and conditions and they meet our investment criteria. Acquisitions of commercial properties entail general investment risks associated with any real estate investment, including:
 
·  IRSA’s estimates of the cost of improvements needed to bring the property up to established standards for the market may prove to be inaccurate;
·  
IRSA’s estimates of the cost of improvements needed to bring the property up to established standards for the market may prove to be inaccurate;
 
·  properties IRSA acquires may fail to achieve, within the time frames it projects, the occupancy or rental rates it expects to achieve at the time it makes the decision to acquire, which may result in the properties’ failure to achieve the returns that IRSA projected;
·  
properties IRSA acquires may fail to achieve, within the time frames it projects, the occupancy or rental rates it expects to achieve at the time it makes the decision to acquire, which may result in the properties’ failure to achieve the returns that IRSA projected;
 
·  IRSA pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs, which could significantly increase the total acquisition costs; and
·  
IRSA pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs, which could significantly increase the total acquisition costs; and
 
·  IRSA investigation of a property or building prior to its acquisition, and any representations IRSA may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
·  
IRSA investigation of a property or building prior to its acquisition, and any representations IRSA may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
 
If IRSA acquires a business, it will be required to merge and integrate the operations, personnel, accounting and information systems of such acquired business. In addition, acquisitions of or investments in companies may cause disruptions in IRSA’s operations and divert management’s attention away from day-to-day operations, which could impair IRSA’s relationships with its current tenants and employees.
 
Acquired properties may subject IRSA to unknown liabilities.
 
Properties that IRSA acquires may be subject to unknown liabilities and IRSA it would have no recourse, or only limited recourse, to the former owners of the properties. Thus, if a liability were asserted against it based upon ownership of an acquired property, IRSA might be required to pay significant sums to settle it, which could adversely affect its financial results and cash flow. Unknown liabilities relating to acquired properties could include:
 
·  liabilities for clean-up of undisclosed environmental contamination;
·  
liabilities for clean-up of undisclosed environmental contamination;
 
·  law reforms and governmental regulations (such as those governing usage, zoning and real property taxes); and
·  
law reforms and governmental regulations (such as those governing usage, zoning and real property taxes); and
 
·  liabilities incurred in the ordinary course of business.
·  
liabilities incurred in the ordinary course of business.
 
IRSA’s dependence on rental income may adversely affect its ability to meet its debt obligations.
 
A substantial part of IRSA’sIRSA's income is derived from rental income from real property. As a result, IRSA’sIRSA's performance depends on its ability to collect rent from its tenants. IRSA’sIRSA's income and funds for distribution would be negatively affected ifis a significant number of its tenants or any of its major tenants (as discussed in more detail below):tenants:
 
·  delay lease commencements;
·  
delay lease commencements;
 
·  decline to extend or renew leases upon expiration;
·  
decline to extend or renew leases upon expiration;
 
·  fail to make rental payments when due; or
·  
fail to make rental payments when due; or
 
·  close stores or declare bankruptcy.
·  
close stores or declare bankruptcy.
 
Any of these actions could result in the termination of leases and the loss of rental income attributable to the terminated leases. In addition, IRSA cannot assureadssure you that any tenant whose lease expires will renew that lease or that we will be able to re-lease space on economically advantageous terms or at all. The loss of rental revenues from afroma number of our tenants and our inability to replace such tenants may adversely affect our profitability and our ability to meet debt and other financial obligations.
 
It may be difficult to buy and sell real estate quickly and transfer restrictions may apply to part of IRSA’s portfolio of properties.
 
Real estate investments are relatively illiquid and this tends to limit its ability to vary its portfolio in response to changes in the economy or other conditions. In addition, significant expenditures associated with each investment, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a decrease in income from an investment. If income from a property declines while the related expenses do not decline, IRSA’s business would be adversely affected. Further, if it becomes necessary or desirable for it to dispose of one or more of the mortgaged properties, IRSA may not be able to obtain a release of the lien on the mortgaged property without payment of the associated debt. The foreclosure of a mortgage on a property or inability to sell a property could adversely affect its business.
 

23

Some of the land IRSA has purchased is not zoned for development purposes, and it may be unable to obtain, or may face delays in obtaining the necessary zoning permits and other authorizations.
 
IRSA owns several plots of land which are not zoned for the type of projects it intends to develop. In addition, IRSA does not yet have the required land-use, building, occupancy and other required governmental permits and authorizations for these properties. IRSA cannot assure you that it will continue to be successful in its attempts to rezone land and to obtain all necessary permits and authorizations, or that rezoning efforts and permit requests will not be unreasonably delayed or rejected. Moreover, IRSA may be affected by building moratorium and anti-growth legislation. If it is unable to obtain all of the governmental permits and authorizations it needs to develop its present and future projects as planned, IRSA may be forced to make unwanted modifications to such projects or abandon them altogether.

 
IRSA’s ability to grow will be limited if IRSA cannot obtain additional financing.
 
IRSA must maintain liquidity to fund its working capital, service its outstanding indebtedness and finance investment opportunities. Without sufficient liquidity, IRSA could be forced to curtail its operations or may not be able to pursue new business opportunities.
 
IRSA´s growth strategy is focused on the development and redevelopment of properties IRSA already owns and the acquisition and development of additional properties. As a result, IRSA is likely to depend to an important degree on the availability of debt or equity capital, which may or may not be available on favorable terms or at all. IRSA cannot guarantee that additional financing, refinancing or other capital will be available in the amounts IRSA desires or on favorable terms. IRSA´s access to debt or equity capital markets depends on a number of factors, including the market’s perception of IRSA´s growth potential, IRSA´s ability to pay dividends, its financial condition, its credit rating and its current and potential future earnings. Depending on these factors, IRSA could experience delays or difficulties in implementing its growth strategy on satisfactory terms or at all.
 
The capital and credit markets have been experiencing extreme volatility and disruption since the last credit crisis. If IRSA’s current resources do not satisfy its liquidity requirements, it may have to seek additional financing. The availability of financing will depend on a variety of factors, such as economic and market conditions, the availability of credit and its credit ratings, as well as the possibility that lenders could develop a negative perception of the prospects of IRSA or the industry generally. IRSA may not be able to successfully obtain any necessary additional financing on favorable terms, or at all.
 
Serious illnesses and pandemics, such as the 2009 outbreak of Influenza A H1N1 virus (the “Swine Flu”), and the current Zika virus, have in the past adversely affected consumer and tourist activity, may do so in the future and may adversely affect our results of operations.
 
As a result of the outbreak of Swine Flu during the winter of 2009, consumers and tourists dramatically changed their spending and travel habits to avoid contact with crowds. Furthermore, several governments enacted regulations limiting the operation of schools, cinemas and shopping centers. Even though the Argentine government only issued public service recommendations to the population regarding the risks involved in visiting crowded places, such as shopping centers, and did not issue specific regulations limiting access to public places, a significant number of consumers nonetheless changed their habits vis-a-vis shopping centers and malls. Similarly, the current zika virus pandemic may result in similar courses and outcomes. We cannot assure you that a new disease outbreak or health hazard (such as the Ebola outbreak in recent years) will not occur in the future, or that such an outbreak or health hazard would not significantly affect consumer and/or tourist activity, and that such scenario would not adversely affect our businesses.
 
Adverse incidents that occur in IRSA’s shopping centers may result in damage to IRSA’s image and a decrease in the number of IRSA’s customers.
 
Given that shopping centers are open to the public, with ample circulation of people, accidents, theft, robbery and other incidents may occur in IRSA´s facilities, regardless of the preventative measures it adopts. In the event such an incident or series of incidents occurs, shopping center customers and visitors may choose to visit other shopping venues that they believe are safer and less violent, which may cause a reduction in the sales volume and operating income of IRSA´s shopping centers.
 
Argentine Law governing leases imposes restrictions that limit IRSA´s flexibility.
 
Argentine laws governing leases impose certain restrictions, including the following:
 
·  a prohibition to include automatic price adjustment clauses based on inflation increases in lease agreements; and
·  
a prohibition on including automatic price adjustment clauses based on inflation increases in lease agreements; and
 
·  the imposition of a two-year minimum lease term for all purposes, except in particular cases such as embassy, consulate or international organization venues, room with furniture for touristic purposes for less than three months, custody and bailment of goods, exhibition or offering of goods in fairs or in cases where due to the circumstances, the subject matter of the lease agreement requires a shorter term.
·  
the imposition of a two-year minimum lease term for all purposes, except in particular cases such as embassy, consulate or international organization venues, room with furniture for touristic purposes for less than three months, custody and bailment of goods, exhibition or offering of goods in fairs or in cases where due to the circumstances, the subject matter of the lease agreement requires a shorter term.
 
As a result of the foregoing, IRSA is exposed to the risk of increases of inflation under our leases, and the exercise of rescission rights by our tenants could materially and adversely affect its business. IRSA cannot assure you that its tenants will not exercise such right, especially if rent values stabilize or decline in the future or if economic conditions deteriorate.
 
In addition, on October 1, 2014, by means of the Law No.26,994, the Argentine Congress sanctionedadopted a new Civil and Commercial Code (the “Civil and Commercial Code”) which although wasn’tbecame effective as ofon June 30, 2015, and is in force since August 1, 2015, and is currently applicable to our leases. The Civil and Commercial Code derogates Law No. 23,091 on Urban Leases, which amends certain important matters in the current law in connection with leases, such as includingrequires that lease agreements provide for a minimum term of two years, and a maximum term of twenty years for residential leases and of fifty years for other purpose leases. Furthermore, the Civil and Commercial Code modifies the regime applicable to contractual provisions relating to foreign currency payment obligations by establishing that foreign currency payment obligations may be discharged in Pesos. This amends the legal framework currently in force, pursuant to which debtors may only discharge their foreign currency payment obligations by making payment in the specific foreign currency agreed upon in their agreements; provided however thatalthough the option to discharge in Pesos a foreign currency obligation may be waived by the debtor is still under discussion. Although certain judicial decisions have set forthheld that this regulation regarding foreign currency can be leftset aside by the parties to an agreement, it is still too early to determine whether or not this legal provision can be leftset aside in an agreement as a general rule. Moreover, and regarding the new provisions for leases, there are no judicial decisions on the scope of this amendment and, in particular, in connection with the ability of the parties to any contract to set aside the new provision and enforce such agreements before an Argentine court.
 
IRSA may be liable for some defects in its buildings.
 
According to the former Argentine Civil Code as previously in effect, the builder of a real estate development was liable in case of property damage – meaning the damages compromises the structure and/or the defects render the building no longer useful – for a period of 10 years since the possession of the property; on the other hand, the builder was liable for the latent defects, even when those defects did not imply significant property damage. In addition, according to the former Argentine Civil Code as previously in effect, provided that such liability was extended to the technical project manager and the designer of any given project. Furthermore, in certain cases, such as when consumer law was involved, the liability could be extended to the developer. The Civil and Commercial Code, which became effective on August 1, 2015, has similar provisions to those included in the former Argentine Civil Code and expressly extends the liability for such damage to real estate developers (i.e., any person who sells real estate built by either themselves or by a third party contractor), and any other person involved in the project, in addition to the liability of the builder, the technical project manager and the designer of any giventhe project. According to the Civil and Commercial Code, the warranty period for latent defects expires after three years ofafter the client takingtakes possession of the real estate, and both the builder and the seller are liable for such defects.
 
In IRSA’s real estate developments it usually act as developer and seller and build through third-party contractors. Absent a specific claim, IRSA cannot quantify the potential cost of any obligation that may arise as a result of a future claim, and it has not recorded provisions associated with them in its financial statements. If IRSA were required to remedy any defects on completed works, its financial condition and results of operations could be adversely affected.
 

24

 
Eviction proceedings in Argentina are difficult and time consuming.
 
Although Argentine law permits a summary proceeding to collect unpaid rent and a special proceeding to evict tenants, eviction proceedings in Argentina are difficult and time-consuming. Historically, the heavy workloads of the courts and the numerous procedural steps required have generally delayed landlords’ efforts to evict tenants. Eviction proceedings generally take between six months and two years from the date of filing of the suit to the time of actual eviction.
 
Historically, IRSA has usually attemptedsought to negotiate the termination of lease agreements with defaulting tenants after the first few months of non-payment in order to avoid legal proceedings. Delinquency may increase significantly in the future, and such negotiations with tenants may not be as successful as they have been in the past. Moreover, new Argentine laws and regulations may forbid or restrict eviction, and in each such case, they would likely have a material and adverse effect on IRSA´s financial condition and results of operation.
 
IRSA is subject to risks inherent to the operation of office buildings that may affect its profitability.
 
Office buildings are subject to various factors that affect their development, administration and profitability, including:
 
·  
a decrease in demand for office space;
a decrease in demand for office space;
·  a deterioration in the financial condition of our tenants may result in defaults under leases due to bankruptcy, lack of liquidity or for other reasons;
·  difficulties or delays renewing leases or re-leasing space;
·  decreases in rents as a result of oversupply, particularly of newer buildings;
·  competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from our tenants; and
 
·  maintenance, repair and renovation costs incurred to maintain the competitiveness of IRSA's office buildings.
·  
a deterioration in the financial condition of our tenants may result in defaults under leases due to bankruptcy, lack of liquidity or for other reasons;
 
·  
difficulties or delays renewing leases or re-leasing space;
·  
decreases in rents as a result of oversupply, particularly of newer buildings;
·  
competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from our tenants; and
·  
maintenance, repair and renovation costs incurred to maintain the competitiveness of IRSA’s office buildings.
If IRSA is unable to adequately address these factors, any one of them could adversely impact our business, which would have an adverse effect on our financial condition and results of operations.
IRSA’s investment in property development and management activities may be less profitable than we anticipate.
 
IRSA is a company engaged in the development and management of shopping centers, office buildings and other rental properties, frequently through third-party contractors. Risks associated with IRSA’s development and management activities include the following, among others:
 
·  abandonment of development opportunities and renovation proposals;
·  
abandonment of development opportunities and renovation proposals;
 
·  construction costs of a project may exceed IRSA’s original estimates for reasons including raises in interest rates or increases in the costs of materials and labor, making a project unprofitable;
·  
construction costs of a project may exceed IRSA’s original estimates for reasons including raises in interest rates or increases in the costs of materials and labor, making a project unprofitable;
 
·  occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment;
·  
occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, resulting in lower than projected rental rates and a corresponding lower return on our investment;
 
·  pre-construction buyers may default on its purchase contracts or units in new buildings may remain unsold upon completion of construction;
·  
pre-construction buyers may default on its purchase contracts or units in new buildings may remain unsold upon completion of construction;
 
·  the unavailability of favorable financing alternatives in the private and public debt markets;
·  
the unavailability of favorable financing alternatives in the private and public debt markets;
 
·  sale prices for residential units may be insufficient to cover development costs;
·  
aggregate sale prices of residential units may be insufficient to cover development costs;
 
·  construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs;
·  
construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs;
 
·  impossibility to obtain or delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, or building moratoria and anti-growth legislation;
·  
failure or delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, or building moratoria and anti-growth legislation;
 
·  significant time lags between the commencement and completion of projects subjects IRSA to greater risks due to fluctuation in the general economy;
·  
significant time lags between the commencement and completion of projects subjects IRSA to greater risks due to fluctuation in the general economy;
 
·  construction may not be completed on schedule because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, or man-made or natural disasters (such as fires, hurricanes, earthquakes or floods), resulting in increased debt service expense and construction costs;
·  
construction may not be completed on schedule because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, or man-made or natural disasters (such as fires, hurricanes, earthquakes or floods), resulting in increased debt service expense and construction costs;
 
·  general changes in IRSA’s tenants’ demand for rental properties; and
·  
general changes in IRSA’s tenants’ demand for rental properties; and
 
·  IRSA may incur capital expenditures that could result in considerable time consuming efforts and which may never be completed due to government restrictions.
·  
IRSA may incur capital expenditures that could result in considerable time consuming efforts and which may never be completed due to government restrictions.
 
In addition, IRSA may face contractors’ claims for the enforcement of labor laws in Argentina (sections 30, 31 and 32 under Law No. 20,744), which provide for joint and several liability. Many companies in Argentina hire personnel from third-party companies that provide outsourced services, and sign indemnity agreements in the event of labor claims from employees of such third company that may affect the liability of such hiring company. However, in recent years, several courts have denied the existence of independence in those labor relationships and declared joint and several liabilities for both companies.
 
While IRSA’s policies with respect to expansion, renovation and development activities are intended to limit some of the risks otherwise associated with such activities, nevertheless IRSA is subject to risks associated with the construction of properties, such as cost overruns, design changes and timing delays arising from a lack of availability of materials and labor, weather conditions and other factors outside of its control, as well as financing costs, may exceed original estimates, possibly making the associated investment unprofitable. Any substantial unanticipated delays or expenses could adversely affect the investment returns from these redevelopment projects and harm its operating results.
 
IRSA is subject to great competitive pressure.
 
IRSA’s real estate activities (in particular due to the acquisition of the office buildings in December 2014) are highly concentrated in the Buenos Aires metropolitan area, where the real estate market is highly competitive due to a scarcity of properties in sought-after locations and the increasing number of local and international competitors.

25

 
Furthermore, the Argentine real estate industry is generally highly competitive and fragmented and does not have high barriers to entry restricting new competitors from entering the market. The main competitive factors in the real estate development business include availability and location of land, price, funding, design, quality, reputation and partnerships with developers. A number of residential and commercial developers and real estate services companies compete with it in seeking land for acquisition, financial resources for development and prospective purchasers and tenants. Other companies, including joint ventures of foreign and local companies, have become increasingly active in the real estate business and shopping center business in Argentina, further increasing this competition. To the extent that one or more of IRSA’s competitors are able to acquire and develop desirable properties, as a result of greater financial resources or otherwise, its business could be materially and adversely affected. If IRSA is not able to respond to such pressures as promptly as its competitors, or the level of competition increases, its financial condition and results of its operations could be adversely affected.
 
All of IRSA’s shopping center properties are located in Argentina.
There are other shopping centers and numerous smaller retail stores and residential properties within the market area of each of our properties. The number of competing properties in a particular area could have a material adverse effect on its ability to lease retail space in its shopping centers or sell units in its residential complexes and on the amount of rent or the sale price that IRSA is able to charge. IRSA cannot assure you that other shopping center operators, including international shopping center operators, will not invest in Argentina in the near future. If additional companies become active in the Argentine shopping center market in the future, such competition could have a material adverse effect on IRSA’s results of operations.
 
Substantially all of IRSA’s offices and other non-shopping center rental properties are located in developed urban areas. There are many office buildings, shopping malls, retail and residential premises in the areas where the properties are located. This is a highly fragmented market, and the abundance of comparable properties in the vicinity may adversely affect the ability to rent or sell office space and other real estate and may affect the sale and lease price of their premises. In the future, both national and foreign companies may participate in Argentina’s real estate development market, competing with IRSA for business opportunities.
 
Some potential losses are not covered by insurance, and certain kinds of insurance coverage may become prohibitively expensive.
 
IRSA currently carries insurance policies that cover potential risks such as civil liability, fire, loss profit, floods, including extended coverage and losses from leases on all of its properties. Although IRSA believes the policy specifications and insured limits of these policies are generally customary, there are certain types of losses, such as lease and other contract claims, terrorism and acts of war that generally are not insured under the insurance policies offered in the national market. Should an insured loss or a loss in excess of insured limits occur, IRSA could lose all or a portion of the capital it has invested in a property, as well as the anticipated future revenue from the property. In such an event, IRSA might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. IRSA cannot assure you that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt its operations, delay revenue and result in large expenses to repair or rebuild the property. If any of its key employees were to die or become incapacitated, it could experience losses caused by a disruption in its operations which will not be covered by insurance, and this could have a material adverse effect on its financial condition and results of operations.
 
In addition, IRSA cannot assure you that it will be able to renew its insurance coverage in an adequate amount or at reasonable prices. Insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and mold, or, if offered, these types of insurance may be prohibitively expensive.
 
Demand for IRSA’s premium properties may not be sufficient.
IRSA has focused on development projects to cater affluent individuals and has entered into property barter agreements pursuant to which IRSA contributes its undeveloped properties to ventures with developers who will deliver to its units in premium locations. At the time the developers return these properties to it, demand for premium residential units could be significantly lower. In such case, IRSA would be unable to sell these residential units at the estimated prices or time frame, which could have an adverse effect on its financial condition and results of operations.
IRSA’s level of debt may adversely affect its operations and its ability to pay its debt as it becomes due.
IRSA had, and expects to have, substantial liquidity and capital resource requirements to finance its business. As of June 30, 2015, IRSA’s consolidated financial debt amounted to Ps.4,973.0 million (including accrued and unpaid interest and deferred financing costs). IRSA cannot assure you that it will have sufficient cash flows and adequate financial capacity in the future.
The fact that it is leveraged may affect its ability to refinance existing debt or borrow additional funds to finance working capital, acquisitions and capital expenditures. In addition, the recent disruptions in the global financial markets, including the bankruptcy and restructuring of major financial institutions, may adversely impact IRSA’s ability to refinance existing debt and the availability and cost of credit in the future. In such conditions, access to equity and debt financing options may be restricted and it may be uncertain how long these economic circumstances may last.
This would require IRSA to allocate a substantial portion of cash flow to repay principal and interest, thereby reducing the amount of money available to invest in operations, including acquisitions and capital expenditures. Its leverage could also affect its competitiveness and limit its ability to changes in market conditions, changes in the real estate industry and economic downturns.
IRSA may not be able to generate sufficient cash flows from operations to satisfy its debt service requirements (including the notes) or to obtain future financing. If IRSA cannot satisfy its debt service requirements or if IRSA default on any financial or other covenants in its debt arrangements, the lenders and/or holders of its debt will be able to accelerate the maturity of such debt or cause defaults under the other debt arrangements. IRSA’s ability to service debt obligations or to refinance them will depend upon its future financial and operating performance, which will, in part, be subject to factors beyond its control such as macroeconomic conditions and regulatory changes in Argentina. If it cannot obtain future financing, it may have to delay or abandon some or all of its planned capital expenditures, which could adversely affect its ability to generate cash flows and repay its obligations.

26

The recurrence of a credit crisis could have a negative impact on its major customers, which in turn could materially adversely affect its results of operations and liquidity.
The international credit crisis in 2009 had a significant negative impact on businesses around the world. The impact of a crisis on our major tenants cannot be predicted and may be quite severe. A disruption in the ability of our significant tenants to access liquidity could cause serious disruptions or an overall deterioration of their businesses which could lead to a significant reduction their future orders of their products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material adverse effect on our results of operations and liquidity.
IRSA is subject to risks affecting the hotel industry.
The full-service segment of the lodging industry in which our hotels operate is highly competitive. The operational success of our hotels is highly dependent on our ability to compete in areas such as access, location, quality of accommodations, rates, quality food and beverage facilities and other services and amenities. Our hotels may face additional competition if other companies decide to build new hotels or improve their existing hotels to increase their attractiveness. 
In addition, the profitability of our hotels depends on:
·  IRSA’s ability to form successful relationships with international and local operators to run our hotels;
·  changes in tourism and travel trends, including seasonal changes and chages due to pandemic outbreaks, such as the A H1N1 virus, a potential ebola outbreak, among others, or weather phenomenas or other natural events, such as the eruption of the Puyehué and the Calbuco volcano in June 2011 and April 2015, respectively;
·  affluence of tourists, which can be affected by a slowdown in global economy; and
·  taxes and governmental regulations affecting wages, prices, interest rates, construction procedures and costs.
An uninsured loss or a loss that exceeds the policies on IRSA’s properties could subject to lost capital or revenue on those properties.
 
Under the terms and conditions of the leases currently in force on IRSA’s properties, tenants are required to indemnify and hold harmless from liabilities resulting from injury to persons, or property, on or off the premises, due to activities conducted on the properties, except for claims arising from our negligence or intentional misconduct or that of its agents.
 
Tenants are generally required, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. In addition, IRSA cannot assure the holders that the tenants will properly maintain their insurance policies or have the ability to pay the deductibles.
 
Should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, IRSA could lose all or part of its invested capital, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on our operating results and financial condition.
Demand for IRSA’s premium properties may not be sufficient.
IRSA has focused on developing residential projects that cater to affluent individuals and has entered into property barter agreements pursuant to which IRSA contributes its undeveloped properties to ventures with developers who will deliver to its units at premium locations. At the time the developers return these properties to it, demand for premium residential units could be significantly lower. In such case, IRSA would be unable to sell these residential units at the estimated prices or time frame, which could have an adverse effect on its financial condition and results of operations.
IRSA’s level of debt may adversely affect its operations and its ability to pay its debt as it becomes due.
IRSA had, and expects to have, substantial liquidity and capital resource requirements to finance its business. As of June 30, 2016, IRSA’s consolidated financial debt amounted to Ps.112,932 million (Including IDBD’s debt outstanding as of that date plus accrued and unpaid interest on such indebtedness and deferred financing costs). IRSA cannot assure you that it will have sufficient cash flows and adequate financial capacity in the future. While, the commitments and other covenants applicable to IDBD’s debt obligations do not have apply IRSA since such it is not recourse to IRSA and it is not guaranteed by IRSA’s assets, these covenants and restrictions may impair or restrict IRSA’s ability to operate IDBD and implement its business strategy.
The fact that IRSA is highly leveraged may affect its ability to refinance existing debt or borrow additional funds to finance working capital requirements, acquisitions and capital expenditures. In addition, the recent disruptions in the global financial markets, including the bankruptcy and restructuring of major financial institutions, may adversely impact IRSA’s ability to refinance existing debt and the availability and cost of credit in the future. In such conditions, access to equity and debt financing options may be restricted and it may be uncertain how long these economic circumstances may last.
This would require IRSA to allocate a substantial portion of cash flow to repay principal and interest, thereby reducing the amount of money available to invest in operations, including acquisitions and capital expenditures. Its leverage could also affect its competitiveness and limit its ability to changes in market conditions, changes in the real estate industry and economic downturns.
IRSA may not be able to generate sufficient cash flows from operations to satisfy its debt service requirements or to obtain future financing. If IRSA cannot satisfy its debt service requirements or if IRSA default on any financial or other covenants in its debt arrangements, the lenders and/or holders of its debt will be able to accelerate the maturity of such debt or cause defaults under the other debt arrangements. IRSA’s ability to service debt obligations or to refinance them will depend upon its future financial and operating performance, which will, in part, be subject to factors beyond its control such as macroeconomic conditions and regulatory changes in Argentina. If it cannot obtain future financing, it may have to delay or abandon some or all of its planned capital expenditures, which could adversely affect its ability to generate cash flows and repay its obligations as they become due.

The recurrence of a credit crisis could have a negative impact on its major customers, which in turn could materially adversely affect its results of operations and liquidity.
The global credit crisis that began in 2008 had a significant negative impact on businesses around the world. The impact of a crisis on our major tenants cannot be predicted and may be quite severe. A disruption in the ability of our significant tenants to access liquidity could cause serious disruptions or an overall deterioration of their businesses which could lead to a significant reduction in their future orders of their products and the inability or failure on their part to meet their payment obligations to us, any of which could have a material adverse effect on our results of operations and liquidity.
IRSA is subject to risks affecting the hotel industry.
The full-service segment of the lodging industry in which our hotels operate is highly competitive. The operational success of our hotels is highly dependent on our ability to compete in areas such as access, location, quality of accommodations, rates, quality food and beverage facilities and other services and amenities. Our hotels may face additional competition if other companies decide to build new hotels or improve their existing hotels to increase their attractiveness. 
In addition, the profitability of our hotels depends on:
·  
IRSA’s ability to form successful relationships with international and local operators to run our hotels;
·  
changes in tourism and travel trends, including seasonal changes and changes due to pandemic outbreaks, such as the A H1N1 virus or a potential ebola outbreak, among others, or weather phenomena’s or other natural events, such as the eruption of the Puyehué and the Calbuco volcano in June 2011 and April 2015, respectively;
·  
affluence of tourists, which can be affected by a slowdown in global economy; and
·  
taxes and governmental regulations affecting wages, prices, interest rates, construction procedures and costs.
 
The shift of consumers to purchasing goods over the Internet, where barriers to entry are low, may negatively affect sales at IRSA´sIRSA’s shopping centers.
 
In recent years, internet retail sales by means of the Internet have grown significantly in Argentina, even thoughalthough the market share of Internet sales related to retailsuch sales is still not significant.insignificant. The Internet enables manufacturers and retailers to sell directly to consumers, diminishing the importance of traditional distribution channels such as retail stores and shopping centers. IRSA believes that its target consumers are increasingly using the Internet, from home, work or elsewhere, to shop electronically for retail goods, and this trend is likely to continue. If e-commerce and retail sales through the Internet continue to grow, consumers’ reliance on traditional distribution channels such as IRSA´s shopping centers could be materially diminished, having a material adverse effect on our financial condition, results of operations and business prospects.
 

27

IRSA’s business is subject to extensive regulation and additional regulations may be imposed in the future.
 
IRSA´sIRSA’s activities are subject to Argentine federal, state and municipal laws, and to regulations, authorizations and licenses required with respect to construction, zoning, use of the soil, environmental protection and historical patrimony, consumer protection, antitrust and other requirements, all of which affect its ability to acquire land, buildings and shopping centers, develop and build projects and negotiate with customers. In addition, companies in this industry are subject to increasing tax rates, the creation of new taxes and changes in the taxation regime. IRSA is required to obtain licenses and authorizations with different governmental authorities in order to carry out IRSA´s projects. Maintaining IRSA´s licenses and authorizations can be a costly provision. In the case of non-compliance with such laws, regulations, licenses and authorizations, IRSA may face fines, project shutdowns, and cancellation of licenses and revocation of authorizations.
 
In addition, public authorities may issue new and stricter standards, or enforce or construe existing laws and regulations in a more restrictive manner, which may force IRSA to make expenditures to comply with such new rules. Development activities are also subject to risks relating to potential delays in obtaining or an inability to obtain all necessary zoning, environmental, land-use, development, building, occupancy and other required governmental permits and authorizations. Any such delays or failures to obtain such government approvals may have an adverse effect on IRSA´s business.
 
In the past, the Argentine government imposed strict and burdensome regulations regarding leases in response to housing shortages, high rates of inflation and difficulties in accessing credit. Such regulations limited or prohibited increases on rental prices and prohibited eviction of tenants, even for failure to pay rent. Most of IRSA´s leases provide that the tenants pay all costs and taxes related to their respective leased areas. In the event of a significant increase in the amount of such costs and taxes, the Argentine government may respond to political pressure to intervene by regulating this practice, thereby negatively affecting IRSA´s rental income. IRSA cannot assure you that the Argentine government will not impose similar or other regulations in the future. Changes in existing laws or the enactment of new laws governing the ownership, operation or leasing of properties in Argentina could negatively affect the Argentine real estate market and the rental market and materially and adversely affect IRSA´s operations and profitability.
 
IRSA’s assets are highly concentrated in certain geographic areas and an economic downturn in such areas could have a material adverse effect on its financial condition.
For the fiscal year ended June 30, 2015, 70.9% of IRSA’s sales from leases and services were derived from shopping centers in the City of Buenos Aires and the Greater Buenos Aires. In addition, all of its office buildings are located in the City of Buenos Aires and a substantial portion of its revenues are now derived from such properties. Although IRSA owns properties and may acquire or develop additional properties outside of the City of Buenos Aires and the Greater Buenos Aires, it expects to continue to depend to a very large extent on economic conditions affecting those areas and therefore, an economic downturn in those areas could have a material adverse effect on its financial condition and results of operations. IRSA’s dependence on rental income may adversely affect its ability to meet our debt obligations.
IRSA faces risks associated with the expansion to other Latin American markets.
From 1994 to 2002, IRSA had substantial investments outside of Argentina, including Brazil Realty, which was sold in 2002, and Fondo de Valores Inmobiliarios in Venezuela, which was sold in 2001.
IRSA continue to believe that Brazil, Uruguay and other Latin American countries offer attractive growth opportunities in the real estate sector. IRSA will continue to consider investment opportunities outside of Argentina as they arise.
Investments in Brazil and other Latin American countries are subject to significant risks including sovereign risks and risks affecting these countries’ real estate sectors. These risks include competition by well-established as well as new developers, unavailability of financing or financing on terms that are not acceptable to IRSA, exchange rate fluctuations, lack of liquidity in the market, rising construction costs and inflation, extensive and potentially increasing regulation and bureaucratic procedures for obtaining permits and authorizations, political and economic instability that may result in sharp shifts in demand for properties, risks of default in payment and difficulty evicting defaulting tenants.
IRSA faces risks associated with its expansion in the United States.
 
On July 2, 2008, we acquired 30% interest in Metropolitan 885 LLC (“Metropolitan”), a limited liability company organized under the laws of Delaware, United States of America. During fiscal year 2011, an agreement was reached to restructure Metropolitan’s debt; after the consummation of the aforementioned restructuring, we indirectly hold 49% of New Lipstick LLC (“New Lipstick”), a holding company which is the owner of Metropolitan. Metropolitan’s main asset is the Lipstick Building, a 34-story building located at 885, Third Avenue between 53 and 54 streets in Manhattan, New York. Metropolitan has incurred in a secured loan in connection with the Lipstick Building. For more information, please see “Item 5. Operating and Financial Review and Prospects”.
 
In March 2012, through our subsidiary Real Estate Strategies, L.P. (“RES”), we acquired 3,000,000 Series C convertible preferred shares issued by Condor in an aggregate amount of US$ 30,000,000,30 million, a REIT focused in middle-class and long-stay hotels in 20 states in the United States of America.
 
During 2008 and 2009, the U.S. markets experienced extreme dislocations and a severe contraction in available liquidity globally as important segments of the credit markets were frozen. Global financial markets have been disrupted by, among other things, volatility in securities prices, rating downgrades and declining valuations. This disruption lead to a decline in business and consumer confidence and increased unemployment and precipitated an economic recession throughout the globe. As a consequence, owners and operators of commercial real estate, including hotels and resorts, and commercial real estate properties such as offices, experienced dramatic declines in property values. We are unable to predict if disruptions in the global financial markets will occur in the future and the impact that may have on IRSA’s business, financial condition and results of operations.
 
IRSA may face risks associated with its investment in Israel.
IDBD is one of the largest business conglomerates of Israel. Particularly, due to the limited size of the Israeli market and due to the high level of governmental regulation, IDBD and its subsidiaries may be limited to expand its business in the future, to form joint ventures and/or strategic alliances, or be obliged to sell, transfer or dispose any of its assets or business segments.
Furthermore, changes in the market prices of securities issued by IDBD and its subsidiaries can affect, directly or indirectly, their results of operations, the shareholders' equity, and/or the enterprise value, the ability to approve and/or distribute dividends, and the availability of credit, among other things.
IDBD is indirectly exposed due to its main investments, to changes in the prices of, raw materials, securities, and other economic indices, which may have a material impact on the results of operations of IDBD and its subsidiaries.
Actual losses on client balances could differ from those that IDBD currently anticipates and, as a result, we may need to adjust our provisions. We cannot assure you that we will accurately assess the creditworthiness of its clients. If IDBD is unable to meet its contractual obligations, it may experience delays in the collection of or be unable to collect its client balances, which would adversely affect our results of operations and cash flows could be adversely affected.
As a consequence of the aforementioned and due to the high level of governmental regulation in Israel, the value of our investment in IDBD could be severely affected and therefore would likely have a significant adverse effect on our business, financial condition and results of operations.
IRSA is currently facing litigation in connection with its investment in IDBD.
On October 20, 2015, the Tel Aviv-Jaffo Court admitted the motion filed by the Arrangement Trustees of IDBH under the Arrangement and determined that any IDBD shares held by any entity controlled by Eduardo Sergio Elsztain and/or transferred by them to third parties shall be prevented from participating as offerees in the Tender Offers as set forth in the Arrangement, with the reservation that this will not apply to IDBD shares which were purchased from minority shareholders on the stock exchange and are in the possession of IFISA. Dolphin filed an appeal before the Supreme Court of Justice of Israel on the Tel Aviv-Jaffo Court's Decision.
There can be no assurances of the final outcome of this litigation if the Supreme Court does not reverse the judgment and remove our ban from participating in the Tender Offers with our indirect shareholdings, and as a consequence the value of our investment in IDBD could be severely affected and therefore would likely have a significant adverse effect on our business, financial condition and results of operations.

28

Conditions in Israel may limit the ability of IDBD to develop and sell products, which could result in a decrease of revenues.
     IDBD’s corporate headquarters and a substantial business are located in Israel. Political, economic and security conditions in Israel could directly affect IDBD´s operations. Since the establishment of the State of Israel, a number of armed conflicts, hostilities and terrorist attacks have taken place in Israel and adjacent areas, which in turn could adversely affect IDBD and its results of operations. The disruption of trade between Israel and its main commercial partners, could affect the economic and financial condition of Israel, which could adversely affect the results of operations of IDBD and its subsidiaries.
The rights and responsibilities of IDBD´s shareholders are governed by Israeli law and differ in some respects from the rights and responsibilities of shareholders under U.S. law.
IDBD is incorporated under Israeli law. The rights and duties of holders of IDBD’s common shares are governed by IDBD´s articles of association and by Israeli law. These rights and duties may differ in some respects from the usual for U.S. corporations. Israeli law provides that these duties are applicable in shareholder votes at the general meeting with respect to, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and actions and transactions involving interests of officers, directors or other interested parties which require the shareholders’ general meeting’s approval. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that he or she possesses the power to determine the outcome of a vote at a meeting of our shareholders, or who has, by virtue of the company’s articles of association, the power to appoint or prevent the appointment of an office holder in the company, or any other power with respect to the company, has a duty of fairness towards the company.
 
If the bankruptcy of Inversora Dársena Norte S.A. is extended to IRSA´s subsidiary Puerto Retiro, IRSA will likely lose a significant investment in a unique waterfront land reserve in the City of Buenos Aires.
 
On April 18, 2000, Puerto Retiro S.A. ("(“Puerto Retiro"Retiro”), was served notice of a filing made by the Argentine Government, through the Ministry of Defense, seeking to extend bankruptcy of Inversora Dársena Norte S.A. ("Indarsa"(“Indarsa”) to the Company. Upon filing of the complaint, the bankruptcy court issued a restraingan order, restraining the ability of Puerto Retiro to dispose of, in any manner, the real property purchased in 1993 from Tandanor.
 
Indarsa had acquired 90% of the capital stock in Tandanor from the Argentine Government in 1991. Tandanor’s main business involved ship repairs performed in a 19-hectare property located in the vicinity of La Boca neighborhood and where the Syncrolift is installed.
 
As Indarsa failed to comply with its payment obligation for acquisition of the shares of stock in Tandanor, the Ministry of Defense filed a bankruptcy petition against Indarsa, seeking to extend it to the Company.
 
The evidentiary stage of the legal proceedings has already concluded. The Company lodged an appeal from the injunction order, and such order was confirmed by the Court of Appeals on December 14, 2000. The parties filed the arguments in due time and proper manner. After the case was set for judgment, the judge ordered the suspension of the judicial order requesting the case records for issuance of a decision based on the alleged existence of pre-judgmental status in relation to the criminal case against former officials of the Ministry of Defense and the Company’s former directors of the Company,executive officers, for which reason the case will not be adjudicated until a final judgment is entered in respect of the criminal case.
 
It has been made known to the commercial court that the expiration of the limitation periodstatute of limitations has been declared in the criminal action and the criminal defendants have been acquitted. However, this decision was reversed by the Criminal Court of Cassation (Cámara de Casación Penal). An extraordinary appeal was filed and rejected, therefore an appeal was directly lodged with the Argentine Supreme Court for improper refusal to permit the appeal, and a decision is still pending.
 
The Management and theexternal legal counsel to the Company believe that there are sufficient legal and technical arguments to consider that the petition for an extension of the bankruptcy will be dismissed by the court. However, in view of the particular features and progress of the case, this position cannot be held to be conclusive.
 
In turn, Tandanor filed a civil action against Puerto Retiro and the other defendants in the criminal case for violation of Section 174 (5) based on Section 173 (7) of the Criminal Code. Such action seeks -on the basis of the nullity of the decree that approved the bidding process involving the Dársena Norte property- a reimbursement in favor of Tandanor for all such amounts it has allegedly lost as a result of a suspected fraudulent transaction involving the sale of the property disputed in the case.
 
In July 2013, the answer to the civil action was filed, which contained a number of defenses. Tandanor requested the intervention of the Argentine Government as third party co-litigant in this case, which petition was granted by the Court. In March 2015, both the Argentine Government and the criminal complainant answered the asserted defenses. On July 12, 2016, Puerto Retiro was legally notified of the decision adopted by the Tribunal Oral Federal N° 5 related to the preliminary objections above mentioned. Two of them were rejected –lack of information and lack of legitimacy (passive). We filed an appeal with regard to the rejection of these two objections. But, on the other hand, the other two objections will be considered at sentencing by the court, which is an important step in order to obtain a favorable decision. As of the date hereof, no resolution has been issued in such regard. We can not assure you thatwe will be successful in getting this Company may succeed in this order.case dismissed.
 
Property ownership through joint ventures or minority participation may limit IRSA´s ability to act exclusively in its interest.
 
In some cases, IRSA develops and acquires properties through joint ventures with other persons or entities when IRSA believes circumstances warrant the use of such structures. For example, IRSA currently owns 80% of Panamerican Mall S.A. (“PAMSA”), while another 20% is owned by Centro Comercial Panamericano S.A., and 50% of Quality Invest S.A. (“Quality Invest”).
 
IRSA could engage in a dispute with one or more of its joint venture partners that might affect its ability to operate a jointly owned property. Moreover, its joint venture partners may at any time, have business, economic or other objectives that are inconsistent with its objectives, including objectives that relate to the timing and terms of any sale or refinancing of a property. For example, the approval of certain of the other investors is required with respect to operating budgets and refinancing, encumbering, expanding or selling any of these properties. In some instances, its joint venture partners may have competing interests in its markets that could create conflicts of interest. If the objectives of its joint venture partners are inconsistent with its own objectives, IRSA will not be able to act exclusively in its interests.
 
If one or more of the investors in any of its jointly owned properties were to experience financial difficulties, including bankruptcy, insolvency or a general downturn of business, there could be an adverse effect on the relevant property or properties and in turn, on its financial performance. Should a joint venture partner declare bankruptcy, IRSA could be liable for its partner’s common share of joint venture liabilities.
 
Dividend restrictions in IRSA’s subsidiaries’ debt agreements may adversely affect it.
 
IRSA hasDividends paid by IRSA’s subsidiaries andare an important source of funds for IRSA as are cash dividends and other permitted payments from its subsidiaries. The debt agreements of its subsidiaries contain covenants restricting their ability to pay dividends or make other distributions. If IRSA’s subsidiaries are unable to make payments to it, or are able to pay only limited amounts, IRSA may be unable to make payments on its indebtedness.

29

 
IRSA is dependent on its Board of Directors.
 
IRSA´s success, to a significant extent, depends on the continued employment of Mr. Eduardo S. Elsztain, and certain other members of its board of directors and senior management, who have significant expertise and knowledge of its business and industry. The loss or interruption of their services for any reason could have a material adverse effect on its business and results of operations. IRSA´s future success also depends in part upon its ability to attract and retain other highly qualified personnel. IRSA cannot assure you that they will be successful in hiring or retaining qualified personnel or that any of I tsits personnel will remain employed by them.
 
IRSA may face potential conflicts of interest relating to its principal shareholders.
 
IRSA’s largest beneficial owner is Mr. Eduardo S. Elsztain, through us. As of June 30, 2015,2016, such beneficial ownership consisted of: (i) 372,112,411366,788,251 common shares held by us, and (ii) 900 common shares held directly by Mr. Elsztain.
 
See Item 7 – Major Shareholders and Related Party Transactions. Conflicts of interest between IRSA’s management, us and its affiliates may arise in the performance of IRSA’s business activities. As of June 30, 2015,2016, Mr. Elsztain also beneficially owned (i) approximately 37.4%30.9% of ours’ common shares and (ii) approximately 95.8%94.6% of the common shares of our subsidiary IRSA Commercial Properties. IRSA cannot assure you that its’ principal shareholders and their affiliates will not limit or cause IRSA to forego business opportunities that its affiliates may pursue or that the pursuit of other opportunities will be in IRSA'sIRSA’s interest.

 
Due to the currency mismatches between assets and liabilities, IRSA may have currency exposure.
 
As of June 30, 2015,2016, the majority of ourIRSA’s liabilities, From the Operation Center in Argentina, such as our Series I andthe Series II Notes are denominated in U.S. Dollarsdollars while ourIRSA’s  revenues are mainly denominated in Pesos.Pesos This currency gap exposes IRSA to a risk of volatility in the rate of exchange rate volatility, which would negatively affectbetween the Peso and the U.S. dollar, and its financial results ifare adversely affected when the Dollar were to appreciateU.S. dollar appreciates against the Peso.  Any further depreciation of the Peso against the U.S. Dollardollar will correspondingly increase the nominal amount of its debt in Pesos, with further adverseadversely effects on its results of operation and financial condition and may increase the collection risk of its leases and other receivables from its tenants, and mortgage debtors, most of whomwhich generate Peso-denominated revenues. Because IRSA records the value of its investment properties in Argentina at acquisition cost plus capital expediture, less amortization, any depreciation or devaluation of the Peso will have Pesodenominated revenues.an adverse effect on its financial statements.
 
IRSA’s Investment in Banco Hipotecario.
 
As of June 30, 2015,2016, IRSA owned approximately 29.99%29.91% of the outstanding capital stock of Banco Hipotecario S.A. ("(“Banco Hipotecario"Hipotecario”), which represented 14.08%11% of IRSA’s consolidated assets from its operations center in Argentina as of such date.
 
All of Banco Hipotecario’s operations, properties and customers are located in Argentina. Accordingly, the quality of Banco Hipotecario’s loan portfolio, financial condition and results of operations depend on economic, regulatory and political conditions prevailing in Argentina.
 
These conditions include growth rates, inflation rates, exchange rates, changes to interest rates, changes to government policies, social instability and other political, economic or international developments either taking place in, or otherwise affecting, Argentina.
 
Risks Relating to the Argentine Financial System and Banco Hipotecario
 
The short-term structure of the deposit base of the Argentine financial system, including Banco Hipotecario, could lead to a reduction in liquidity levels and limit the long-term expansion of financial intermediation. 
 
AfterGiven the Argentine crisis, the volume of financial activity regarding deposits and loans was severely reduced. Between 2003 and 2007, a gradual and increasing recovery of deposits levels took place. But becauseshort-term structure of the global financial crisis, these levels were reduced during 2008 only to be further improved during the last half of 2009, until the present date. 
The Argentine financial system growth strongly depends on deposits levels, due to the small size of its capital markets and the absence of foreign financings during recent years. In the medium term, the growth of credit could depend on the growth of the deposits levels. During 2011-2013 credit was able to grow at a higher rate than deposits, by consuming liquidity excess of financial institutions. Notwithstanding that, in 2014, this scenario started to change, and reasonable deposits started to grow at a faster rate that credits.
The liquiditydeposit base of the Argentine financial system, is currently reasonable, due tocredit lines are also predominantly short-term, with the high levelexception of mandatory deposits reserves of Argentine financial entities, among other short-term investments,mortgages, which represent 43% of total deposits. Notwithstanding that, because most deposits are short term, a substantial partlow proportion of the credits are also short-term maturity, and there are a small proportion of long termexisting credit lines, such as mortgages. Moreover, the restrictions on the purchase of foreign currency naturally reduce the volatility of local currency deposits.base.
 
Although liquidity levels are currently reasonable, no assurance can be given that these levels will not be reduced due to a future negative economic scenario. Therefore, there is still a risk of low liquidity levels that could increase funding cost in the event of a withdrawal of a significant amount of the deposit base of the financial system, and limit the long-term expansion of financial intermediation including Banco Hipotecario.
Future governmental measures may adversely affect the economy and the operations of financial institutions.
The Argentine government has historically exercised significant influence over the economy, and financial institutions, in particular, have operated in a highly regulated environment. We cannot assure that the laws and regulations currently governing the economy or the banking sector will remain unaltered in the future. We cannot assure you that changes will not adversely affect Banco Hipotecario’s business, financial condition or results of operations and Banco Hipotecario’s ability to honor its debt obligations in foreign currency.
As of the date of this annual report, there are three legislative bills to amend the Financial Institutions Law which have been sent to the Argentine Congress seeking to modify different aspects of the Financial Institutions Law. If the law currently in force were to be comprehensively modified, the financial system as a whole could be substantially and adversely affected. If any of these legislative bills were to be enacted or if the Financial Institutions Law were amended in any other way, there is no prediction on the impact of the subsequent amendments to the regulations on the financial institutions in general, Banco Hipotecario’s business, its financial condition and the results of operations.
Law No. 26,739 was enacted to amend the Central Bank’s charter, the principal aspects of which are: (i) to broaden the scope of the Central Bank’s mission (by establishing that such institution shall be responsible for financial stability and economic development while pursuing social equity); (ii) to change the obligation to maintain an equivalent ratio between the monetary base and the amount of international reserves; (iii) to establish that the board of directors of the institution will be the authority responsible for determining the level of reserves required to guarantee normal operation of the foreign exchange market based on changes in external accounts; and (iv) to empower the monetary authority to regulate and provide guidance on credit through the financial system institutions, so as to “promote long-term production investment”.

30

In addition, the Civil and Commercial Code, among other things, modifies the applicable regime for contractual provisions relating to foreign currency payment obligations by establishing that foreign currency payment obligations may be discharged in Pesos. This amends the legal framework, pursuant to which debtors may only discharge their foreign currency payment obligations by making payment in the specific foreign currency agreed upon in their agreements; provided however that the option to discharge in Pesos a foreign currency obligation may be waived by the debtor is still under discussion.
We are not able to ensure that any current or future laws and regulations (including, in particular, the amendment to the Financial Institutions Law and the amendment to the Central Bank’s charter) will not result in significant costs to us, or will otherwise have an adverse effect on Banco Hipotecario’s operations.
 
The stability of the financial system depends upon the ability of financial institutions, including ours, to maintain and increase the confidence of depositors.
 
The measures implemented by the Argentine government in late 2001 and early 2002, in particular the restrictions imposed on depositors to withdraw money freely from banks and the “pesification” and restructuring of their deposits, were strongly opposed by depositors due to the losses on their savings and undermined their confidence in the Argentine financial system and in all financial institutions operating in Argentina.
 
If depositors once again withdraw their money from banks in the future, there may be a substantial negative impact on the manner in which financial institutions, including ours, conduct their business, and on their ability to operate as financial intermediaries. Loss of confidence in the international financial markets may also adversely affect the confidence of Argentine depositors in local banks.
 
In the future, an adverse economic situation, even if it is not related to the financial system, could trigger a massive withdrawal of capital from local banks by depositors, as an alternative to protect their assets from potential crises. Any massive withdrawal of deposits could cause liquidity issues in the financial sector and, consequently, a contraction in credit supply.
 
The occurrence of any of the above could have a material and adverse effect on Banco Hipotecario’s expenses and business, results of operations and financial condition.
 
The asset quality of financial institutions is exposed to the non-financial public sector’s and Central Bank’s indebtedness.
 
Financial institutions carry significant portfolios of bonds issued by the Argentine government and by provincial governments as well as loans granted to these governments. The exposure of the financial system to the non-financial public sector’s indebtedness had been shrinking steadily, from 48.9% of total assets in 2002 to 9.1%10.3% in 2014.2015 and 9.2% for the period of six months ended as June 30, 2016. To an extent, the value of the assets held by Argentine banks, as well as their capacity to generate income, is dependent on the creditworthiness of the non-financial public sector, which is in turn tied to the government’s ability to foster sustainable long-term growth, generate fiscal revenues and cut back onreduce public expenditure.
 
In addition, financial institutions currently carry securities issued by the Central Bank in their portfolios, which generally are short-term; as of June 30, 2016 such securities issued by the Central Bank representsrepresented approximately 19.5%23.6% of the total assets of the Argentine financial system. As of June 30, 2015,2016, Banco Hipotecario’s total exposure to the public sector was Ps.2,286.4Ps.7,517.5 million, which represented 7.6%20.3% of its assets as of that date, and the total exposure to securities issued by the Central Bank was Ps. 2,422.21,499.8 million, which represented 7.3%4.1% of its total assets as of June 30, 2015.2016.
 
The Consumer Protection Law may limit in some of the rights afforded to Banco Hipotecario.
 
Argentine Law No. 24,240 (the “Consumer Protection Law”) sets forth a series of rules and principles designed to protect consumers, which include Banco Hipotecario’s customers. The Consumer Protection Law was amended by Law No. 26,361 on March 12, 2008 to expand its applicability and the penalties associated with violations thereof. Additionally, Law No. 25,065 (as amended by Law No. 26,010 and Law No. 26,361, the “Credit Card Law”) also sets forth public policy regulations designed to protect credit card holders. Recent Central Bank regulations, such as Communication “A” 5388, also protect consumers of financial services.
 
In addition, the Civil and Commercial Code has a chapter on consumer protection, stressing that the rules governing consumer relations should be applied and interpreted in accordance with the principle of consumer protection and that a consumer contract should be interpreted in the sense most favorable to it.
 
The application of both the Consumer Protection Law and the Credit Card Law by administrative authorities and courts at the federal, provincial and municipal levels has increased. This trend has increased general consumer protection levels. In the event thatIf Banco Hipotecario is found to be liable for violations of any of the provisions of the Consumer Protection Law or the Credit Card Law, the potential penalties could limit some of Banco Hipotecario’s rights, for example, with respect to its ability to collect payments due from services and financing provided by us, and adversely affect Banco Hipotecario’s financial results of operations. We cannot assure you that court and administrative rulings based on the newly-enacted regulation or measures adopted by the enforcement authorities will not increase the degree of protection given to Banco Hipotecario’s debtors and other customers in the future, or that they will not favor the claims brought by consumer groups or associations. This may prevent or hinder the collection of payments resulting from services rendered and financing granted by us, which may have an adverse effect on Banco Hipotecario’s business and results of operations.
 

Class actions against financial institutions for unliquidated amounts may adversely affect the financial system’s profitability.
 
Certain public and private organizations have initiated class actions against financial institutions in Argentina. The National Constitution and the Consumer Protection Law contain certain provisions regarding class actions. However, their guidance with respect to procedural rules for instituting and trying class action cases is limited. Nonetheless, through an ad hocdoctrine, Argentine courts have admitted class actions in some cases, including various lawsuits against financial entities related to “collective interests” such as alleged overcharging on products, interest rates and advice in the sale of public securities, etc. If class action plaintiffs were to prevail against financial institutions, their success could have an adverse effect on the financial industry in general and indirectly on Banco Hipotecario’s business.
 
Banco Hipotecario operates in a highly regulated environment, and its operations are subject to regulations adopted, and measures taken, by several regulatory agencies.
 
Financial institutions are subject to a major number of regulations concerning functions historically determined by the Central Bank and other regulatory authorities. The Central Bank may penalize Banco Hipotecario and its directors, members of the Executive Committee, and members of its Supervisory Committee, in the event of any breach of the applicable regulation. Potential sanctions, for any breach on the applicable regulations may vary from administrative and/or disciplinary penalties to criminal sanctions. Similarly, the CNV, which authorizes securities offerings and regulates the capital markets in Argentina, has the authority to impose sanctions on us and Banco Hipotecario’s Board of Directors for breaches of corporate governance established in the capital markets laws and CNV Rules. The Financial Information Unit ("Unidad(Unidad de Información Financiera"Financiera or “UIF”) as per its acronym in spanish) regulates matters relating to the prevention of asset laundering and has the ability to monitor compliance with any such regulations by financial institutions and, eventually, impose sanctions.

31

 
We cannot assure you whether such regulatory authorities will commence proceedings against Banco Hipotecario, its shareholders or directors, or its Supervisory Committee, or penalize Banco Hipotecario. This notwithstanding, and in addition to “Know Your Customer” compliance, Banco Hipotecario has implemented other policies and procedures to comply with its duties under currently applicable rules and regulations.
 
In addition to regulations specific to the banking industry, Banco Hipotecario is subject to a wide range of federal, provincial and municipal regulations and supervision generally applicable to businesses operating in Argentina, including laws and regulations pertaining to labor, social security, public health, consumer protection, the environment, competition and price controls. We cannot assure that existing or future legislation and regulation will not require material expenditures by Banco Hipotecario or otherwise have a material adverse effect on Banco Hipotecario’s consolidated operations.
 
Risks Relating to the Bank’s Business.
The quality of Banco Hipotecario’s loan portfolio could be impaired if the Argentine private sector continues to be affected in the event of a decrease in the level of activity.
Banco Hipotecario’s loan portfolio is concentrated on recession-sensitive segments and it is to a large extent dependent upon local and international economic conditions. This in turn might affect the credit worthiness of Banco Hipotecario's loan portfolio and its results of operations.
Increased competition and M&A activities in the banking industry may adversely affect Banco Hipotecario.
 
Banco Hipotecario foresees increased competition in the banking sector. If the trend towards decreasing spreads is not offset by an increase in lending volumes, the ensuing losses could lead to mergers in the industry. These mergers could lead to the establishment of larger, stronger banks with more resources than us. Therefore, although the demand for financial products and services in the market continues to grow, competition may adversely affect Banco Hipotecario’s results of operations, resulting in shrinking spreads and commissions.
Future governmental measures may adversely affect the economy and the operations of financial institutions.
The Argentine government has historically exercised significant influence over the economy, and financial institutions, in particular, have operated in a highly regulated environment. We cannot assure you that the laws and regulations currently governing the economy or the banking sector will remain unaltered in the future or that any such changes will not adversely affect Banco Hipotecario’ s business, financial condition or results of operations and Banco Hipotecario’ s ability to honor its debt obligations in foreign currency.
Several legislative bills to amend the Financial Institutions Law have been sent to the Argentine Congress. If the law currently in force were to be comprehensively modified, the financial system as a whole could be substantially and adversely affected. If any of these legislative bills were to be enacted or if the Financial Institutions Law were amended in any other way, the impact of the subsequent amendments to the regulations on the financial institutions in general, Banco Hipotecario’ s business, its financial condition and the results of operations is uncertain.
Law N° 26,739 was enacted to amend the Central Bank’s charter, the principal aspects of which are: (i) to broaden the scope of the Central Bank’s mission (by establishing that such institution shall be responsible for financial stability and economic development while pursuing social equity); (ii) to change the obligation to maintain an equivalent ratio between the monetary base and the amount of international reserves; (iii) to establish that the board of directors of the institution will be the authority responsible for determining the level of reserves required to guarantee normal operation of the foreign exchange market based on changes in external accounts; and (iv) to empower the monetary authority to regulate and provide guidance on credit through the financial system institutions, so as to “promote long-term production investment”.
In addition, the Civil and Commercial Code, among other things, modifies the applicable regime for contractual provisions relating to foreign currency payment obligations by establishing that foreign currency payment obligations may be discharged in Pesos. This amends the legal framework, pursuant to which debtors may only discharge their foreign currency payment obligations by making payment in the specific foreign currency agreed upon in their agreements; provided however that the option to discharge in Pesos a foreign currency obligation may be waived by the debtor is still under discussion.
We are not able to ensure that any current or future laws and regulations (including, in particular, the amendment to the Financial Institutions Law and the amendment to the Central Bank’s charter) will not result in significant costs to us, or will otherwise have an adverse effect on Banco Hipotecario’ s operations.
Risks Relating to Banco Hipotecario’s Business
The quality of Banco Hipotecario’s loan portfolio could be impaired if the Argentine private sector continues to be affected in the event of a decrease in the level of activity.
Banco Hipotecario’s loan portfolio is concentrated on recession-sensitive segments and it is to a large extent dependent upon local and international economic conditions. This in turn might affect the creditworthiness of Banco Hipotecario’s loan portfolio and its results of operations.

 
Reduced spreads without corresponding increases in lending volumes could adversely affect Banco Hipotecario’s profitability.
 
The spread for Argentina’s financial system between the interest rates on loans and deposits could be affected as a result of increased competition in the banking sector and the Argentine government’s tightening of monetary policy in response to inflation concerns.
 
Since 2009, the interest rate spreads throughout the Argentine financial system have generally increased. This increase was sustained by a steady demand for consumer loans in recent years. In 2013 and 2014, borrowing and lending rates increased significantly. However, the net interest margin of the financial system remained stable due to a substantial growth both in the loan and deposit portfolios.
 
In June 2014, the Central Bank established a system of maximum active benchmark rates for consumer loans and secured loans and additionally, in October 2014, established a new mechanism of regulation by setting a minimum deposit rate for certain deposits of natural persons.
 
We cannot guarantee that interest rate spreads will remain stable unless increases in lending or additional cost-cutting takes place.occurs. A reversal of this trend, or a new regulation imposing maximum active benchmark rates, could adversely affect Banco Hipotecario’s profitability.
Differences in the accounting standards between Argentina and certain countries with developed capital markets, such as the United States, may make it difficult to compare Banco Hipotecario’s financial statements and those prepared by companies from these other countries.
Publicly available information about Banco Hipotecario in Argentina is presented differently from the information available for registered public companies in certain countries with highly developed capital markets, such as the United States. Except as otherwise described herein, Banco Hipotecario prepares its financial statements in accordance with Central Bank GAAP, which differ in certain significant respects from Argentine GAAP and from U.S. GAAP.
The Argentine Government might prevail at Banco Hipotecario’s General Shareholders’ Meetings.
By virtue of Law No. 23,696 (the “Privatization Law”) there are no restrictions on the Argentine Government’s ability to dispose of its Class A shares and all those shares minus one could be sold to third parties through public offering. Banco Hipotecario’s By-laws set forth that if at any time Class A shares were to represent less than 42% of Banco Hipotecario’s shares with right to vote, Class D shares automatically lose their triple vote right, which could result in the principal shareholders losing control of Banco Hipotecario. Should any such situation materialize and should the Argentine Government retain a sufficient number of Class A shares, the Argentine Government could prevail in Shareholders’ Meetings (except for some decisions that call for qualified majorities) and could thus exert actual control on the decisions that must be submitted to consideration by the Shareholders’ Meeting.
 
Banco Hipotecario’s obligations as trustee of the Programa de Crédito Argentino del Bicentenario para la Vivienda Única Familiar (“PROCREAR”) trust are limited.
 
Banco Hipotecario currently acts as trustee of the PROCREAR Trust, which aims to facilitate access to housing solutions by providing mortgage loans for construction and developing housing complexes across Argentina. Under the terms and conditions of the PROCREAR Trust, all the duties and obligations under the trust have to be settled with the trust estate. Notwithstanding, if the aforementioned is not met, Banco Hipotecario could have its reputation affected. In addition, if the Argentine government decides to terminate the PROCREAR Trust and/or terminate Banco Hipotecario’sHipotecario’ s role as trustee of the PROCREAR Trust, this may adversely affect Banco Hipotecario’sHipotecario’ s results of operations.
 
InThe Argentine Government might prevail at Banco Hipotecario’ s General Shareholders’ Meetings.
By virtue of Law N° 23,696 (the “Privatization Law”) there are no restrictions on the future,Argentine Government’s ability to dispose of its Class A shares and all those shares minus one could be sold to third parties through public offering. Banco Hipotecario may consider new business opportunities,Hipotecario’ s By-laws set forth that if at any time Class A shares were to represent less than 42% of Banco Hipotecario’ s shares with right to vote, Class D shares automatically lose their triple vote right, which could turn outresult in the principal shareholders losing control of Banco Hipotecario. Should any such situation materialize and should the Argentine Government retain a sufficient number of Class A shares, the Argentine Government could prevail in Shareholders’ Meetings (except for some decisions that call for qualified majorities) and could thus exert actual control on the decisions that must be submitted to be unsuccessful.consideration by the Shareholders’ Meeting.
 
In recent years Banco Hipotecario has considered some business acquisitions or combinations and plans to continue considering acquisitions that offer appealing opportunities and that are in line with Banco Hipotecario’s commercial strategy. However, Banco Hipotecario cannot assure you that such businesses could deliver sustainable outcomes or that it will be able to consummate the acquisition of financial institutions in favorable conditions. Additionally, Banco Hipotecario’s ability to obtain the desired outcome because of said acquisitions will be partly dependent upon its ability to follow through with the successful integration of the businesses. To integrate any acquired business entails major risks, including unforeseen difficulties in integrating operations and systems; problems inherent in assimilating or retaining the target’s employees; challenges associated with keeping the target’s customers; unforeseen liabilities or contingencies associated with the target; and the likelihood of management having to take time and attention out of the business’s day-to-day to focus on the integration activities and the resolution of associated problems.

32

Cybersecurity events could negatively affect Banco Hipotecario’s reputation, its financial condition and results of operations.
 
Banco Hipotecario has access to large amounts of confidential financial information and control substantial financial assets belonging to the customers as well as to Banco Hipotecario. In addition, Banco Hipotecario provides its customers with continuous remote access to their accounts and the possibility of transferring substantial financial assets by electronic means. Accordingly, cybersecurity is a material risk for Banco Hipotecario. Cybersecurity incidents, such as computer break-ins, phishing, identity theft and other disruptions could negatively affect the security of information stored in and transmitted through Banco Hipotecario ‘s computer systems and network infrastructure and may cause existing and potential customers to refrain from doing business with Banco Hipotecario.
 
In addition, contingency plans in place may not be sufficient to cover liabilities associated with any such events and, therefore, applicable insurance coverage may be deemed inadequate, preventing Banco Hipotecario from receiving full compensation for the losses sustained because of such a disruption.
 
Although Banco Hipotecario intends to continue to implement security technology devices and establish operational procedures to prevent such damage, we cannot assure you that all of Banco Hipotecario‘s systems are entirely free from vulnerability and these security measures will be successful. If any of these events occur, it could damage Banco Hipotecario’s reputation, entail serious costs and affect Banco Hipotecario‘s transactions, as well as its results of operations and financial condition.
 
A disruption or failure in any of Banco Hipotecario’s information technology systems could adversely affect its business.
 
Banco Hipotecario depends on the efficient and uninterrupted operation of internet-based data processing, communication and information exchange platforms and networks, including those systems related to the operation of Banco Hipotecario’s ATM network. Banco Hipotecario‘sHipotecario’s operations depend on its ability to manage its information technology systems and communications efficiently and without interruption. Banco Hipotecario’s communications, systems or transactions could be harmed or disrupted by fire, floods, power failures, defective telecommunications, computer viruses, electronic or physical theft and similar events or disruptions. In addition, Banco Hipotecario’s information technology systems and operations may suffer if its suppliers do not meet the delivery of products in a timely manner or decide to end the relationship with Banco Hipotecario.
 
Any of the foregoing events may cause disruptions in Banco Hipotecario‘sHipotecario’s information technology systems, delays and the loss of critical data, and could prevent Banco Hipotecario from operating at optimal levels. In addition, the contingency plans in place may not be sufficient to cover all those events and, therefore, this may mean that the applicable insurance coverage is limited or inadequate, preventing Banco Hipotecario from receiving full compensation for the losses sustained because of such a disruption. Also, Banco Hipotecario‘sHipotecario’s recovery of losses plan may not be enough to prevent damage resulting from all the cases and Banco Hipotecario’s insurance coverage could be inadequate to cover losses from interruptions. If any of these assumptions occur Banco Hipotecario’s reputation, business, results of operations and financial condition could be adversely affected.
Differences in the accounting standards between Argentina and certain countries with developed capital markets, such as the United States, may make it difficult to compare Banco Hipotecario’s financial statements and those prepared by companies from these other countries.
Publicly available information about Banco Hipotecario in Argentina is presented differently from the information available for registered public companies in certain countries with highly developed capital markets, such as the United States. Except as otherwise described herein, Banco Hipotecario prepares its financial statements in accordance with Central Bank GAAP, which differ in certain significant respects from Argentine GAAP and from U.S. GAAP.

Operations Center in Israel
Risks related to Israel
Conditions in Israel could adversely affect our subsidiary IDBD.
Our subsidiary IDB Development Corporation is incorporated and operates in Israel. Accordingly, political, economic and military conditions in Israel directly affect IDBD’s business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel, the Palestinian Authority and Israel’s Arab neighbors. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and has continued with varying levels of severity. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel. In November 2012, for approximately one week, Israel experienced a similar armed conflict, resulting in hundreds of rockets being fired from the Gaza Strip and disrupting most day-to-day civilian activity in southern Israel. Due to these conflicts, political, economic and military conditions in Israel may directly affect IDBD and could result in physical damage to its related facilities or the interruption or curtailment of trade between Israel and its present trading partners. If IDBD’s assets are damaged as a result of hostile action or hostilities otherwise disrupt its ongoing operations, IDBD’s business could be materially adversely affected. We do not believe that the political and security situation has had any material impact on IDBD to date; however, we can give no assurance that security and political conditions will not have such effect in the future. Any armed conflict, political instability or continued violence in the region, or the interruption or curtailment of trade between Israel and its present trading partners may have a negative effect on the Israeli economy and IDBD and adversely affect the results of operations business, and financial condition, thereby negatively impacting its ability to generate revenue.
Israel’s economy may become unstable.
Over the years, the Israeli economy has been subject to periods of inflation, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. For these and other reasons, the government of Israel has, from time to time, intervened in the economy employing fiscal and monetary policies. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previous destabilizing factors could make it more difficult for IDBD to operate its business and could adversely affect its financial results.
In the years in which there is strong economic activity and positive growth in the Israeli economy, there is an increase in demand. Conversely, in times of financial crisis, demand decreases, which would adversely affect the results of IDBD and, in turn, adversely affect our consolidated results.
The compliance of the new provisions of the Reduced Centralization Act may have an adverse material impact in IDBD’s results of operations.
In December 2013, the official “Reshumot” published in Israel the Promotion of Competition and Reduction of Centralization Law, 5774-2013 (the “Reduced Centralization Act”), which imposes certain limits in the ownership and control of reporting companies.
One provision limits the pyramidal structure (or multiholding companies) of control in reporting companies (in special entities whose securities are held by public shareholders) to two layers of entities (with the holding company in the first layer not including a reporting entity that has no controlling shareholder). In case Discount Investment is considered a second-tier company, it would be prohibited to control publicly held companies. IDBD may be required to merge Discount Investments in order to enable continued control of IDBD and/or Discount Investments in other companies.
In connection with evaluating the application of the Law, in August 2014, IDBD’s Board of Directors appointed an advisory committee to examine various alternatives to address the implications of the Law to comply with the provisions that apply to control in a pyramid o multiholding company structure in order to enable continued control of IDBD and/or Discount Investments in “other tier companies” (currently held directly by Discount Investments) as of December 2019. The advisory committee has recommended the following alternatives:
(a)  
Taking either IDBD or Discount Investments private thereby removing the requirement that they be reporting entities (and as a result not a “tier company”); and
(b)  
Merge IDBD and Discount Investments.
The Board of Directors of Discount Investments has appointed an advisory committee with a similar function. As of the date of this Annual Report, no specific alternatives have been identified. The implementation of an alternative that would be adopted is likely to take several years.
Based on these analyses, IDBD considers it more likely that the completion of one of the specified alternatives will be adopted to comply with the restrictions of the Law regarding pyramidal holdings, while allowing IDBD to continue to control Discount Investments, and Discount Investments to continue to control Cellcom after December 2019. PBC, which currently is a third-tier company that controls each of Gav-Yam, Ispro and Mehadrin, has preliminarily evaluated application of the Law on its holding structure and determined that it will be able to maintain said control, as it has concluded that the Law has no effect over its financial statements.
Another new provision determines the separation of significant affiliates and significant financial institutions. In May 2015, companies of Clal Holdings Insurance Enterprises (except Clal Holdings Insurance Enterprises), including Clal Insurance and Epsilon Investment House Ltd. (held by Discount Investments) were included in the list of the significant financial institutions published in the website Ministry of Finance and the official gazette in connection with the Reduced Centralization Act. Clal Holdings Insurance Enterprises was included in the list as a significant corporation. The classification of Clal Holdings Insurance Enterprises as a significant corporation directly impacts its control over Clal Insurance.
In December 2014, Israel’s concentration committee issued directives for the appointment of a trustee in Clal Holdings Insurance Enterprises to hold the control currently held by IDBD. In addition, in December 30, 2014, the committee delivered a notification requesting IDBD to sell its interest in Clal Holdings Insurance Enterprises. The sale arrangement outlined in the letter involves IDBD’s and the Trustee’s interests in the sale process under different options and timeframes. As of June 30, 2016, the current sale arrangement involved the sale of the interest in the stock exchange or by over-the-counter trades, as per the following detail and by the following dates:
a.  IDBD would have to sell at least 5% of its equity interest in Clal from May 7, 2016.
b.  During each of the subsequent four-month periods, IDBD would have to sell at least an additional 5% of its equity interest in Clal.
c.  If IDBD sells more than 5% of its equity interest in Clal in any given four-month period, the percentage in excess of the required 5% would be offset against the percentage required in the following period.
As a result we record our investment in CLAL as a financial asset at market value through profit or loss. The request to sell the shares of CLAL in 5% tranches could cause a negative impact on the market price. A decrease in the market price of Clal’s shares would cause an immediate effect in our income statements and financial results. 
Clal Holdings Insurance Enterprises appealed to the committee, requesting a reclassification of its status of significant corporation. Dolphin filed an appeal before the Supreme Court of Justice of Israel on the Tel Aviv-Jaffo Court’s Decision.  We cannot assure that we will be successful in our appealing with the concentration committee.
The compliance of the Reduced Centralization Act, in particular the provisions related to reporting companies in pyramid structure (or multiholding companies) and separation of significant corporations and significant financial corporations, may have a material adverse impact on IDBD’s business and results of operations and, as a consequence, a negative effect on the value of our investment in IDBD. For more information about the Reduced Centralization Act and potential implications of its provisions on IDBD and its subsidiaries, see “Item 4 – Information on the Company”.
IDBD’s operations may be disrupted by the obligations of personnel to perform military service.
IDBD’s Israeli employees may be called upon to perform up to 36 days (and in some cases more) of annual military reserve duty until they reach the age of 40 (and in some cases, up to the age of 45 or older) and, in emergency circumstances, could be called to permanent active duty. In response to increased tension and hostilities, there have been occasional call-ups of military reservists, including in connection with the mid-2006 war in Lebanon and the December 2008 and November 2012 conflicts with Hamas in the Gaza Strip. It is possible that there will be additional call-ups in the future. IDBD could be disrupted by the absence of a significant number of employees or the absence of one or more key employees for extended periods of times due to military service. Such disruption could materially adversely affect IDB’s business and its results of operations. Additionally, the absence of a significant number of the employees of IDB’s Israeli suppliers and contractors or the absence of one or more key employees for extended periods of time due to military service may disrupt their operations and thereby materially adversely affect IDBD’s ability to generate revenue and, in turn, adversely affect our consolidated results.

Political relations could limit IDBD’s ability to do business internationally.
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may materially limit IDBD’s ability to export or import certain services, or reduce the domestic demand for its products and services as a result of the interruption or curtailment of trade between Israel and its present trading partners, which could adversely affect IDBD’s ability to generate revenue and, in turn, adversely affect our consolidated results.
IDBD may face difficulties in exporting offshore.
Israel’s export policy currently sets forth certain restrictions that may be unfavorable to IDBD’s activities. Changes in customs tariffs for goods and in policy on protecting local production may impact the results of some IDBD’s subsidiaries and/or associates. In addition, the possibility of exportation and sales in Israel depends on several factors, such as establishment of export and transportation facilities, obtaining regulatory approvals, the economic viability of exports, geopolitical challenges, identification of potential customers in the international market, and financing investments in development and establishment of the export projects. In view of the complexity and potential limited ability to export, IDBD may be unable to export surplus supply and this may materially adversely affect the its financial results.
IDBD’s business is subject to substantial regulation and permit requirements in Israel and may be materially adversely affected if it is unable to comply with existing regulations or requirements, or changes in applicable regulations or requirements.
Our subsidiary IDBD is subject to a number of laws and regulations affecting many aspects of its present and future operations, as well as permits from Israeli government authorities. Such laws and regulations generally require that IDBD obtain and comply with a wide variety of licenses, permits and other approvals.
In recent years there is a trend of increased legislation, standards and regulations in various sectors of Israel’s economy. Legislative changes in various areas in Israel, such as reducing economic concentration, promoting competition and laws concerning anti-trust, taxation, mandatory tender offers, regulation of the communications market, supervision of insurance business, corporate law and securities law, laws concerning supervision of prices of goods and services, consumer protection laws, environmental protection laws, planning and construction laws. This trend may impact the business and financial results of IDBD and its subsidiaries, their financial results and trading price of their securities. Furthermore, changes in policy applied by various Israeli authorities pursuant to these laws may also have similar impact.
Under these and other laws and regulations, IDBD could be subject to business restructurings, changes in its corporate structure, business strategy and other corporate adaptations. Failure to comply with these laws and regulations may also result in the suspension or termination of IDBD’s operations and subject them to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that could substantially increase its costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could have a material adverse effect on IDBD’s financial condition and results of operations. Stricter regulation applicable to IDBD’s business, restrictive trade practices, control of prices and similar factors, may materially adversely affect IDBD’s businesses.
IDBD’s activities are subject to approvals, permits and licenses awarded to them by law by various authorities (such as: the Commissioner of Capital Market, Ministry of Communications, Ministry of Environmental Protection, Petroleum Supervisor at the Ministry of Energy and Water). Failure to comply with terms and conditions of such approvals, permits or licenses may result in sanctions being imposed (including criminal sanctions) on the companies in breach, including fines and/or termination of the relevant approvals, permits or licenses. Some of the aforementioned licenses are for a limited term and may be renewed from time to time, all subject to terms and conditions thereof and to statutory provisions. As of the date hereof, we cannot predict what changes (if any) will be made with respect to future licensing and other regulatory matters. Furthermore, there is no certainty that IDBD’s existing licenses will be renewed at the end of their terms or that there will not be a change in the licenses’ conditions.
We cannot assure that the existing laws and regulations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to IDBD, or that future changes in laws and regulations will not have a detrimental effect on its business. Although not currently required, additional regulatory approvals may be required in the future due to a change in laws and regulations or for other reasons. We cannot assure that IDBD will be able to obtain all required regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory approvals, or maintain all required regulatory approvals.
Changes in regulations, licensing or any other regulatory matters could adversely affect IDBD’s ability to generate revenues. This, in turn, could represent a negative effect in our consolidated results.
IDBD may be adversely affected by class actions on consumer-related matters and environmental protection-related matters
The nature of the business developed by certain IDBD’s subsidiaries, namely Cellcom and Shufersal, the investment in Clal and the associate Adama, exposes these companies to class actions with regard to consumer issues and issues related to environmental protection, such as ionizing radiation from cellular devices, emissions, water, noise and smell pollution. Moreover, in most cases, our patients may benefit from Israeli consumer protection laws, which provide special procedural rules, such as the shifting of the burden of proof, strict liability and joint and several liability for damage caused by companies outsourced by us to provide specific services. The amount involved in this type of class action can be sumptuous, in special in issues related to environmental protection, and might even exceed IDBD’s shareholders equity, and must defend against such lawsuits at significant cost, even if such lawsuits are unfounded. If the decisions in any such actions are unfavorable to IDBD, it might be required to pay heavy fines to cover damages. Any proceeding involving consumer complaints may also adversely affect IDBD’s reputation and, consequently, its client base. Class actions may adversely affect IDBD’s financial condition and materially adversely affect its reputation. As a result, IDBD’s is subject to a potential decrease in the number of clients and in its gross operating revenue. Consequently, IDBD’s business, results of operations, financial condition and the market price of its securities may be adversely affected.

Risks related to IDBD and IDBD’s subsidiaries and/ or associates.
Most of IRSA’s  revenues are generated by IDBD, an entity incorporated and operating in Israel.
IDBD is incorporated in Israel, where it operates the totality of its business. As of June 30, 2016, IDBD’s revenues corresponded to approximately 86.4% of IRSA’s total revenues for our fiscal year then ended.
IDBD’s activities are subject to Israel’s political, economic and military conditions and also to extensive Israeli regulation related to, among other matters, licensing, competition, rates and environmental practices. There can be no assurance that governmental policies in Israel or the current regulations will not change in the future and adversely affect IDBD’s business. We are unable to predict whether IDBD’s success will continue to prosper in Israeli markets. For more information, please refer to the risk factors under “Risks Related to Israel”.
IDBD may not be able to comply with  financial commitments with its creditors and to fully comply with Israeli laws, which would have a material adverse effect on its financial condition and on its ability to continue as a going concern.
On October 11, 2015, we gained effective control over IDBD and we started consolidating IDBD’s results of operations.
IDBD’s activities were materially affected with the promulgation of the Promotion of Competition and Reduction of Centralization Law Nº 5.774-13 (the “Reduced Centralization Act”) published in December 2013. In order to fully comply with this law, IDBD could be forced to adopt some adverse measures, such as dispose its controlling interest in Clal or to merge with DIC. For more information about the Reduced Centralization Act and potential implications of its provisions on IDBD and its subsidiaries, see “Item 4 – Information on the Company”.
IDBD is also subject to compliance with certain covenants under its debt arrangements. Although IDBD has successfully negotiated waivers to these covenants with its creditors valid until December 2016, we cannot assure that it will be successful in renegotiating an extension or other new terms. If IDBD is unable to renegotiate or, as an alternative, to raise additional capital, the original covenants of such arrangements will become effective again and creditors could require immediate repayment of the debt.
All factors mentioned above raise significant uncertainties as to IDBD’s capacity to continue as a going-concern. IDBD’s ability to continue as a going concern will depend on its ability in renegotiating the terms of its arrangements, in raising additional funds and also its ability to fully comply with Israel authority’s demands.
IDBD is currently exploring alternative measures to meet its future liquidity requirements and is making payments to significant creditors as cash flow permits. IDBD is in ongoing contact with its creditors regarding future payments, and is attempting to resolve issues regarding its late payments or non-payments. Based on its future cash flow projections, IDBD expects to have the required liquidity to meet its commitments by issuing new debt in Israel, selling financial assets such as Clal and dividend payouts by Clal. IDBD could also secure additional financing through the private issuance of equity securities. However, there can be no assurance that IDBD will be able to resolve these matters satisfactorily, and if it is unable to do so, it may be unable to pay out debts as they become due and could be subject to litigation regarding non-payment that could have a material adverse effect on its business, financial condition, and results of operations.
Our independent registered public accounting firm has included an explanatory paragraph in their opinion to makes references to Note 1 of the consolidated financial statements as of and for the year ended June 30, 2016, which discloses the existence of risks and uncertainties in relation to IDBD and indicating that our financial statements do not include any adjustments related to the valuation of IDBD’s assets and liabilities that would be required if IDBD were not able to continue as a going-concern.
The outcome of the arbitration proceedings between Dolphin and ETH is uncertain and may have an adverse effect on our business.
The arbitration process between Dolphin an ETH (a non-related company established under the laws of the State of Israel, which was presented to Dolphin as a company controlled by Mordechay Ben Moshé) regarding certain matters related to the acquisition and obtainment of control of IDBD, though partially resolved, is still pending.
On September 24, 2015, the competent arbitrator resolved that: (i) Dolphin and IFISA were entitled to act as buyers in the BMBY process, and ETH had to sell all of the IDBD shares held by it at a price of NIS 1.64 per share; (ii) The buyer had to fulfill all of the commitments included in the Arrangement, including the commitment to carry out Tender Offers; (iii) The buyer had to pledge in favor of the Arrangement Trustees the shares that were previously pledged in favor of the Arrangement Trustees by the seller.
However, Dolphin and ETH still have counterclaims of different kinds which are subject to such arbitration proceeding, which, as of the filing date of this Annual Report, is still being heard. There can be no assurances of the final outcome of this process. Should the arbitrator rule in favor of ETH, the value of our investment in IDBD could be severely affected and therefore would likely have a significant adverse effect on our business, financial condition and results of operations.
IDBD’s subsidiaries do business abroad and might be subject to foreign regulation and, therefore, are subject to substantial foreign regulations and permit requirements and may be materially adversely affected if it is unable to comply with existing regulations or requirements, or changes in applicable regulations or requirements.
Some of IDBD subsidiaries do business overseas or their securities are traded on foreign stock exchanges. Changes in legislation and regulatory policy in foreign countries as well as characteristics of the business environment in the operating country may impact the financial results and business standing of those companies.
Changes in international financial reporting standards or in accounting principles applicable to IDBD and its subsidiaries may impact various data (including equity attributable to equity holders and earnings) reported on the financial statements of IDBD and its subsidiaries, their compliance with financial covenants, if any, their compliance with terms and conditions of permits and licenses awarded to them and their capacity to distribute dividends. We cannot assure that the existing laws and regulations in the countries where IDBD’s subsidiaries and/ or associates have operations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to IDBD’s subsidiaries and/ or associates, or that future changes in laws and regulations will not have a detrimental effect on its business. Although not currently required, additional regulatory approvals may be required in the future due to a change in laws and regulations or for other reasons. We cannot assure that IDBD’s subsidiaries and/ or associates will be able to obtain all required regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory approvals, or maintain all required regulatory approvals in the countries in which they operate.
Changes in regulations, licensing or any other regulatory matters in the countries where IDBD’s subsidiaries and/ or associates operate could adversely affect their ability to generate revenues. This, in turn, could represent a negative effect in IDBD’s and, as consequence, in our consolidated results.

IDBD’s subsidiary Property and Building (“PBC”) operates in real estate industry, and is exposed to the risks inherent to that industry.
As part of the real estate industry, PBC face similar risks as described above, regarding our Operation Center in Argentina, such as:
·  
“Our performance is subject to risks associated with our properties and with the real estate industry.”
·  
“An adverse economic environment for real estate companies such as a credit crisis may adversely impact our results of operations and business prospects significantly”
·  
“We may face risks associated with property acquisitions.”
·  
“Our future acquisitions may be unprofitable.”
·  
“Properties we acquire may subject us to unknown liabilities.”
·  
“Our dependence on rental income may adversely affect our ability to meet our debt obligations.”
·  
“It may be difficult to buy and sell real estate quickly and transfer restrictions may apply to part of our portfolio of properties.”
·  
“We are subject to risks inherent to the operation of office buildings that may affect our profitability.”
·  
“The recurrence of a credit crisis could have a negative impact on our major customers, which in turn could materially adversely affect our results of operations and liquidity.”
IDBD’s subsidiary Shufersal operates in the retail industry, which is a highly regulated industry in Israel.
Israeli legislation with respect to sanitation licensing, as well as new consumer legislation which confers extensive authority upon the Israel Consumer Protection and Fair Trade Authority, consumer legislation and the increased enforcement thereof, and increased oversight of prices or increases in the minimum wage, may adversely affect the business affairs of Shufersal, its financial position and its results of operations. An increase in the minimum wage may adversely affect the financial results of Shufersal, including its profitability. Additionally, the regulator’s determinations regarding the rules for conduct between the large marketing chains, of which Shufersal is one, and dominant suppliers in the food supply segment, including by virtue of the provisions of the Food Law, and regarding the merger of Shufersal with Clubmarket, which is one of the largest retail chains in Israel, may adversely affect Shufersal’s business, financial condition and results of operations.
Shufersal faces intense competition in all aspects of its business.
Shufersal closely monitors the developments in the retail sector, and adjusts its operations, if and insofar as is required, in accordance with those developments. Shufersal faces intense competition, especially as it proceeds with full implementation of its business plan. Competitive pressures, including the responses of competitors to Shufersal’s strategy and the manner of its implementation, may adversely affect Shufersal’s ability to deal with competition, and may lead to lower pricing and the loss of market share in a manner which may have an adverse effect on Shufersal’s business, financial condition and results of operations. The entry of new competitors into markets in which Shufersal is engaged, or the entry of existing competitors into segments in which they were not previously active, could adversely affect Shufersal’s business.
An ineffective wholesale market for retail, the offering of services not in accordance with the criteria of the wholesale market, or the pricing thereof by competitors in order to expand market share could harm Shufersal’s ability to offer competitive services and its competitive position. If Shufersal is unable to manage its competition in an effective manner, its future results might be adversely affected.
The sale of Adama is subject to Chinese regulatory and antitrust approvals and the sale transaction may not be completed.
On July 17, 2016, our indirect subsidiary DIC, agreed to sell its remaining 40% in Adama to ChemChina for cash consideration of US$ 230 million and cancellation of a loan due to a Chinese bank. It is expected that the sale transaction be consummated by the first week of November 2016, subject to the fulfillment of certain conditions, including the receipt of Chinese regulatory and antitrust approvals. Upon completion of the transaction, each party will waive all claims and demands against each other. If the sale transaction is not completed for any reason, the value of our investment in IDBD could be materially adversely affected and therefore would likely have a significant adverse effect on our business, financial condition and results of operations.
IDBD’s subsidiary Cellcom operates in telecommunications industry, which is a highly regulated industry in Israel. In recent years, regulation in Israel has materially adversely affected Cellcom’s results. 
A substantial part of Cellcom’s operations is subject to the Israeli Communications Law, No 1982, the Israeli Wireless Telegraph Ordinance (New Version), No 1972, the regulations promulgated thereunder and the licenses for the provision of different telecommunications services that Cellcom received from the Ministry of Communications in accordance with the Communications Law. The interpretation and implementation of the Communications Law, Wireless Telegraph Ordinance and regulations and the provisions of its general licenses, as well as its other licenses, are not certain and subject to change, and disagreements have arisen and may arise in the future between the Ministry of Communications and us. The Communications Law and regulations thereunder grant the Ministry of Communications extensive regulatory and supervisory authority with regard to its activities, as well as the authority to impose substantial sanctions in the event of a breach of its licenses or the applicable laws and regulations. Further, in the event that Cellcom materially violate the terms of its licenses, the Ministry of Communications has the authority to revoke them. Cellcom’s operations are also subject to the regulatory and supervisory authority of other Israeli regulators which have the authority to impose criminal and administrative sanctions against us. 

Cellcom’s general cellular license is valid until February 2022. It may be extended for additional six-year periods upon request to the Ministry of Communications and confirmation from the Ministry of Communications that Cellcom has complied with the provisions of its license and applicable law, has invested in the improvement of its service and network and has demonstrated the ability to do so in the future. Netvision’s unified licenses (granted in July 2015 and amended in February 2016) under which Netvision is providing landline telephony services, internet connectivity services, or ISP, and international long distance services, or ILD, are valid until March 2026 and February 2022, respectively, and may be extended for additional ten year periods, on terms similar to those provided in its cellular license. Cellcom’s other licenses are also limited in time. Cellcom’s licenses may not be extended when requested, or, if extended, the extensions may be granted on terms that are less favorable to Cellcom. In addition, the Ministry of Communications has interpreted and may interpret its licenses and has modified and may modify its licenses without Cellcom’s consent and in a manner that could limit its ability to conduct its business and harm its results of operations. Possible changes to its licenses and legislation which would require us to change its pricing plans and information systems frequently or on a timetable Cellcom cannot meet, can increase the risk of noncompliance with its licenses or violation of such legislation and its exposure to lawsuits and regulatory sanctions.
IDBD’s subsidiary Cellcom faces intense competition in all aspects of its business.
The Israeli telecommunications market is highly competitive in many of its elements, including the cellular and landline service markets. The competition level has increased substantially in recent years, following the entry of additional competitors and regulatory changes alleviating entry barriers and transfer barriers. Also, there is a continued increase of competition in the end user equipment market. In the last year, Cellcom entered both the TV market through its OTT TV service and the landline infrastructure market, through the landline wholesale market (VDSL). In the other markets Cellcom operates in and specifically in the cellular market, the intensified competition led to price competition, the adverse effects of which include a high churn rate and high subscriber acquisition costs, in addition to continued price erosion, all of which have ultimately led to a material decrease in revenues and profitability for us and other MNOs. The current level of competition in all the markets in which Cellcom operates and aggressive price plan offerings by its competitors are expected to continue. The entry of new competitors into markets in which Cellcom is engaged, or the entry of existing competitors into segments in which they were not previously active, or were partially active, as a result of regulatory changes, would allow other operators to provide services currently provided only by Cellcom to its subscribers.
An ineffective wholesale market for landline communication, including due to the exclusion of telephony services from the wholesale market, the offering of services not in accordance with the criteria of the wholesale market, or the pricing thereof in a manner which could harm Cellcom’s ability to offer competitive services packages, and competition on the part of Bezeq and Hot (due to their dominant status in the landline communication market), particularly if the cancellation or easement of the structural separation which applies to the Bezeq and Hot groups is implemented before the creation of an effective wholesale market in the landline communication market. We are unable to foresee if the current high level of competition and trends will continue in the future or if it will continue to affect Cellcom results of operations. In case Cellcom is unable to manage its competition in an effective manner, its future results might be adversely affected.
Cellcom may be adversely affected by the significant technological and other changes in the cellular communications industry.
The telecommunications market is known for rapid and significant technological changes and requires ongoing investments in advanced technologies in order to remain competitive. In recent years Cellcom has witnessed a growing demand for Internet, content and data through advanced third and fourth generation cellular phones, smartphones, modems, tablets and other devices using cellular data that resulted in a rapid and immense growth of data traffic on cellular networks and required cellular operators to upgrade their networks to accord such demand. Transfer of subscribers to unlimited packages of services and national roaming on its network, have contributed to the substantially growing demand for data traffic on its network, as well as to voice and text messages.
We estimate that data traffic will continue to rapidly grow in the future. To meet the growing demand for cellular data traffic, Cellcom is required, among others, to continue its investment in its 4G network and upgrading its transmission network, to allow larger capacity and higher data speed rates. In addition, as in order to provide optimal performance, its LTE network requires additional frequencies to those allocated to us under the LTE frequencies tender (as the Ministry of Communications expects us to evacuate 12 1800MHz which were allocated to us for its 2G network, to be used by its LTE network), Cellcom is in the process of allocating additional 1800MHz to its LTE network, in areas where lower usage of its 2G network, together with advanced and modern equipment and software features, allows such allocation, with negligible adverse effect to its 2G network performance. Nonetheless, such limited quantity of frequencies may adversely affect its network performance, specifically if Cellcom cannot use additional frequencies under network sharing agreements, as its 4G network will have 15MHz at most (similar to Pelephone’s network, unless Pelephone enters a network sharing agreement), whereas Partner and Hot’s 4G combined network enjoys 20MHz.
If Cellcom fails to obtain or maintain favorable arrangements with foreign telecommunications operators, its services may be less attractive or less profitable.
Cellcom relies on agreements with cellular providers outside Israel to provide roaming capabilities to its cellular subscribers in many areas outside Israel. Cellcom cannot control or compel the improvement of the quality of the service that they provide and it may be inferior or less advanced than the service that it provides. Some of Cellcom’s competitors may be able to obtain lower roaming rates than it does because they may have larger call volumes or can use more favorable agreements of their overseas affiliates. If Cellcom’s competitors’ providers can deliver a higher quality, more advanced or a more cost effective roaming service, then subscribers may migrate to those competitors and its results of operation could be adversely affected, more so if the proposed amendment to its license, allowing other operators to provide roaming services to its subscribers, will be adopted.
In recent years, roaming tariffs for Cellcom’s subscribers have decreased. If roaming tariffs continue to decrease including as a result of the increasing competition or the changing regulation, this could adversely affect its profitability and results of operations. Inbound roaming to its network is also influenced by its ability to maintain favorable roaming arrangements. The entry of additional UMTS providers has not only increased competition regarding outgoing roaming services but also increased competition on inbound roaming services. Additional operators or the abovementioned proposed amendment to its license, may increase such competition further. Cellcom also relies on agreements with foreign carriers to provide ILD services by Netvision as well as its international voice hubbing (providing ILD services to foreign operators) services. The risks detailed above in relation to roaming services and possible effects of such risks, apply to Netvion’s ILD and hubbing services as well.
Cellcom’s substantial debt increases its exposure to market risks, may limit its ability to incur additional debt that may be necessary to fund its operations and could adversely affect its financial stability; regulatory change, market terms and its financial results may affect its possibilities to raise debt.
IDBD’s investment Clal operates in the insurance industry, which is a highly regulated industry in Israel. Therefore, Clal is subject to substantial regulations and permit requirements in the insurance area and may be materially adversely affected if it is unable to comply with existing regulations or requirements, or changes in applicable regulations or requirements.
Clal is exposed to changes in legislation and regulation which pertain to its operating segments. In particular, some of the regulatory changes which were recently implemented and proposed, may adversely affect components of the business model in the sector. Additionally, changes in legislation and regulation, including circulars, determinations in principle, position papers and provisions which the Commissioner of Capital Markets is authorized to impose in connection with changes to policy terms, including policy premiums which may affect Clal, including with reference to products which were sold in the past, both by way of retroactive application and due to their effect on the interpretation of agreements which were signed in the past.
Significant operations in Clal are subject to detailed and complex regulation. In particular, the insurance and long-term savings activities are subject to regulatory directives which change from time to time, with respect to products which were sold over many years, and which have long insurance coverage periods and/or savings periods. Non-compliance with the regulatory requirements, including by mistake, may lead to sanctions, including the revocation of licenses and permits and monetary fines, against Clal, also as part of audits on behalf of oversight entities, and may serve as a basis for claims against it.
 
Risks Related to the ADSs and the Common Shares.
 
Shares eligible for sale could adversely affect the price of our common shares and American Depositary Shares.
 
The market prices of our common shares and ADS could decline as a result of sales by our existing shareholders of common shares or ADSs in the market, or the perception that these sales could occur. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
 
The ADSs are freely transferable under U.S. securities laws, including common shares sold to our affiliates. IFISA, which as of June 30, 2015,2016, owned approximately 37.4%30.88% of our common shares (or approximately 187,552,100154,898,780 common shares which may be exchanged for an aggregate of 18,755,21015,489,878 ADSs), is free to dispose of any or all of its common shares or ADSs at any time in its discretion. Sales of a large number of our common shares and/or ADSs would likely have an adverse effect on the market price of our common shares and the ADSs.

 
If we issue additional equity securities in the future, you may suffer dilution, and trading prices for our equity securities may decline.
 
We may issue additional shares of our common stock for financing future acquisitions or new projects or for other general corporate purposes, although there is no present intention to do so. Any such issuance could result in a dilution of your ownership stake and/or the perception of any such issuances could have an adverse impact on the market price of the ADSs.
 
We are subject to certain different corporate disclosure requirements and accounting standards than domestic issuers of listed securities in the United States.
 
There may be less publicly available information about the issuers of securities listed on the Buenos Aires Stock Market (“Mercado de Valores de Buenos Aires”Aires or “MERVAL”) as per its acronym in spanish) than is regularly published by or about domestic issuers of listed securities in the United States and certain other countries.
We are exempt from the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
 
We have identifiedThe identification of a material weakness in our internal controls over financial reporting relatedcould negative affect the trading price of our shares or ADSs
Our management is responsible for establishing and maintaining adequate Internal Control over Financial Reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our Internal Control over Financial Reporting includes a series of procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with IFRS and includes those policies and procedures that (1) pertain to the accounting for derivativemaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial instruments derived from non-routine, complex contractual provisionsstatements in accordance with IFRS and that the contextrelevant entity’s or division’s receipts and expenditures are being made only in accordance with authorizations of theour management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of an associate.our assets that could have a material effect on our consolidated financial statements.
 
Our management has concluded that our disclosure controls and procedures as of the end of fiscal year 2014 were not effective given to a material weakness in our internal control over financial reporting. This material weakness iswas related to the accounting for derivative financial instruments derived from non-routine complex contractual provisions in the context of the acquisition of an associate.associate and was already remediated. Under this concept, a material weakness is a deficiency, or combination of deficiencies, in the internal control over financial reporting that may reasonably cause that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. See Item 15. Controls“Controls and Procedures - A. Disclosure Controls and Procedures.Procedures”.
 
Any failure to implement and/or maintain improvements in the controls over our financial reporting, or any difficulties encountered in the implementation of such improvements, could result in a material misstatement in our annual or interim financial statements that: (i) may not be prevented or detected; and/or, (ii) may cause us to fail to meet our reporting obligations under the applicable securities laws. This situation may also cause investors to lose confidence in our reported financial information, and this could have an adverse impact on the trading price of our shares or ADSs.
 
Investors may not be able to effect service of process within the U.S., limiting their recovery of any foreign judgment.
 
We are a publicly held stock corporation (sociedad(sociedad anónima)nima) organized under the laws of Argentina. Most of our directors and our senior managers and most of our assets are located in Argentina. As a result, it may not be possible for investors to effect service of process within the United States upon us or such persons or to enforce against us or them in United States court judgments obtained in such courts predicated upon the civil liability provisions of the United States federal securities laws. There is doubt whether the Argentine courts will enforce, to the same extent and in as timely a manner as a U.S. or foreign court, an action predicated solely upon the civil liability provisions of the United States federal securities laws or other foreign regulations brought against such persons or against us.
 

33

If we are considered to be a passive foreign investment company for United States federal income tax purposes, U.S. Holders of our common shares or ADSs would suffer negative consequences.
 
Based on the current and projected composition of our income and valuation of our assets, including goodwill, we do not believe we were a passive foreign investment company (“PFIC”) for United States federal income tax purposes for the taxable year ending June 30, 2015,2016, and we do not currently expect to become a PFIC, although there can be no assurance in this regard. The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may be a PFIC in the current or any future taxable year due to changes in our asset or income composition or if our projections are not accurate. The volatility and instability of Argentina’s economic and financial system may substantially affect the composition of our income and assets and the accuracy of our projections. In addition, this determination is based on the interpretation of certain U.S. Treasury regulations relating to rental income, which regulations are potentially subject to differing interpretation. If we become a PFIC, U.S. Holders (as defined in “Taxation—United States Taxation”) of our common shares or ADSs will be subject to certain United States federal income tax rules that have negative consequences for U.S. Holders such as additional tax and an interest charge upon certain distributions by us or upon a sale or other disposition of our common shares or ADSs at a gain, as well as reporting requirements. Please see ‘‘Taxation—United States Taxation—Passive Foreign Investment Company’’ for a more detailed discussion of the consequences if we are deemed a PFIC. You should consult your own tax advisors regarding the application of the PFIC rules to your particular circumstances.
 
Changes in Argentine tax laws may adversely affect the tax treatment of our common shares or ADSs.
 
On September 23, 2013, the Argentine income tax law was amended by the passage of Law N° 26,893. Under the amended law, the distribution of dividends is subject to income tax at a rate of 10%, unless the dividends are distributed to Argentine corporate entities. In addition, the amended law establishes that the sale, exchange or other transfer of shares and other securities is subject to a capital gain tax at a rate of 15% for Argentine resident individuals and foreign beneficiaries. There is an exemption for Argentine resident individuals if certain requirements are met; however, there is no such exemption for non-Argentine residents. See Item“Item 10.E –“- Taxation —Argentine Taxation.”Taxation”. However, as of the date hereof many aspects of the amended tax law remain unclear and, pursuant to certain announcements made by Argentine tax authorities, they are subject to further rulemaking and interpretation, which may adversely affect the tax treatment of our common shares and/or ADSs.
 
The income tax treatment of income derived from the sale of ADSs, dividends or exchanges of shares from the ADS facility may not be uniform under the revised Argentine income tax law. The possibly varying treatment of source income could impact both Argentine resident holders as well as non-Argentine resident holders. In addition, should a sale of ADSs be deemed to give rise to Argentine source income, as of the date of this annual report no regulations have been issued regarding the mechanism for paying the Argentine capital gains tax when the sale exclusively involves non-Argentine parties. However, as of the date of this annual report, no administrative or judicial rulings have clarified the ambiguity in the law.
 
Therefore, holders of our common shares, including in the form of ADSs, are encouraged to consult their tax advisors as to the particular Argentine income tax consequences under their specific facts.

 
Holders of our ADSs may be unable to exercise voting rights with respect to the common shares underlying the ADSs at our shareholders’ meetings.
 
We will not treat the holders of our ADSs as one of our shareholders and the holders of our ADSs will not have shareholder rights. The ADS depositary will be the holder of the common shares underlying your ADSs and ADS holders may exercise voting rights with respect to the common shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. There are no provisions under Argentine law or under our by-laws that limit the exercise by ADS holders of their voting rights through the ADS depositary with respect to the underlying common shares. However, there are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. For example, holders of our common shares will receive notice of shareholders’ meetings through publication of a notice in an Official Gazette in Argentina, an Argentine newspaper of general circulation and the bulletin of the Buenos Aires Stock Exchange (“BCBA”), and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders, by comparison, will not receive notice directly from us. Instead, in accordance with the deposit agreement, we will provide the notice to the ADS depositary. If requested by us, the ADS depositary will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the ADS depositary as to voting the common shares represented by their ADSs. Due to these procedural steps involving the ADS depositary, the process for exercising voting rights may take longer for ADS holders than for holders of common shares and common shares represented by ADSs may not be voted as ADS holders desire.
 
Under Argentine law, shareholder rights may be fewermore limited or less well defined than in other jurisdictions.
 
Our corporate affairs are governed by our by-laws and by Argentine corporate law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the States of Delaware or New York, or in other jurisdictions outside Argentina. In addition, your rights or the rights of holders of our common shares to protect your or their interests in connection with actions by our board of directors may be fewer and less well defined under Argentine corporate law than under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets are not as highly regulated or supervised as the U.S. securities markets or markets in some other jurisdictions. In addition, rules and policies against self−dealing and regarding the preservation of shareholder interests may be less well defined and enforced in Argentina than in the United States, putting holders of our common shares and ADSs at a potential disadvantage.
 
The protections afforded to minority shareholders in Argentina are different from and more limited than those in the United States and may be more difficult to enforce.
 
Under Argentine law, the protections afforded to minority shareholders are different from, and much more limited than, those in the United States and some other Latin American countries. For example, the legal framework with respect to shareholder disputes, such as derivative lawsuits and class actions, is less developed under Argentine law than under U.S. law as a result of Argentina’s short history with these types of claims and few successful cases. In addition, there are different procedural requirements for bringing these types of shareholder lawsuits. As a result, it may be more difficult for our minority shareholders to enforce their rights against our directors or us or controlling shareholder than it would be for shareholders of a U.S. company.
 
The majority of our shareholders may determine to not pay any dividends.
 
In accordance with Argentine corporate law we may pay dividends to shareholders out of net and realized profits, if any, as set forth in our Audited Financial Statements prepared in accordance with IFRS. The approval, amount and payment of dividends are subject to the approval by our shareholders at our annual ordinary shareholders meeting. The approval of dividends requires the affirmative vote of a majority of the shareholders entitled to vote at the meeting. As a result, we cannot assure you that we will be able to generate enough net and realized profits so as to pay dividends or that our shareholders will decide that dividends will be paid
paid.
 
Our ability to pay dividends is limited by law and economic conditions.
 
In accordance with Argentine corporate law, we may pay dividends in Pesos out of retained earnings, if any, to the extent set forth in our audited financial statements.Audited Financial Statements. Our ability to generate retained earnings is subject to the results of our operations. During 2014 inflation has accelerated mainly due to the devaluation process carried out by the Argentine Central Bank.operations.. The uncertainty surrounding future rates of inflation may affect our results of operations and as a resultconsequently our ability to pay dividends. If the Peso continues to devaluate significantly, all of the negative effects on the Argentine economy related to such devaluation could recur, with adverse consequences on our business and as a result on the results of our operations and our ability to pay dividends.
 
The ability of holders of the ADS to receive cash dividends may be limited.
 
The ability of the ADS holders to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in Pesos into U.S. Dollars. Under the terms of our deposit agreement with the depositary for the ADSs, to the extent that the ADS depositary can in its judgment, and in accordance with local exchange regulations, convert Pesos (or any other foreign currency) into U.S. Dollars on a reasonable basis and transfer the resulting U.S. Dollars abroad, the ADS depositary will promptly as practicable convert or cause to be converted all cash dividends received by it in Pesos on the deposited securities common shares into U.S. Dollars. If, in the judgment of the depositary, this conversion is not possible on a reasonable basis (or is not permitted by applicable Argentine laws, regulations and approval requirements), the ADS depositary may distribute the foreign currency received by it in Pesos in Argentina or in its discretion hold such currency uninvested for the respective accounts of the owners entitled to receive the same. As a result, if the exchange rate fluctuates significantly during a time when the depositary cannot or does not convert the foreign currency, you may lose some or all of the value of the dividend distribution. For further information see “Risks Relating to Argentina—Restrictions on transfers of foreign currency and the repatriation of capital from Argentina may impair our ability to pay dividends and distributions.”
 
Our inabilityability to providepay dividends is limited by law and our by-laws.
In accordance with Argentine corporate law, we may pay dividends in Pesos out of retained earnings, if any, to the extent set forth in our audited financial statements for IDBD in accordance with Rule 3-09statements. Our ability to generate retained earnings is subject to the results of Regulation S-Xour operations. During 2014 inflation accelerated mainly due to the devaluation process carried out by the Central Bank. The uncertainty surrounding future inflation may cause us to be unable to completeaffect our results and as a registered offering, which would materially adversely affectresult our ability to accesspay dividends. If the capital markets, may cause certain of our shareholdersPeso continues to be unable to rely on Rule 144 for sales of our securities and may ultimately result in the delisting of our ADSs from NASDAQ.
We have been unable to obtain financial statements for IDBD for the year ended December 31, 2014 audited in accordance with auditing standards generally accepted in the United States (“U.S. GAAS”) that may be required to be included in this Annual Report on Form 20-F by Rule 3-09 of Regulation S-X (“Rule 3-09”). As of June 30, 2015, we held 49% of IDBD and, as such, we did not control IDBD and did not have the power to direct IDBD or its management to provide us with such audited consolidated financial statements. In reliance on Rule 12b-21 promulgated under the Exchange Act and Rule 409 promulgated under the Securities Act of 1933, as amended, we have provided unaudited consolidated financial statements for IDBD for the year ended December 31, 2014, which do not comply with Rule 3-09. As a result of including such financial information, we do not believe that the omissiondevaluate significantly, all of the audited financial statements in accordancenegative effects on the Argentine economy related to such devaluation could recur, with Rule 3-09 will have a material impactadverse consequences on a reader’s understanding of our financial condition or our results of operations.
We are in the process of requesting a waiver from the SEC for filing the audited consolidated financial statements of IDBD for the year ended December 31, 2014 as may be required by Rule 3-09. We cannot provide you with any assurances that we will obtain this waiver. If the SEC does not grant this waiver to us, we will have to file an amendment to this annual report including the financial statements of IDBD for the year ended December 31, 2014 audited in accordance with U.S. GAAS as soon as such financial statements become available. If this annual report on Form 20-F is considered materially deficient due to the lack of financial statements of IDBD for the year ended December 31, 2014 audited in accordance with U.S. GAAS, we may no longer be considered current in our Exchange Act reporting requirements until the time we file such amendmentbusiness and we may no longer be considered timely in our Exchange Act reporting requirements. As a result, we would become ineligible to use a “short form” registration statement on Form F-3 for 12 months. In addition, the SEC may not declare effective any registration statement that we file in connection with an offering that requires the financial statements under Rule 3-09 to be included. If, as a result we are unable to complete a registered offering,on the results of our operations and our ability to access the public capital markets would be materially adversely affected. Any resulting inability to complete a registered offering may materially adversely impact our business, liquidity position, growth prospects, financial condition and results of operations. Furthermore, the Rule 144 safe harbor for the sale of our securities may be unavailable for a certain period of time, which may make it harder to effect such sales. Finally, our ADSs may ultimately be delisted from NASDAQ.pay dividends.
 

Item 4.                      Information on the Company
 
 
General Information
 
Our legal name is Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria, and our commercial name is “Cresud”. We were incorporated and organized on December 31, 1936 under Argentine law as a stock corporation (sociedad anónima) and were registered with the Public Registry of Commerce of the City of Buenos Aires (Inspección General de Justicia), on February 19, 1937 under number 26, on page 2, book 45 of National By-laws Volume. Pursuant to our bylaws, our term of duration expires on July 6, 2082. Our headquarters are located at Moreno 877, 23rd Floor (C1091AAQ), Ciudad Autónoma de Buenos Aires, Argentina. Our telephone is +54 (11) 4814-7800, and our website is www.cresud.com.ar.
 
Information contained in or accessible through our website is not a part of this annual report on Form 20-F. All references in this annual report on Form 20-F to this or other internet sites are inactive textual references to these URLs, or “uniform resource locators” and are for information purposes only. We assume no responsibility for the information contained on these sites.
 

34


History
 
We were incorporated in 1936 as a subsidiary of Credit Foncier, a Belgian company engaged in the business of providing rural and urban loans in Argentina. We were incorporated to administer real estate holdings foreclosed by Credit Foncier. Credit Foncier was liquidated in 1959, and as a part of such liquidation, our shares were distributed to Credit Foncier’s shareholders and in 1960 were listed on the Buenos Aires Stock Exchange (“BASE”). During the 1960s and 1970s, our business shifted to exclusively agricultural activities.
 
In 1993 and 1994, Consultores Asset Management acquired, on behalf of certain investors, approximately 22% of our shares on the BASE. In late 1994, an investor group led by Consultores Asset Management (including Dolphin Fund plc.) acquired additional shares increasing their aggregate shareholding to approximately 51.4% of our outstanding shares. In 1995, we increased our capital through a rights offering and global public offering of ADRs representing our common shares and listed such ADRs on the NASDAQ. We started our agricultural activities with 7 farmlands and 20,000 hectares under management.
 
As of June 30, 2015,2016, we have invested approximately Ps. 1,077.5 million to acquire our current 64.30%had a 63.77% equity interest in IRSA (without considering treasury shares). IRSA is one of Argentina’s largest real estate companies and is engaged in a range of diversified real estate activities including residential properties, office buildings, shopping centers and luxury hotels in Argentina. A majority of our directors are also directors of IRSA.
 
In line with our international expansion strategy, on September of 2005 we participated in the creation of Brasilagro with the purpose of replicating our business model in Brazil. We created BrasilAgro together with our partners, Cape Town Llc, Tarpon Investimentos S.A., Tarpon Agro LLC, Agro Investments S.A. and Agro Managers S.A.
 
On May 2, 2006, BrasilAgro’s shares were listed on the Novo Mercado of the Brazilian Stock Exchange (“BOVESPA”) with the symbol AGRO3. BrasilAgro’s shares were placed jointly with Banco de Investimentos Credit Suisse (Brazil) S.A. in the Brazilian market through investment mechanisms regulated by controlling authorities and with sales efforts pursuant to an exception from registration under the US Securities Act of 1933. The amount originally offered was R$ 532 million, equivalent to 532,000 common shares at a price of R$ 1,000 per share of BrasilAgro.
 
In addition, we purchased shares in the offering for R$ 42.4 million (approximately US$ 20.6 million). Following such contribution we held a total amount of 42,705 shares, equivalent to 7.4% of BrasilAgro’s capital stock. On October 31, 2007, BrasilAgro carried out a 1-for-100 share split approved at the special shareholders' meeting held on March 15, 2007 and ratified at the annual shareholders' meeting held on October 29, 2007. Following this split, BrasilAgro's capital stock was composed of 58,422,400 common shares.
 
On October 20, 2010 and on December 23, 2010, along with Tarpon we executed two amendments to the share purchase agreement dated as of April 28, 2010, under which we acquired 9,581,750 shares of common stock of BrasilAgro, representing 16.40% of the outstanding stock. Consequently, on October 20, 2010 we paid R$25.2 million and on December 23, 2010 we paid R$50.8 million, and the price reminder of R$52.6 million was paid on April 27, 2011.
 
Consequently, as of the date of this annual report, we hold 23,150,050 shares or 39.76% of BrasilAgro’s outstanding capital stock. It should be noted that such acquisition of shares does not imply any change of control within the shareholders’ group of BrasilAgro according to the legal regime in Brazil;Brazil. Additionally, we own 168,902177,004 BrasilAgro’s first issuance warrants and 168,902177,004 BrasilAgro’s second issuance warrants.
 
In addition, during the last quarter of calendar year 2010, we entered into an agreement by means of which we assigned all equity and political rights related to 2,276,534 shares of BrasilAgro for two years. The agreement also provides a promise to sell, under which the assignee may at any time request the sale of BOVESPA’s shares or the transfer of shares on its behalf. In consideration for the assignment, we paid a fixed value of US$0.8 million and additionally, in the event the assignee requested the sale or transfer of share, it should paid US$7.15 per share sold or transferred. On June 27, 2012, we agreed together with Mr. Elie Horn and Cape Town Llc. to terminate the shareholder’s ageerrment.
From fiscal year 2011, we present our financial statements in consolidated form with Brasilagro’s. In November past, Brasilagro’s shares became listed as Level II ADRs on the NYSE, under the ticker symbol LND.
 
In the context of operations that represent a new expansion of our agricultural business in south america, on September 2008, we entered into several agreements to carry out real estate and agricultural, livestock and forestry activities in the Republic of Paraguay. Under these agreements, a new corporation was organized together with Carlos Casado S.A. (“Carlos Casado”) under the name Cresca, in which we hold a 50% equity interest. Additionally, we provide consulting services for the agricultural, livestock and forestry development of a rural property of 41,931 hectares.
 
In March 2008 we concluded a capital increase of 180 million shares. As a result, 180 million shares offered at the subscription price of US$ 1.60 or Ps. 5.0528 per share were fully subscribed, in the local and international markets. In addition, each shareholder received, without additional cost, one warrant for each share subscribed. See Item 9 “The Offer and Listing – A. Offer and Listing Details - Stock Exchanges in which our securities are listed”. This capital increase allows us to expand our international operations to Paraguay and Bolivia.
 
We entered into an agreement to purchase a 50% interest in a rural property located in Mariscal José Felix Estigarribia, Department of Boquerón, Chaco Paraguayo, Republic of Paraguay, owned by Carlos Casado, for a price of US$5.2 million, in order to contribute them to the new company organized. The contribution was made on January 26, 2009, and the title deed to the property was executed on February 3, 2009. Therefore, jointly with the contribution made by Carlos Casado, the total value of the contributions in Cresca is US$10.5 million. In addition, Cresca has an option granted by Carlos Casado for the purchase of 100,000 additional hectares located in Paraguay.
 
On March 19, 2010 the option granted under the agreement dated September 3, 2008 was partially exercised, whereby 3,614 hectares, valued at US$350 each, were transferred to Cresca. Finally, on June 29, 2010, the title deed was executed, involving the conveyance of 3,646 hectares.
 
In December 2013, we sold our entire interest in Cresca, in which we held 50% of its capital stock, capital, and the option granted by Carlos Casado for the purchase of 100,000 additional hectares located in Paraguay, to our subsidiary Brasilagro for US$ 18.5 million, thus adding 145,000 hectares in the Paraguayan Chaco to its land portfolio intended for development. On April 3, 2014, Cresca signed a bill of sale whereby it sells an area of 24,624 hectares located in Chaco Paraguayo.
 
During fiscal year 2015 the option granted under the agreement dated September 3, 2008 was exercised, whereby 60,531 hectares, valued at US$350 each, were transferred to Cresca.

 
In the framework of a series of transactions that represent a new expansion of our agribusiness operations in South America, in line with our business plan, we have incorporated companies that own land in the Republic of Bolivia during 2008.

35

 
For such purposes, the following companies were incorporated: Agropecuaria Acres del Sud S.A (“Acres del Sud”), Ombú Agropecuaria S.A.(“Ombú”), Yatay Agropecuaria S.A. (“Yatay”) and Yuchan Agropecuaria S.A. (“Yuchan”). The preceding Bolivia-based companies acquired land for agricultural operations. We maintain a 100.00%100% ownership interest in the capital stock of those companies, all engaged in agricultural operations.
 
In addition, during October 2008, we acquired, a company named Helmir S.A. (“Helmir”), domiciled in the Republic of Uruguay and incorporated with a broad-ranging corporate purpose.
 
In line with our international expansion strategy, we have entered into a number of agreements to formalize our position in various South American countries. In July 2008, we, executed several promise to purchase agreements for an aggregate of 12,166 hectares in the Republic of Bolivia for a total price of US$28.9 million.
 
In connection with these lands, on November 20, 2008, two purchase instruments including delivery of possession were executed, as part of the process of casting into public deed and filing of deeds with the relevant registries, involving the purchase of 883, 2,969 and 3,748 hectares in “San Cayetano,” “San Rafael” and “La Fon Fon” farmlands, respectively, located in Santa Cruz, Bolivia.
 
On January 22, 2009, we executed a deed of purchase for 4,566 hectares in Las Londras farmlands, located in the Province of Guarayos, Republic of Bolivia. On that date, the sum of US$3.8 million was paid, representing 42.9% of the total agreed price. The remaining balance is payable in two annual installments: the first one was paid during the 2010 fiscal period, and the second one was paid in fiscal year 2011.
 
During fiscal year 2010, 10,800 hectares of the farmlands located in Bolivia were sown. This region has traditionally achieved double harvesting of soybean, which means that better results can be obtained per hectare during a single season; yet, the weather conditions that prevailed during the last year have not allowed double harvesting.
 
In June 2011, we entered into a purchase agreement for two agricultural parcels located at Santa Cruz, Republic of Bolivia, with a total surface of 5,000 hectares, which are used for agricultural exploitation: (i) The first parcel has a surface of approximately 2,660 hectares for sugar cane exploitation purposes. The purchase price was US$8.4 million which was fully paid, and (ii) the second parcel has a surface of approximately 2,340 hectares for soybeans exploitation purposes. The purchase price was US$4.9 million which was fully paid.
 
Additionally, we have agreed to sell a parcel of La Fon Fon with a surface of 910 hectares for US$3.64 million and 1,643 hectares of "La Fon Fon II" for an overall amount of US$ 7.21 million.
In December 2013, we sold to our subsidiary Brasilagro the entire interest in CRESCA, representing 50% of its stock capital.
 
On May 27, 2014 Ombú executed a purchase and sale agreement involving a sale subject to retention of title covering 883 hectares of “San Cayetano I” for an aggregate amount of US$ 4.2 million.
 
Acquisitions,On July 6, 2016, we sold to the "El Invierno" and "La Esperanza" farmlands. The total amount of the transaction was set at US$ 6 million, which of US$ 5 million have been paid and the balance of US$ 1 million, secured by a mortgage on the property, in five equal, consecutive and annual installments ending in August 2021. For more information see “Cresud’s Recent Developments.”
In October 11, 2015, continuing with IRSA’s strategy of expansion and diversification in the international markets, we gained control of the Israeli conglomerate IDBD. IDBD is one of the largest and most diversified conglomerates in Israel which participates through its subsidiaries in numerous markets and industry sectors, such as: real estate (Property & Building Corporation), supermarkets (Shufersal), agrochemicals (Adama), insurance (Clal Holdings Insurance Enterprises), and telecommunications (Cellcom), among others. IDBD’s shares ceased to be listed on the Stock Exchange of Tel Aviv (“TASE”). For more information about the control obtainment of IDBD please see “Significant acquisitions, dispositions and authorization pending approvaldevelopment of business - Acquisition of control of IDBD”.
 
Year
Significant acquisitions, dispositions and development of business
Acquisitions
a)  
Acquisition of control of IDBD.
On May 7, 2014, the Company, acting indirectly through Dolphin, acquired jointly with ETH, an aggregate of 106.6 million common shares in IDBD, representing 53.30% of IDBD’s stock capital, in the context of a restructuring Arrangement of IDBH, IDBD’s parent company. Under the terms of the agreement, Dolphin and ETH (the “Shareholders’ Agreement”)1, Dolphin acquired 50% interest in this investment, and ETH acquired a 50% equity stake in IDBH. The initial investment amount was NIS 950 million, equivalent to approximately US$272 million at the exchange rate prevailing on that date.
On May 28, 2015, in accordance to the requirements under existing shareholder arrangements, ETH launched a tender offer to acquire all the shares of IDBD held by minority shareholders, at a fixed price.  The obligation to consummate this acquisition was assumed by the buyers.  On June 10 and 11, 2015, Dolphin gave notice to ETH of its intention to buy all the shares of IDBD held by ETH.
After certain aspects of the offer were resolved in arbitration brought by Dolphin and ETH, on September 24, 2015, the arbitration panel resolved that: (i) Dolphin and IFISA were entitled to act as buyers in the tender offer and ETH had to sell all IDBD shares held by it (92,665,925 shares) at a price of NIS 1.64 per share; (ii) the buyer was obligated to fulfill the commitments assumed by ETH, including the commitment to carry out the tender offers; and (iii) the buyer was obligated to pledge the shares of acquired from ERT to the Agreement Trustees.
On October 11, 2015, the BMBY process concluded, and IFISA acquired all IDBD’s shares from ETH. Consequently, the Shareholders’ Agreement was terminated and members of IDBD’s board of directors appointed by ETH tendered their resignations, leaving Dolphin with the authority to appoint new members to the Board. Additionally, Dolphin pledged additional shares as collateral to secure compliance with the IDBD stock purchase agreement, thereby increasing the number of pledged shares to 64,067,710. As a consequence, IRSA acquired control of IDBD and started to consolidate financial statements as from that date.
In addition to the arbitration decision issued on September 24, 2016, ETH and Dolphin have counterclaims that remain unresolved in such arbitration proceeding. As of the date of this Annual Report, the proceeding is still pending.
Subsequently following the exercise of BMBY, Dolphin has entered into an option agreement with IFISA that grants Dolphin the right for a period fo two years to acquire the 92,665,925 shares in IDBD owned by IFISA at a price per share of NIS 1.64 plus an annual interest rate of 8.5%. The exercise date for the option extends for two years.  Dolphin also has a first refusal if IFISA agrees to sell these shares to a third party. The value of the option agreement as of June 30, 2016 is zero.

b)  
Acquisition of non-controlling interest
Dolphin was required to carry out the first tranche of tender offers in December 2015. Before expiration of such first tranche, Dolphin and the arrangement trustees (the “Trustees”) entered into an extension agreement (the “Extension Agreement”), which was replaced by the final agreement approved by approximately 95% of the non-controlling shareholders of IDBD (excluding IFISA) and by warrants holders of IDBD on March 2, 2016 and by the competent court on March 10, 2016. The major amendments to the Arrangement were:
(i)Replacement of the obligation to conduct tender offers as previously established under the Arrangement whereby Dolphin would purchase all the shares outstanding on March 29, 2016 from non-controlling shareholders of IDBD (except for those held by IFISA) on March 31, 2016. On March 29, 2016, all IDBD shares would be delisted from the TASE. On that date, all IDBD warrants held by non-controlling shareholders would expire and Dolphin would make capital contributions to IDBD or grant subordinate loans, as described hereafter.
(ii)The price to be paid for each IDBD share held by non-controlling shareholders on March 29, 2016 would be NIS 1.25 payable in cash, plus NIS 1.20 adjusted nominal value in bonds of the IDBD Series 9 (the “IDBD Bonds”), which IDBD will issue directly to non-controlling shareholders and holders of warrants, and Dolphin will inject funds into IDBD equal to the adjusted nominal value of IDBD Bonds. Additionally, Dolphin would undertake to pay NIS 1.05 per share (subject to adjustments) in cash if Dolphin, either directly or indirectly, gains control of Clal, or if IDBD sells a controlling stake in Clal under certain parameters (the “Clal payment”), which refers mainly to Clal’s sale price (at a price which exceeds 75% of its book value upon execution of the sale agreement, subject to adjustments) and, under certain circumstances, the proportion of ownership of Clal shares sold by IDBD.
(iii)The warrants held by non-controlling shareholders that have not been exercised until March 28, 2016 expired on March 31, 2016. Each warrant holder was entitled to elect whether: (a) to receive IDBD bonds (based on the adjusted nominal value) in an amount equal to the difference between NIS 2.45 and the exercise price of the warrants and be entitled to the Clal payment; or (b) to receive a payment determined by an independent appraiser and approved by Court. Regarding warrant holders choosing this second alternative of payment, the District Court has rejected the experts opinion with respect to the evaluation of the Clal payment and one of the warrants holders has decided to file an appeal before the Supreme Court. As of the date of this filing, the process has not been ended and the Supreme Court has not rendered a decision yet.
(iv)Dolphin committed to providing IDBD a total amount of NIS 515 million (the “Contribution to IDBD”), out of which Dolphin contributed NIS 15 million in February 2016 and NIS 85 million in March 2016. The amount injected to IDBD would be reduced by any capital contribution resulting from the exercise of warrants held by non-controlling shareholders (maximum amount of approximately NIS 37.5 million). The contribution to IDBD would further cover the IDBD Bonds necessary to comply with the transactions described above (between NIS 166.5 million and NIS 178 million), and the balance would be contributed until completing the amount committed by Dolphin either as a capital contribution or as a subordinated loan which amounted to NIS 248.45 million.
(v)Dolphin had to pledge 28% of its IDBD shares, as well as all rights held by Dolphin in relation to the subordinated loan granted in the amount of NIS 210 million in December 2015, until the payment obligation for Clal has been completed or has expired, after which the pledge will be discharged. Should new shares be issued by IDBD, Dolphin will be required  to pledge additional shares until completing the 28% of all IDBD share capital. This pledge supersedes the existing pledge on approximately 64 million shares of IDBD and all Dolphin’s rights in relation to the Subordinated Loan.
(vi)Additionally, Dolphin agreed not to exercise its right to convert the subordinated loans into shares of IDBD until the pledge described above has been released. Should the pledge on subordinated loans be exercised by the Trustees, then those trustees may convert the subordinated loans into shares; however, in such case, the maximum percentage of the IDBD capital that may be pledged is 35%, and any shares in excess of such amount will be released from the pledge.
On March 31, 2016: (i) Dolphin acquired all shares from IDBD’ minority shareholders (except for IFISA), (ii) all warrants held by IDBDs minority shareholders expired, and (iii) Dolphin made additional contributions to IDBD via subordinated loans pursuant. All commitments to invest in IDBD by Dolphin have been satisfied; only obligation to make a payment to Clal is outstanding, provided certain conditions are met. Additionally, Dolphin is obligated ound to exercise its warrants if both of the following conditions occur:
(i)
An agreement is reached to renegotiate the debt covenants applicable to IDBD and its subsidiaries; and
(ii)
Control over Clal is obtained.
The obligation would amount to NIS 391 million. The warrants mature on February 10, 2018.  As of June 30, 2016, IRSA’s indirect interest in IDBD was 68.28% without considering dilution.
The transaction described above represented the acquisition of an additional interest of 19.28% in IDBD for a total amount of Ps.1,249 million. As a result of this transaction, the non-controlling interest was increased by Ps.346 million and the interest attributable to the shareholders’ of the controlling parents was increased by Ps.234 million.
Acquisition and disposal of investment properties
During the fiscal year ended June 30, 2016, IRSA sold certain floors corresponding to Maipú 1300 Building, Intercontinental Plaza and all the floors corresponding to Dique IV and Isla Sirgadero, among others. All sales of the year led to a combined profit for the us of Ps. 1,101 million, disclosed within the line “Gain from disposal of investment properties” in the Statement of Income.
During the fiscal year ended June 30, 2015, IRSA acquired five plots of farmlands in Luján in the amount of Ps. 210 million and, through IRSA CP, a plot of land in Córdoba in the amount of Ps. 3.1 million, and has sold floors corresponding to Maipú 1300 building, Intercontinental Plaza, Bouchard 551, the entire Madison 183 building and parking spaces in Bouchard 551, Libertador 498 and Maipú 1300.  All sales of the year led to a combined profit for us of Ps. 1,150.2 million, disclosed within the line “Gain from disposal of investment properties” in the Statement of Income.
During the fiscal year ended June 30, 2014, IRSA acquired, through IRSA CP, a building next to Alto Palermo Shopping for US$ 3.8 million and has sold floors corresponding to Maipú 1300 building, Bouchard 551 and the entire buildings Mayo 589, Rivadavia 565, Costeros Dique IV Constitución 1159 and parking spaces in Maipú 1300, Bouchard 551 and Libertador 498 buildings. All sales of the year led to a combined profit for us of Ps. 230.9 million, disclosed within the line “Gain from disposal of investment properties” in the Statement of Income.
Changes in non-controlling interest
IRSA
During the fiscal year ended June 30, 2016, we sold a 0.93% interest in IRSA for a total amount of Ps. 86.4 million. This resulted in an increase in non-controlling interests of Ps. 20.6 million and a increase in equity attributable to holders of the parent of Ps. 40.3 million, net of tax effect.
During the fiscal year ended June 30, 2015, we sold a 1.81% interest in IRSA for a total amount of Ps. 181.8 million. This resulted in an increase in non-controlling interests of Ps. 33.7 million and a increase in equity attributable to owners of the parent of Ps. 97.7 million, net of tax effect.

The effects of disposals of the ownership interest of IRSA on the equity attributable to owners of us is summarized as follows:
 
June 30,  2016
Ps. Million
 
June 30, 2015
Ps. Million
Carrying amount of the non-controlling interests sold by us(20.6) (33.7)
Consideration collected 
86.4 181.8
Tax effect 
(25.5) (50.4)
Reserve recorded in equity 
40.3 97.7
During the fiscal year ended June 30, 2015, we acquired a 0.65% interest in IRSA for a total amount of Ps. 50.7 million. This resulted in a decrease in non-controlling interests of Ps. 12.7 million and an decrease in equity attributable to holders of the parent of Ps. 38 million, net of tax effect.
The effect of acquisition of the ownership interest of IRSA on the equity attributable to owners of us is summarized as follows:
June 30, 2015
Ps. Million
Carrying amount of our interest acquired of 
12.7
Consideration paid for non-controlling interests 
(50.7)
Reserve recorded in equity                                                                                                 (38.0)
On June 10, 2014, the Board of Directors of IRSA resolved to finish the stock repurchase plan that was approved by resolution of the Board on July 25, 2013, and modified by resolutions adopted on September 18, 2013, October 15, 2013 and October 22, 2013. During the term of the Stock Repurchase Plan, IRSA has repurchased 4,904,697 shares for an aggregate amount of Ps. 37,905,631.
Dolphin
During year 2015, we through our subsidiaries, contributed an amount of US$ 146 million in Dolphin. Such amount was also allocated to increase Dolphin’s investment in IDBD. This resulted in a decrease in non-controlling interests of Ps. 21 million and an increase in equity attributable to the holders of the parent.
 
Sale of Farmlands
Cresca farmland
 
On April 3, 2014, Cresca S.A. signed a bill of sale whereby it sells an area of 24,624 hectares located in Chaco Paraguayo. The total price iswas US$ 14.7 million (Ps. 56.3(equivalent to Ps. 116.9 million), which amount shall be collectable as followsfollows: US$ 1.8 million (equivalent to Ps. 14.3 million) were collected upon the execution of the bill of sale, US$ 4.3 million (equivalent to Ps. 34.2 million) upon execution of the conveyance deed; US$ 3.7 million (equivalent to Ps. 33.1 million) interest-free inbetween April and July, 2015; and US$ 4.9 million (equivalent to Ps. 73.1 million) interest-free were collected in July 2016.2016, thus being cancelled all the mortgage that had been granted in guarantee price balance. Possession was delivered upon execution of the conveyance deed of title and constitution of a mortgage to secure payment of the balance, on July 14, 2014.
The Company hasdeed. We have recognized gains of Ps. 19.1 million as result of this transaction.
 
Sale of Cremaq farmland
 
On June 10, 2015, Brasilagro sold the remaining area of 27,745 hectares of Cremaq field, an establishment, located in the municipality of Baixa Grande do Ribeiro (Piaui). The saletransaction price was pricedfixed at Rs. 270 million (Ps. 694.0(equal to Ps. 694 million), which have already been fully collected, and Rs. 49.7 million (equivalent to Ps. 127.7 million) of which Rs. 67.5 million (Ps. 196.8 million) were collected in full asremain under “Restricted Assets” on condition that the public deed for 6,020 be registered and that an agreement for the termination of the date of these financial statements.
The Company haspossessory actions related to a disputed fraction be notarized. We have recognized gains of Ps. 525.9 million as result of this transaction.
 
Sale of La Fon Fon II farmlands
 
On October 17, 2013, Yuchán Agropecuaria signed a purchase-sale agreement involving a sale subject to retention of title involving 1,643 hectares of "La Fon Fon II" for an overall amount of US$ 7.21 million (equivalents to Ps. 59.059 million). As of the consolidated financial statementbalance sheet date, the amount of US$ 1.57.1 million (equivalent to Ps. 58.1 million) has been collected, and the remaining balance amounts to US$ 5.710.12 million (equivalent to Ps. 0.9 million) that will be cancelled in 6 semi-annual2 installments, starting in December this year, and concluding in June, 2018.December 2017. Under the contract, the conveyance shallwill be recorded with the Registry once the price has been fully paid off. On June 24, 2015, possession was granted by Yuchán Agropecuaria.n. During thisthe year the Company2015 we recognized a profit before tax of US$ 2.7 million (equivalents to Ps. 24.6 million) as result of this transaction.
 
Sale of investment propertiesAraucária
 
On July 7,June 27, 2014, IRSA signed the transfer deed forBrasilagro sold a total area of 1,164 hectares of Araucaria farmland.
The sale was priced at Rs. 32.5 million (Ps. 117.5 million). We recorded a profit before tax on the sale of the 19th and 20th floorsAraucaria farmland for an amount of the Maipú 1300 Building. The total price of the transaction wasRs. 21.0 million (or Ps. 24.7. Such transaction generated a profit before tax of approximately Ps. 20.3 million.75.8 million).
 
On September 29, 2014, the Company finalized the sale of the Madison 183 Building, through the subsidiary Rigby 183 LLC (“Rigby 183”), in the city of New York, United States, in the sum of US$ 185 million, thus paying off the mortgage levied on the asset in the amount of US$ 75 million. Such transaction generated a gain before tax of approximately Ps. 296.5 million.
On October 8, 2014, the Company through IRSA signed the transfer deed for the sale of the 22th and 23th floors of the Bouchard 551 Building. The total price of the transaction was Ps. 168.7 million. Such transaction generated a gain before tax of approximately Ps. 150.1 million.
On October 22, 2014, the Company through IRSA signed the transfer deed for the sale of the 10th floor and two parking units of the Maipú 1300 Building and one parking unit of the building Libertador 498. The total price of the transaction was Ps. 12.0 million. Such transaction generated a gain before tax of approximately Ps. 10.1 million.
On October 28, 2014, the Company through IRSA signed the transfer deed for the sale of 9th, 10th and 11th floors of the Bouchard 551 Building. The total price of the transaction was Ps. 279.4 million. Such transaction generated a gain before tax of approximately Ps. 238.6 million.
On November 7, 2014, the Company through IRSA signed the transfer deed for the sale of the 21th floor of the Bouchard 551 Building. The total price of the transaction was Ps. 75.6 million. Such transaction generated a gain before tax of approximately Ps. 66.1 million.

36

On December 10, 2014, the Company through IRSA signed the transfer deed for the sale of the 9th floor of the Maipú 1300 Building. The total price of the transaction was Ps. 12.5 million. Such transaction generated a gain before tax of approximately Ps. 10.7 million.
On December 22, 2014, IRSA transfered to IRSA Commercial Properties, 83,789 m2 of our premium office space including the República Building, the Bouchard 710 building, the Della Paolera 265 building, the Intercontinental Plaza Building, the Suipacha 652 building and the land reserve “Intercontinental II” with potential to develop up to 19,600 square meters, each located in the City of Buenos Aires, to implement our objective of expanding our business of developing and operating commercial properties in Argentina and to create a unique and unified portfolio of rental properties consisting of the best office buildings in the city of Buenos Aires and the best shopping centers in Argentina. The total value of the transaction was US$308.0 million, based on third party appraisals. This transaction had no accounting impact.
On May 5, 2015, the Company through IRSA Commercial Properties has signed a bill of sale to transfer 8,470 square meters corresponding to nine offices floors and 72 parking units of Intercontinental Plaza Building. The transaction price was Ps. 376.4 million, which has already been paid in full. On June 30, 2015, the title deed was executed and the possession of the units previously mentioned was granted. Gross profit before tax of this operation amounted to Ps. 338.4 million. San Cayetano
 
On May 19, 2015, the Company through IRSA27, 2014, Ombú signed the transfer deeda purchase-sale agreement involving a sale subject to retention of title for the sale883 hectares of the 15th floor"San Cayetano I" establishment for an overall amount of the Maipú 1300 Building and one parking unit in Libertador 498 Building. The total price of the transaction was US$ 13.5 million. Such transaction generated a profit before tax of approximately4.2 million (equivalents to Ps. 11.6 million.31 million).
 
On June 5, 2015,20, 2016, an Agreement was signed to modify a Purchase-Sale Private Deed with Reserve of Property Rights where the Company through IRSA signed the transfer deed for the saleprecise area of the 14th floor ofproperty has been determined to cover 855,3213; the Maipú 1300 Building. The totalparties have agreed to adjust the sale price of the transaction wasproperty by deduction US$ 1.5 million. Such transaction generated a profit before tax of approximately0.1 million (equivalent to Ps. 11.5 million.1.4 million) from the total price.
 
All salesThe amount of fiscal year ended June 30, 2015 ledUS$ 3.2 million (equivalent to a combined profit forPs. 23.6 million) of the Companyprice has already been paid, and the balance will be paid in three installments, with the last installment being due upon execution of Ps. 1,150.2 million approximately, disclosed within the line “Gain from disposal of investment properties” in the income statement.title conveyance deed.
 
For more information, see “Item 4—Recent Developments.”
Decreased shareholding in Avenida Inc.
On July 18, 2014,Under the Company, through Torodur S.A., exercisedcontract, the warrant that remained associated to this investment and consequently its interest in Avenida Inc. increased to 6,172,840 shares or 35.46%. Simultaneously, however, a new investor acquired 35.12% of interest inconveyance shall be recorded once the Company, diluting the Cresud’s holding to 23.01% at such date.
On September 2, 2014, Torodur S.A. sold 1,430,000 shares representing 5%price has been fully collected off. Possession was granted upon execution of the Avenida Inc.’s capital stock in the amount of Ps. 19.1 million (US$ 2.3 million), thus reducing the equity interest to 17.68% of its share capital. Such transaction generatedcontract. We recorded a gain of Ps. 8.8US$ 1.8 million which are shown in(Ps.15.6 million) on the line "Other operating results, net" in the income statement.sale.
 
As a result of the sale of the interest, the Company has ceased to recognize the equity interest in Avenida Inc. as investment in associates and began to consider it as a financial asset at fair value in the financial statements as of June 30, 2015. On July, 2015, following last year sale of 5% and the recent capital round, our share interest was diluted to 11.38% of Avenida.
 
Acquisition of additional interest in BHSA
 
During the year ended June 30, 2015, weIRSA acquired through IRSA, 3,289,029 additional shares of BHSA for a total price of Ps.14.2 million, thusthereby increasing its interest in such companyequity stake from 29.77% to 29.99%, without consideration of Treasury shares.
Investment in IDBD
General
As of. During the year ended June 30, and as of the date hereof, we hold an indirect investment, through Dolphin Fund Limited (“Dolphin Fund”) and Dolphin Netherlands B.V. (“Dolphin Netherlands” and together with Dolphin Fund, “Dolphin”), of 49% of the outstanding capital of IDBD.
As of June 30, 2015 we recorded our investment in IDBD of Ps, 1,136 million and had accounted for a liability that reflected Dolphin’s obligation to undertake the Tender Offers (as defined below) for an amount of Ps. 502.6 million.
As a part of the terms of the Arrangement (as defined below), Dolphin agreed to undertake one or more Tender Offers for the acquisition of2016 IRSA sold 1,115,165 shares of IDBD forBHSA in a total amount of NIS512.09Ps.7.7 million, (equivalentthereby decreasing its interest to approximately US$ 135.7 million at the exchange rate prevailing as of June 30, 2015), as follows: (i) at least NIS249.8 million for a price per share of NIS7.798 (price valid as of June 30, 2015, subject to adjustment) by December 31, 2015, an amount of; and (ii) at least NIS512.09 million less the offer made in 2015, for a price per share of NIS8.188 (price as of June 30, 2015, subject to adjustments) by December 31, 2016.
For more information see “—Investment in IDBDBackground of the Investment in IDBD”.
Background of the Investment in IDBD
On May 7, 2014, through Dolphin Netherlands B.V, we entered into a transaction, jointly with C.A.A. Extra Holdings Limited, a non-related company, controlled by Mordechai Ben Moshé (“Extra”), through which 106.6 million common shares of IDBD representing 53.30% of its stock capital were acquired under the scope of a debt restructuring of IDBD’s holding company, IDB Holdings Corporation Ltd. (“IDBH”) with its creditors (the “Arrangement”).
Under the terms of the shareholders' agreement entered into between Dolphin Fund and E.T.H.M.B.M. Extra Holdings Ltd., a company controlled by Mordechai Ben Moshé, to which Dolphin Netherlands and Extra acceded (the “Shareholders' Agreement”), Dolphin acquired a 50% interest in this investment, while Extra acquired the remaining 50%. The total investment amount was NIS950 million, equivalent to approximately US$272 million at the exchange rate prevailing on that date.
Under the Arrangement, Dolphin and Extra agreed to participate on a joint and several basis in the capital increases by way of rights offerings resolved by IDBD’s Board of Directors in order to carry out its business plan for 2014 and 2015, in an amount of at least NIS300 million for 2014 and NIS500 million for 2015.
As of June 30, 2015, Dolphin has contributed NIS668.6 million in aggregate while Extra contributed NIS203.5 million in IDBD. Thus, Dolphin has completed its committed contributions, while IDBD is claiming from Extra, and Dolphin, under its joint and several liability, to pay the balance committed by Extra for an aggregate of NIS196.5 million (equivalent to approximately US$52.1 million at the exchange rate prevailing as of June 30, 2015).
Moreover, as part of the Arrangement, Dolphin and Extra committed jointly and severally to make one or more tender offers (the “Tender Offers”) for the acquisition of shares of IDBD for a total amount of NIS512.09 million (equivalent to approximately US$135.7 million at the exchange rate prevailing as of June 30, 2015), as follows: (i) by December 31, 2015 at least NIS249.8 million for a price per share of NIS7.798 (value as of June 30, 2015, subject to certain adjustments) and (ii) by December 31, 2016, for at least NIS512.09 million, less the offer made in 2015, for a price per share of NIS8.188 (value as of June 30, 2015, subject to certain adjustments). As security for the performance for the Tender Offers, a total of 34,130,119 shares of IDBD were pledged as of June 30, 2015.
On May 12, 2014, IDBD’s shares were listed on the “Tel Aviv Stock Exchange (“TASE”), consequently, all the shares (including the pledged shares) were deposited in escrow with Bank Leumi Le-Israel in compliance with the lock-up provisions set forth in the TASE Regulations, which provide that initially listed shares may not be disposed of for a term of 18 months and allow the release of 2.5% per month beginning on the fourth month since the initial listing date, consequently, pursuant to the TASE’s regulations as of June 30, 2015, 39,237,461 shares and 243,394 Series 3 warrants remained deposited as set forth above (including part of the pledged shares).
In addition, as of June 30, 2015, 49,695,135 shares, 23,950,072 Series 4 warrants, 22,752,569 Series 5 warrants and 20,357,561 Series 6 warrants of IDBD held by Dolphin were deposited in the same escrow account in which the pledged shares are deposited, and were later transferred to an account of Dolphin which is not an escrow account. As of the date hereof today, the Tender Offers have not been consummated yet.
Pursuant to the provisions of IDBD’s shelf offering report for the rights issuance dated June 9, 2014, on June 26, 2014, a total of 1,332,500 rights to subscribe shares and warrants were granted by IDBD to Dolphin at a ratio of one per each 40 shares held, which were exercised on July 1, 2014. Later on, during IDBD’s rights issuance process, Dolphin and Extra acquired 0.89 million additional rights for NIS2.83 million, equivalent to approximately US$0.83 million, out of which 50% correspond to Dolphin and 50% to Extra, all in accordance with the terms of the Shareholders' Agreement.
The rights offered by IDBD allowed to subscribe in July 2014 for 13 common shares of IDBD for a price of NIS65 (NIS5 per share) and 27 warrants, 9 of each series (series 1, 2 and 3) to be issued by IDBD, at no cost. Each warrant issued by IDBD would allow the acquisition of one common share of IDBD. Series 1 matured on November 1, 2014 and were exercisable at NIS5.50 per warrant. Series 2 matured on May 1, 2015 and were exercisable at NIS6.00 per warrant. Series 3 matures on December 1, 2015 and is exercisable at NIS6.50 per warrant.
On July 1, 2014 Dolphin exercised all granted rights it held as of June 30, 2014 to acquire additional shares in IDBD. As a result of the exercise of such rights, Dolphin received 23.1 million shares and 16 million of each of Series 1, 2 and 3 warrants. Extra held the same number of rights and acquired the same number of shares and warrants as Dolphin.
During the period from July 9 to July 14, 2014, Dolphin acquired through market transactions 0.42 million shares and 0.34 million Series 2 warrants for NIS1.77 million (equivalent to approximately US$0.52 million as of such date); 50% of which were subsequently sold to Extra pursuant to the provisions of the Shareholders’ Agreement.
On November 2, 2014, Dolphin exercised 15,998,787 Series 1 warrants and Extra exercised its respective share of Series 1 warrants.
On January 19, 2015, Dolphin acquired through market transactions 94,000 shares of IDBD for a total amount of NIS0.13 million (equivalent to US$0.03 million as of the purchase date) and subsequently sold 50% to Extra in accordance with the terms of the Shareholders´ Agreement. In addition, Dolphin acquired 42,564 shares of Discount Investment Corporation Ltd. (“DIC”), IDBD's subsidiary, for NIS0.24 million (equivalent to US$0.06 million as of the purchase date), 50% of which was offered to Extra under the terms of the Shareholders Agreement; notwithstanding the aforementioned,  Extra decided not to acquire the corresponding 50%29.91%.
 
 Furthermore, on January 19, 2015, IDBD issued a shelf offering report for the issuance of rights (the “Rights Offering”) for approximately NIS800 million (the “Maximum Immediate Payment”) pursuant to an irrevocable offer from Dolphin dated December 29, 2014, to grant on January 26, 2015, one right (one “New Right”) for each 25 shares held in IDBD. Each New Right would grant a right to subscribe on February 10, 2015, 45 common shares of IDBD for NIS68.04 (NIS1.512 per share) and 20 Series 4 warrants, 19 Series 5 warrants and 17 Series 6 warrants issued by IDBD at no cost. Each warrant issued by IDBD would allow acquiring a common share in IDBD. The Series 4 warrants will mature on February 10, 2016 at an exercise price of NIS1.663 per warrant. Series 5 warrants will mature on February 12, 2017 at an exercise price of NIS1.814 per warrant. Series 6 warrants mature on February 12, 2018 at an exercise price of NIS1.966 per warrant.
As a result of the Rights Offering above mentioned, on January 26, 2015, Dolphin received 3.7 million New Rights, while Extra received the same number of New Rights. The Rights Offering shelf offering report also stipulated that on February 5, 2015 the rights received could be traded on the public market during such single day only.
 In addition, on February 5, 2015, Dolphin acquired 2.05 million New Rights for a total amount of NIS0.94 million (equivalent to US$0.24 million as of the purchase date), 50% of which was offered to Extra under the terms of the Shareholders´ Agreement; notwithstanding the aforementioned, Extra decided not to acquire the corresponding 50%.
On February 10, 2015 Dolphin exercised all New Rights received and acquired on the market. As a result of exercise of these New Rights, Dolphin received 258,970,184 shares, 115,097,859 Series 4 warrants, 109,342,966 Series 5 warrants and 97,833,180 Series 6 warrants.  Extra did not exercise any of the New Rights it held. On February 10, 2015, Dolphin sold 71.39 million shares of IDBD to Inversiones Financieras del Sur S.A. (“IFISA”) at the closing price of NIS1.39 per share, totaling NIS99.23 million, equivalent to US$25.65 million at the exchange rate prevailing on the date of the transaction.
As a result of the Right Offering, Dolphin remained obliged to inject an amount of NIS8.5 million as equity into IDBD by way of an additional rights offering.
In addition, between February 9 and February 16, 2015, Dolphin acquired in the market 0.36 million shares of DIC for NIS2.88 million, equivalent to US$0.74 million at the exchange rate prevailing on the date of each transaction, part of which was offered to Extra under the terms of the Shareholders Agreement, notwithstanding the foregoing, Extra decided not to acquire its part of such shares according to the Shareholders Agreement.
On May 1, 2015 the IDBD Series 2 warrants matured without being exercised.
On May 31, 2015 Dolphin sold to IFISA 46 million Series 4 warrants for a total amount of NIS0.46 million (equivalent to US$0.12 million as of the date of the transaction), on condition that IFISA agrees to exercise all of them when so required by IDBD to Dolphin, in accordance with the proposal made on May 6, 2015 (as detailed below).
On June 3, 2015 in accordance with the Dolphin proposal dated May 6, 2015, Dolphin exercised 44.2 million Series 4 warrants for a total amount of NIS73.5 million (equivalent to US$19.2 million at the exchange rate prevailing on such date) and IFISA exercised 46 million Series 4 warrants for a total aggregate amount of NIS76.5 million.
As a result of the transactions described above, as of June 30, 2015, Dolphin held an aggregate number of 324,445,664 shares, 15,988,787 Series 3 warrants, 24,897,859 Series 4 warrants, 109,342,966 Series 5 warrants and 97,833,180 Series 6 warrants, accounting for a 49.0% share interest in IDBD, and IFISA held 117,390,470 shares accounting for a 17.73% share interest in IDBD. In addition, as of June 30, 2015 Dolphin held 406,978 shares of DIC, representing a direct interest of 0.48%.
As of June 30, 2015, IDBD’s Board of Directors consisted of nine members, three of which were appointed by Dolphin as regular directors: Eduardo Sergio Elsztain, Alejandro Gustavo Elsztain (on July 7 Roni Bar- On replaced him) and Saúl Zang.
For more information, see “Item 4—Recent Developments.”
IDBD Arbitration
On February and March 2015 Dolphin and Extra exchanged letters mainly in relation to claims from Extra in connection with the Rights Offering and Extra’s claim demanding a pro rata acquisition of shares of IDBD owned by Dolphin acquired under the Rights Offering,  all the shares acquired thereafter by IFISA and the allocation of certain IDBD shares between Dolphin and Tyrus, asserting in the latter cases the rights under the Shareholders ‘Agreement (first refusal).
Based on the foregoing and in accordance with the provisions of the Shareholders’ Agreement with respect to dispute resolution, on April 30, 2015 arbitration proceedings were initiated in Tel Aviv (the “Preliminary Hearing”), and the Israeli law applies thereto. The arbitration proceedings are intended to settle the issues referred to above, and application and interpretation of certain clauses of the Shareholders' Agreement.
In addition, during the Preliminary Hearing, the parties agreed on the rules and procedures that would govern the conduct of the arbitration proceedings and a schedule for such purposes.
 On May 28, 2015, before the filing of the arbitration claim, Extra triggered the Buy Me Buy You (“BMBY”) clause in the Shareholders´ Agreement, which establishes that each party to the Shareholders Agreement may offer to the counterparty to acquire (or sell, as the case may be) the shares it holds in IDBD at a fixed price; and within 14 days from delivery of the BMBY notice (the “Notice”) recipient should let it know whether it desires to sell or acquire the other party’s shares pursuant to the terms of the Notice, in accordance with the provisions of the Shareholders Agreement. In the Notice, Extra further added that the purchaser thereunder would be required to assume all obligations of seller under the Arrangement.
On June 10 and 11, 2015, Dolphin gave notice to Extra of its intention to buy all the shares of IDBD held by Extra, asserted its defenses and its interpretation about application and construction of the BMBY, establishing that Extra’s interpretation of such mechanism was inaccurate, and pursuant to the BMBY clause, Dolphin was not required to assume all of the obligations under the Arrangement, but that if the arbitrator shall decide that Dolphin is required to assume such obligations, then Dolphin would still be the purchasing party in the BMBY.
As a result, the parties pursued arbitration to settle their disputes and in respect of the correct interpretation of the BMBY clause, in order to determine, first, who would be the purchaser under the BMBY clause, and whether such party will be under the obligation to assume all the obligations of seller under the Arrangement.
For such purposes, the arbitrator decided to divide the arbitration proceedings into two phases: the first one to deal with the disputes related to application and interpretation of the mechanism under the BMBY clause and the second one in relation to the parties’ additional claims.
The parties then filed their respective arguments related to the application and interpretation of the BMBY clause mechanism, and two hearings were held on July 19 and July 22, 2015 in order to reach a decision on this matter.
 Moreover, on June 28 and 30, 2015 Extra filed a motion with the arbitrator requesting an injunction preventing changes in IDBD’s current Board of Director’s composition at IDBD’s annual shareholders’ meeting held on July 7, 2015.
For more information, see “Item 4—Recent Developments.”

37

Proposals to IDBD
On December 29, 2014, Dolphin agreed to inject funds in IDBD, directly or indirectly, through entities controlled by Eduardo Sergio Elsztain, for at least NIS256 million and up to NIS400 million, as follows: (i) NIS256 million through the exercise of the New Rights arising from the Rights Offering by Dolphin; (ii) an additional investment (the “Additional Investment”) for an amount equivalent to (a) the Maximum Immediate Payment), less (b) the amount received by IDBD under the Rights Offering, excluding the exercise of the new warrants, but in no case for an amount higher than NIS144 million. The Additional Investment will be made by Dolphin or by any entity directly or indirectly controlled by Eduardo Sergio Elsztain exercising additional rights to be acquired by them or, if such rights are not acquired, by participating in another rights offering to be made by IDBD.
On February 10, 2015, Dolphin subscribed a total of NIS391.5 million, with a remaining contribution commitment of NIS8.5 million.
In addition, Dolphin committed to (i) exercise the Series 4 warrants for a total amount of NIS150 million if so requested by IDBD’s Board of Directors within six to 12 months as from the Rights Offering date; and (ii) exercise the remaining Series 4, 5 and 6 warrants received under the Rights Offering, subject to the satisfaction of two conditions simultaneously: (a) that IDBD and its creditors reach an agreement to amend certain debt covenants; and (b) that a control permit over Clal is given by the Capital Markets, Insurance and Savings Commissioner of Israel.
On May 6, 2015, Dolphin submitted to IDBD’s Board of Directors a binding and irrevocable proposal, which mainly provided the following:
·  Appointment of Eduardo Sergio Elsztain as sole chairman of IDBD’s Board of Directors;
·  Dolphin’s commitment (directly or through any vehicle controlled by Eduardo Sergio Elsztain) to accelerate its obligation to exercise the Series 4 warrants for NIS150 million, and thus IDBD will have the possibility to require their exercise since May 20, 2015 (later it was clarified that this date would be no later than June 2, 2015) instead of on July 19, 2015, provided that before May 20, 2015, IDBD receives a written irrevocable commitment from the representatives of the IDBD bondholders to the effect that until July 20, 2015 they will not call a bondholders meeting (unless they are required to do so under the applicable laws) that includes in its agenda any of the following items:
i)  Appointment of advisers (financial, legal or otherwise);
ii)  Appointment of a committee representing IDBD’s bondholders (as defined below);
iii)  File legal actions against IDBD; and
iv)  Accelerate the maturity or demand immediate payment of any indebtedness of IDBD.
·  IDBD’s Board of Directors should set up a committee composed of two members of IDBD’s monitoring committee and two members of IDBD’s board appointed by Dolphin, which shall have the following duties, subject to the applicable law (later it was clarified that such committee shall not have the authority to make any decision but rather only to make recommendations to the board of directors):
i)  Manage, discuss, negotiate and conclude negotiations with the representatives of IDBD’s bondholders regarding their requests;
ii)  Negotiate with IDBD’s financial creditors a new set of covenants for IDBD’s financial indebtedness; and
iii)  Devise a business and financial plan for IDBD.
·  
Dolphin (directly or through any vehicle controlled by Eduardo Sergio Elsztain), promised to submit offers to purchase IDBD shares in the public phase of the public offering at an amount of up to NIS100 million at a price per share which is no less than the opening price in the public phase of the public offering, and subject to the following conditions, inter alia:
i)  That IDBD makes a public offering of its shares under terms acceptable to the market and approved by IDBD’s Board of Directors, for an amount of at least NIS100 million and not to exceed NIS125 million, and that the offering is made between October 1, 2015 and November 15, 2015.
ii)  The commitment assumed by Dolphin would automatically expire upon the occurrence of any of the following events before the day of the public auction under the public offering: (i) if any of IDBD’s creditors or any of the representatives of IDBD’s bondholders files legal actions against IDBD, including a request for early or immediate repayment or acceleration of any portion of IDBD’s debt; (ii) if a meeting of any of IDBD’s bondholders is called including in its agenda any of the matters set forth above; (iii) if IDBD receives capital contributions for a total amount of NIS100 million in any manner, whether through a rights offering, the exercise of warrants, a private or public placement, and if such contributions are made by Dolphin directly or through any vehicle controlled by Eduardo Sergio Elsztain (apart from the capital contributions creditable against the remaining NIS8.5 million obligation under Dolphin’s irrevocable proposal dated December 29, 2014), or by any other individual or legal entity, or the investor public, and at any event when the aggregate amount of such capital contributions under paragraph 5 (d) (iii) of the proposal so submitted is lower than NIS100 million, Dolphin’s commitment under Section 5 (c) above would be reduced accordingly; or (iv) if a material adverse event or change occurs in IDBD or its control structure or in any of its material affiliates.
On May 7, 2015, IDBD’s Board of Directors approved the proposal and Eduardo Sergio Elsztain was appointed sole Chairman of IDBD’s Board of Directors.
On June 3, 2015, pursuant to Dolphin´s original proposal dated December 29, 2014, as amended by paragraph (ii) of the proposal dated May 6, 2015, Dolphin exercised 44.2 million Series 4 warrants, while IFISA exercised the remaining Series 4 warrants required to complete the total NIS150 million commitments. Therefore, the commitment was satisfied as of June 30, 2015.
Proposal to IDBD and DIC
On June 29, 2015, Dolphin submitted an irrevocable proposal to IDBD and DIC (the “Proposal Sent to IDBD and DIC”) which offered that, subject to its approval by the Boards of Directors of both companies, DIC would start as soon as possible a rights offering for up to approximately NIS500 million (“DIC’s Rights Offering”) (equivalent to US$132.5 million at the exchange rate prevailing as of June 30, 2015). Under DIC’s Rights Offering, each shareholder of DIC would receive, for no consideration, DIC’s right units consisting of 4 series of warrants issued by DIC (which would be registered for trading in the TASE), each of which would be exercisable for one common share of DIC (“DIC’s Warrants”), with the following features:
·  DIC’s Warrants would be divided into 4 series, and the exercise price of each of such series would be approximately NIS125 million, as follows:
i)  The first series of warrants would be exercisable until December 21, 2015, for a price to be determined based on acceptable market conditions and after consultation with capital market experts, but in no case for a higher price than NIS6.53 (“DIC’s #1 Warrants”).
ii)  The second series of warrants would be exercisable until December 21, 2016, for an exercise price equivalent to 110% of DIC’s #1 Warrants’ exercise price.
iii)  The third series of warrants would be exercisable until December 21, 2017, for an exercise price of: (i) 110% of DIC’s #1 Warrants’ exercise price, in the event they are exercised before December 21, 2016; or (ii) 120% of DIC’s #1 Warrants’ exercise price if they are exercised between December 21, 2016 and December 21, 2017.
iv)  The fourth series of warrants would be exercisable until December 21, 2018, for an exercise price of: (i) 110% of DIC’s #1 Warrants’ exercise price, in the event they are exercised before December 21, 2016; or (ii) 130% of DIC’s #1 Warrants’ exercise price if they are exercised between December 21, 2016 and December 21, 2018.
·  As part of DIC’s Rights Offering, IDBD would promise to exercise all DIC’s #1 Warrants issued in favor of IDBD, for a total amount of approximately NIS92.5 million (“IDBD’s Investment Amount”) by December 21, 2015, provided that the following conditions have been satisfied as of such date:
i)  IDBD should have the written consent of IDBD’s main lenders for IDBD to exercise DIC’s #1 Warrants issued in its favor under DIC’s Rights Offering.
ii)  IDBD should have conducted and completed a Public Offering (as defined below), under which it should have raised an amount of at least NIS200 million.
iii)  IDBD should have received the written consent of its main lenders in order for any amount injected as capital in IDBD after the date of such proposal in excess of NIS100 million and up to NIS350 million, to be used at any time for injection from IDBD into DIC, through any capital injection method.
iv)  IDBD's obligation expires upon the occurrence of any of the events which result in the expiration of Dolphin's commitment pursuant to the proposal (as described below) or in case of a material adverse event or change occurs in IDBD or its control structure or in any of its material affiliates.
·  In turn, Dolphin proposed the following to IDBD:
i)  IDBD’s public offering amount under Dolphin’s proposal dated May 6 would be increased by at least NIS100 million and up to NIS125 million (the “Public Offering under the Proposal to IDBD and DIC”). In other words, the total amount would be increased from a minimum of NIS100 million to a minimum of NIS200 million, and the maximum amount would be increased from a maximum of NIS125 million to a maximum of NIS250 million (the “Total Increased Amount”).
ii)  Therefore, Dolphin’s obligation to participate in the Public Offering under the Proposal to IDBD and DIC would be increased (compared to the proposal dated May 6, 2015) by an amount equal to the difference between the Total Increased Amount and the total amount of commitments received, always provided that such amounts were not higher than NIS200 million (the “Capital Contribution Amount”).
iii)  The approval of this proposal would constitute IDBD’s confirmation and approval that all of Dolphin’s commitments under this proposal would imply the full and complete settlement of its remaining obligations to inject NIS8.5 million in IDBD, pursuant to Dolphin’s irrevocable proposal dated December 29, 2014 (provided however that Dolphin shall participate in an amount exceeding NIS8.5 million).
iv)  The amount mention in section 5(d)(iii) of the May 6 proposal shall be NIS200 million.
v)  Dolphin’s commitment would automatically expire upon the occurrence of any of the following events: (i) if any of DIC’s creditors or any of the trustees of DIC’s bonds filed any legal action against DIC, including a request for early repayment or acceleration of any portion of DIC’s debt; and/or (ii) if any meeting of DIC’s bondholders included in its agenda any or many of the following matters: (a) appointment of advisers (financial, legal or otherwise); (b) appointment of a committee of representatives of DIC’s bondholders; (c) filing of any legal action against DIC; and/or (d) request for early or immediate repayment of any portion of DIC’s debt, or any similar discussion.
The Proposal to IDBD and DIC was binding and irrevocable, and it was valid up to July 13, 2015 (later extended to July 16, 2015) and expired on such date if the Boards of Directors of IDBD and DIC did not accept it and approve it unconditionally. On July 9 and 16, 2015, Dolphin submitted clarifications on the Proposal to IDBD and DIC. The Proposal to IDBD and DIC was approved by IDBD’s Board of Directors on July 16, 2015.
For more information, see “Item 4—Recent Developments.”

38

Disposal of financial assets
 
During August 2014, IRSA has sold through its subsidiary, REIGReal Estate Investment Group IV, the balance of 1one million shares ofin Hersha Hospitality Trust, at an average price of US$ 6.74 per share.
 
Transactions with non-controlling interests
IRSA
During the fiscal year ended June 30, 2015, the Company sold a 1.81% interest in IRSA for a total amount of Ps. 181.8 million. This resulted in an increase in non-controlling interests of Ps. 33.7 million and a decrease in equity attributable to holders of the parent of Ps. 97.7 million, net of tax effect. The effect on shareholders’ equity of this change in the equity interest in IRSA is summarized as follows:
Ps. (million)
Carrying amount of the non-controlling interests sold by the Company(33.7)
Consideration collected181.8
Tax effect(50.4)
Reserve recorded in shareholders’ equity97.7
During the fiscal year ended June 30, 2015, the Company acquired a 0.65% interest in IRSA for a total amount of Ps. 50.7 million. This resulted in a decrease in non-controlling interests of Ps. 12.7 million and an increase in equity attributable to holders of the parent of Ps. 38.0 million, net of tax effect. The effect on shareholders’ equity of this change in the equity interest in IRSA is summarized as follows:
Ps. (million)
Carrying amount of Company´s interest acquired of12.7
Consideration paid for non-controlling interests(50.7)
Reserve recorded in shareholders’ equity(38.0)
As a result of the transactions mentioned above, as of June 30, 2015, the equity interest in IRSA amounts to 64.30%, not considering effects of treasury stock.
IRSA Commercial Properties
During the fiscal year ended June 30, 2015, the Company, through IRSA, acquired an additional 0.10% interest in IRSA Commercial Properties for a total amount of Ps. 5.7 million. This resulted in a decrease in non-controlling interests of Ps. 0.9 million and an increase in equity attributable to the holders of the parent of Ps. 4.7 million. As of June 30, 2015, IRSA's equity interest in IRSA Commercial Properties amounts to 95.80%. The effect on shareholders’ equity of this change in the equity interest in IRSA Commercial Properties is summarized as follows:
Ps. (million)
Carrying amount of Company’s interest acquired of                                                                                                        0.9
Consideration paid for non-controlling interests                                                                                                        (5.6)
Reserve recorded in shareholders’ equity                                                                                                        (i) (4.7)
(i)  The reserve includes Ps. 1.6 million for non-controlling interest
Dolphin
During February 2015, the Company through its subsidiaries, contributed an amount of US$ 146 million in Dolphin. Such amount was also allocated to increase Dolphin’s investment in IDBD. This resulted in a decrease in non-controlling interests of Ps. 21.0 million and an increase in equity attributable to the holders of the parent.

39

Ps. (million)
Carrying amount of non-controlling interest                                                                                                        21.0
Consideration paid for non-controlling interests                                                                                                        -
Reserve recorded in shareholders’ equity                                                                                                        (i) 21.0
(i)  The reserve includes Ps. 6.9 million for non-controlling interest
Disposal of Associates
 
On February 5, 2014, the Company,IRSA, through Ritelco, sold its interest in Bitania, 26 S.A., representing 49% of its capital stock, for an amount of US$ 4.2 million. Such transaction generated a net gain of approximately Ps. 13.3 million which are shown in the line "Other operating results, net" in the income statement.statement of income.
 
Acquisition of BACS Banco de Crédito y Securitización S.A.
 
The Company
IRSA through Tyrus, subscribed a purchase-sale agreement of shares of BACS, Banco de Crédito y Securitización S.A., representing an interest of 6.125%. The transaction amounts to, for US$ 1.35 million. This operation is yet to be approved by the Banco Central de la República Argentina,BCRA as of June 30, 2016, according to regulations in force.  The advance payment related to this transaction is disclosed in “Trade and other receivables”. On August 24, 2016 the operation was approved by the BCRA.
 
The Company through IRSA, onOn June 17, 2015, we through IRSA, subscribed Convertible Notes, issued by BACS Banco  de Crédito y Securitización S.A. forwith a nominal value of Ps. 100,000,000, which are convertible into common stock.
 
On June 21, 2016 we notified BACS on our right to convert all of the convertible subordinated corporate notes into common shares.
As a consequence, BACS initiated the relevant diligence before the Argentine Central Bank in order to secure the authorization to issue the shares in our favor.
Capital reduction of Rigby 183 LLC
 
On October 17, 2014, Rigby 183 LLC reduced its capital stock by distributing among existing shareholders, proportionally to their shareholdings, the gain made onfrom the sale of the Madison building. The total amount distributed is US$ 103.8 million, of which the CompanyIRSA received US$ 77.4 million (US$ 26.5 million through IRSA International and US$ 50.9 million through IMadison LLC) and US$ 26.4 million were distributed to other shareholders. As a result of such reduction, the CompanyIRSA has decided to reverse the corresponding accumulated currency translationconversion difference on a pro rata basis, which amounted to Ps. 188.3 million. This reversal has been recognized in the line “Other operating results, net" in the statement of income.
 
Capital Expenditures
Our capital expenditures totaled Ps. 2,4582 million, Ps. 4883 million and Ps. 4364 million for the fiscal years ended on June 30, 2016, 2015 and 2014, including other property and equipment acquired in business combinations. Our capital expenditures consisted in the purchase of real estate and farms, acquisition and improvement of productive agricultural assets, completion of building a shopping center, construction of real estate and acquisition of land reserves.
Our capital expenditures for the new fiscal year will depend on the prices of real estate, land for agriculture and cattle as well as the evolution of commodity prices.
Fiscal Year Ended June 30, 2016
Fiscal Year 2016. During the fiscal year ended June 30, 2016, we invested Ps. 2,369 million, mainly related to: (a) acquisitions and improvements in Property, plant and equipment for Ps. 1,172 million, primarily i) Ps. 378 million in buildings and facilities, mainly in our operation center in Israel’s supermarkets, ii) Ps. 310 million in communication networks, and iii) Ps. 291 million in machinery and equipment; (b) improvements in our rental properties for Ps. 260 million, primarily in our operation center in Argentina’s shopping centers; and (c) the development of properties for Ps. 919 million, mainly in our operation center in Israel.
In addition, our main investments in the agriculture business during the fiscal year 2015 were Ps. 89 million, mainly due (a) acquisition and development of owner occupied farmland for Ps. 65 million (including Ps. 36 million of subsidiary Brasilagro), (b) Ps. 7 million in machinery and equipment, (c) Ps. 3 million in vehicles, and (d) Ps. 14 million in other building and facilities.
Fiscal Year Ended June 30, 2015
Fiscal Year 2015. During the fiscal year ended June 30, 2015 we invested Ps. 307 million in the urban properties and investment business, mainly due to (a) improvements in our hotels Sheraton Libertador, Intercontinental and Llao Llao for Ps. 1 million, Ps. 9 million and Ps. 5 million, respectively, (b) acquisition of furniture and fixtures, machinery and equipment, vehicles and other buildings and facilities for Ps. 35 million, (c) improvements made to our shopping centers for Ps. 60 million, (d) development of properties for Ps. 175 million, corresponding Ps. 1 million to "Distrito Arcos" project and Ps. 174 million to Shopping Neuquén project, (e)  supliers advances for investment acquisitions for Ps. 14 million, (f) Ps.  6 million improvements in our Office buildings and other rental properties and (g) Ps. 2 million were related to the acquisition of plots of lands.
In addition, our main investments in the agriculture business during the fiscal year 2015 were Ps. 181 million, mainly due (a) acquisition and development of owner occupied farmland for Ps. 153 million (including Ps. 93 million of subsidiary Brasilagro), (b)  Ps. 8 million in investment properties, (c) Ps. 6 million in machinery and equipment, (d) Ps. 5 million in vehicles, (e) Ps. 8 million in other building and facilities and (f) Ps. 1 million in furniture and fixtures.

Fiscal Year Ended June 30, 2014
 
SaleFiscal Year 2014. During the fiscal year ended June 30, 2014 we invested Ps. 318 million in the urban properties and investment business, mainly due to (a) improvements in our hotels Sheraton Libertador, Intercontinental and Llao Llao for Ps. 6 million, Ps. 2 million and Ps. 3 million, respectively, (b) acquisition of farmlandsfurniture and fixtures, machinery and equipment, and other buildings and facilities for Ps. 10 million, (c) improvements made to our shopping centers for Ps. 61 million, (d) development of properties for Ps. 180 million, corresponding Ps. 100 million to "Arcos" project and Ps. 80 million to Shopping Neuquén project, (e)  supliers advances for investment acquisitions for Ps. 30 million, (f) Ps.  25 million improvements in our Office buildings and other rental properties and (g) Ps. 1 million were related to the acquisition of plots of lands.
In addition, our main investments in the agriculture business during the fiscal year 2014 were Ps. 118 million, mainly due (a) acquisition and development of owner occupied farmland for Ps. 97 million (including Ps. 58 million of subsidiary Brasilagro), (b)  Ps. 7 million in investment properties, (c) Ps. 6 million in machinery and equipment, (d) Ps. 3 million in vehicles, (e) Ps. 3 million in other building and facilities and (f) Ps. 1 million in furniture and fixtures.
Recent Developments
Cresud’s Recent Developments
Credit Line with IFISA.
 
On June 27, 2014, Brasilagro soldJuly 1º, 2016, we renewed the credit line with IFISA for up to 3,500,000 ADRs (previously 4,053,942) of our subsidiary IRSA, in which we are the lender and IFISA is the borrower. The term of the transaction was set at 30 days, renewable up to a total areamaximum of 1,164 hectares365 calendar days with an annual interest rate of Araucaria field.6%.
 
The sale was valued at Rs. 32.5 million (or Ps.117.5 million). In July 2014 the buyer made an initial payment
Selling of  Rs. 4.5 million"El Invierno" and remaining balance will be collected in five annual installments. The first installment"La Esperanza" farmlands, city of Rs. 4.5 million was collected in November 2014 and the second installment,Rancul, province of Rs. 6.9 million, in June 2015. The Company recorded a profit before tax on the sale of the Araucaria farmland for an amount of Rs. 21.0 million (or Ps. 75.8 million).La Pampa.
 
On May 27, 2014 Ombú Agropecuaria S.A. executed a purchase-sale agreement involving a condition saleJuly 6, 2016, we sold to an unrelated party the "El Invierno" and "La Esperanza" farmlands. The transaction included 2,615 hectares suitable for agricultural activities which are located in "Rancul" province of real property covering 883 hectares of “San Cayetano I” for aLa Pampa. The total amount of the transaction was set at US$ 4.26 million (equivalents to Ps. 31.0 million)(US$ / ha 2,294). US$ 2.35 million have already been collected whereaspaid to date and the remaining balance shall be collected in five consecutive semi-annual installments, with the last falling due in November 2016. Under the contract, the conveyance shall be recorded once the price has been fully collected off. Possession was granted upon execution of the contract. The Company recorded a profit before tax of US$ 1.81 million, (Ps.15.6 million)secured by a mortgage on the sale.property, in 5 equal, consecutive and annual installments ending in August 2021.
Director renouncement
On September 6, 2016, David Alberto Perednik resigned, being its mandate up to June 30, 2016. Its replacement will be appointed in the next shareholder meeting.
 
Subscription of sharesthe Prior Commitment of Avenida Inc.Merger between Cresud and AGRO MANAGERS S.A.
 
On August 29, 2013,In July 2016, Cresud made a shares purchase offer to the Company, through Torodur S.A., subscribed 3,703,704 sharesother shareholders of Avenida Inc., a Company incorporated in Delaware, United States, representing 24.79% of its outstanding capital. At that moment,Ps. 5.5 million to acquire their total ownership interest, this company had neither activity nor significant assets. Additionally, the Company acquired a warrantoffer was accepted. Thus, our direct interest increased to increase such equity interest up to 37.04% of the company. The transaction price was Ps. 13 million, which were already paid in full. After acquisition, Avenida Inc. established a Company named "Avenida Compras S.A.", a Company incorporated in Argentina and engaged in e-commerce activity. Avenida Inc. owns 100% of Avenida Compras S.A..
Stock call option Agreement for the shares of Arcos del Gourmet S.A..
 
On September 16, 2013 IRSA Commercial Properties entered into an2016, a pre-merger agreement with Messrs. Eduardo Giana, Pablo Bossiwas executed, by which all assets, rights and Patricio Tobal (non-controlling shareholdersobligations of Arcos del GourmetAgromanagers S.A.), whereby are transferred to us.
Annual Shareholders’ Meeting
Our annual shareholders’ meeting will be held on October 31, 2016, in order to consider and approve, among others, the latter grant to IRSA Commercial Properties an exclusive and irrevocable option to purchase 10%following matters: (i) consideration of documents contemplated in section 234, paragraph 1, of the equity interest of Arcos del Gourmet S.A., which can be executed up to December 31, 2018. In the event the option is exercised, IRSA Commercial Properties should pay the amount of US$ 8.0 million.
Furthermore, in the mentioned agreement a fixed amount of US$ 2.0 million was arranged, which was cancelled, and another variable amount to be paid on a monthly basis, that results from applying a 4.5% on the amounts accrued on each prior calendar month as rental and admission fees, net of certain expenses, during 5 years from the opening of the shopping mall, in relation to the assignment of rights to collect dividends of Arcos during such period.
Acquisition of common shares of Condor Hospitality Trust Inc. (formerly Supertel Hospitality, Inc. due to change of corporate name) (“Condor”).
On January 9, 2014, the Company, through its subsidiary, Real Estate Strategies L.P. (“RES”), granted a loan to Condor for an amount of US$ 2.0 million. This loan included a conversion option whereby RES was allowed to apply the aggregate amount of the loan to purchase common shares of Condor under a “Subscription Rights Offering” or convert the loan directly into common shares of Condor. Additionally, from February 2012, the Company holds two financial instruments in Condor, preferred shares and warrants, which are still held on the balance sheet date. On June 6, 2014, under the "Subscription Rights Offering", RES exercised its conversion right to acquire 1,250,000 common shares at US$ 1.60 per share. As a result of this acquisition, the Company – through RES – acquired a 26.9% equity interest in Condor.
The fair value of the Company’s investment in Condor was based on the fair value of its net assets. Condor´s main assets consist of 65 hotels in United States operated by various hotel chains. The Company has allocated the price paid at the fair value of net assets acquired based on the information available on the balance sheet date. Such fair value amounted to Ps. 31.5 million, resulting in a gain on the acquisition of Ps. 15.4 million, which has been recognized under “Share of loss of associates and joint ventures” in the income statementsArgentine Companies Law No. 19,550 for the fiscal year ended June 30, 2014.2016; (ii) Consideration of the result of the fiscal year ended June 30, 2016 which resulted in a loss for the amount of Ps.1,401,856,585; (iii) consideration of Board of Directors’ performance; (iv) consideration of Supervisory Committee’s performance; (v) consideration of compensation payable to the Board of Directors for Ps.18,985,218 (total compensation) for the fiscal year ended June 30, 2016; (vi) consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2016; (vii) consideration of the appointment of Regular Directors and Alternate Directors, as applicable; (viii) appointment of Regular and Alternate Members of the Supervisory Committee; (ix) appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers; (x) updating of report on Shared Services Agreement; (xi) treatment of amounts paid as personal assets tax levied on the shareholders; (xii) consideration of the renewal of the delegation to the Board of Directors of the broadest powers to establish the time and currency of issuance, and other terms and conditions of the issuance of notes under the global note program, for up to US$ 300.000.000 currently in force in accordance with approval of the shareholders' meeting dated October 31, 2012, and November 14, 2014 and its extension for an additional amount of US$ 200.000.000 in accordance with the approval of the shareholders' meeting dated October 30, 2015; (xiii) consideration of granting indemnities to Messrs. Directors, Syndics and Managers who work or have worked in the Company in a manner subsidiary to D&O policies; (xiv) consideration of special financial merger statement of AGRO MANAGERS S.A.; special separate financial merger statements of Cresud and consolidated financial merger statements of Cresud with AGRO MANAGERS S.A. as of June 30, 2016 as well as the reports of the supervisory committee and the auditor. Consideration of the preliminary merger by absorption with AGRO MANAGERS S.A. and other related documentation. Authorizations and delegations. Appointment of proxy to grant definitive agreements and other formalities; (xv) consideration of the distribution of treasury shares.
Repurchased of notes
Since the end of fiscal year 2016 until October 7, 2016, we have repurchased Notes (Class XIV, XVI and XVIII) by operations in the local market with unrelated parties for a total amount of Ps.149,821,406, equivalent to the amount of NV 11,022,123.
 

IRSA’s Recent Developments
Operations Center in Argentina
Dolphin Netherlands shares subscription.
On August 10, 2016, through a subsidiary, IRSA subscribed additional shares of Dolphin Netherlands B.V. for a subscription price of US$ 3.2 million. As of June 30, 2016 IRSA owned 98.6% of Dolphin Netherlands B.V.
Issuance of Series VII and Series VIII Notes.
On September 8, 2016, IRSA issued the Series VII Notes, for Ps. 384,233,262, bearing an adjustable interest rate of BADLAR + 2.99% and the Series VIII Notes, for US$ 184,507,138, bearing interest at a fixed rate of 7% per year. Both Series mature on September 9, 2019. The use of proceeds was mainly to repay debt.
Redemption of Series I Notes.
On September 9, 2016, IRSA announced its intention to redeem all outstanding Series I Notes for a total amount of US$ 74.55 million. The redemption took place on October 11, 2016, and the redemption price was equal to 100% of the aggregate principal amount of the outstanding Notes plus accrued interest, as a result of the redemption, the outstanding amount of the Notes was cancelled in full.
Operations Center in Israel
ChemChina’s offer for Adama Agricultural Solutions Ltd.
On July 17, 2016, IRSA’s indirect subsidiary DIC, agreed to sell its remaining 40% in Adama to ChemChina for cash consideration of US$ 230 million and cancellation of a loan due to a Chinese bank. It is expected that the sale transaction be consummated by the first week of November 2016, subject to the fulfillment of certain conditions, including the receipt of Chinese regulatory and antitrust approvals.
Dismissal of liquidation request of IDBD.
On July 18, 2016, the Tel Aviv District Court dismissed the request for liquidation of IDBD and appointment of interim liquidator put forward by Hermetic Trust (1975) Ltd. on behalf of IDBD’s Series 9 bondholders.
Issuance of Notes by IDBD and DIC.
On August 2, 2016 IDBD issued a new Series of Debentures in the Israeli market for an amount of NIS 325 million due November 2019 at an annual interest rate adjustable by CPI plus 4.25%. The notes are pledged by shares of Clal Insurance Enterprise Holdings Ltd (“Clal”), subject to the approval of the Commissioner of Capital Markets, Insurance and Savings. IDBD is working to get the authorization to constitute the guarantee through the filing of an application to the Supreme Court asking for such approval. In case IDBD does not get the required approval, funds must be repaid with interest plus a penalty. on September 15, 2016, the High Court of Justice gave a partial judgment and decision, according to which it was decided, to reject the petition  for the most part and to grant an order which instructs the Commissioner to appear and show a reason for her opposition to the request of the company to pledge up to 5% of the shares of Clal Holdings, subject to an outline agreed to at the time by the company. Furthermore, the company maintains the right to accede to a proposal for compromise which was raised in the context of the discussion. A hearing date was set for January 2017.
Furthermore, DIC re-opened its issuance of Notes due 2025 for an additional principal amount of NIS 360 million.
Notes in IDBD and subsidiaries
In July 2016, Shufersal acquired Notes Series B shares with a Nominal Value of NIS 511 million by way of an additional issue of Notes Series F shares at a ratio of 1.175 for each NIS 1 nominal value of the Series B shares outstanding. The Notes Series B shares acquired by Shufersal were cancelled and delisted.
Acqusition of DIC shares from IDBD
On September 23, 2016, we acquired from IDBD 8,888,888 shares of Discount Investment Corporation (“DIC”) (DISI:TASE) for NIS 100 million (approximately US$ 26.7 million), equivalent to the 8.8% of DIC’s shares outstanding.
B. BUSINESS OVERVIEW
General
We are a leading Latin American agricultural company engaged in the production of basic agricultural commodities with a growing presence in the agricultural sector of Brazil, through our investment in Brasilagro, as well as in other Latin American countries. We are currently involved in several farming activities including grains and sugarcane production, cattle raising and milk production. Our business model focuses on the acquisition, development and exploitation of agricultural properties having attractive prospects for agricultural production and/or value appreciation and the selective sale of such properties where appreciation has been realized. In addition, we lease land to third parties and perform agency and agro-industrial services, including a meat packing plant. Our shares are listed on Mercado de Valores de Buenos Aires (“MVBA”) and the NASDAQ.
We are also directly and indirectly engaged in the real estate business through our subsidiary IRSA and its subsidiaries and joint ventures, one of Argentina’s leading real estate companies. IRSA is engaged in the development, acquisition and operation of shopping centers, premium offices, and luxury hotels in Argentina, as well as the sales and development properties. Also, IRSA has international investments, that mainly operate in the United States in relation to the lease of office buildings and hotels in that country, and the investment in IDBD, one of the largest and most diversified investment groups of Israel, which, through its subsidiaries, participates in numerous markets and industry sectors, including real estate, retail, agroindustry, insurance, telecommunications, among others. IRSA’s shares are listed on the MVBA and the NYSE. We own 63.38% of the outstanding common shares of IRSA and a majority of our directors are also directors of IRSA.

During fiscal years ended June 30, 2016, 2015 and 2014, we had consolidated revenues of Ps. 35,384 million, Ps. 5,652 and Ps. 4,604 million, and consolidated net income/(loss) of Ps. 4,166 million, Ps. 1,767 million and Ps. 1,186 million, respectively. During the fiscal years ended June 30, 2015 and June 30, 2016, our total consolidated assets increased 986.7% from Ps. 15,276 million to Ps. 166,001 million, and our consolidated shareholders’ equity decreased 290.3% from Ps. 3,903 million to Ps. 15,232 million.
We operate in two businesses areas, namely, “Agricultural” and “Investment and Development Properties” businesses, as further described below.
In fiscal year ended June 30, 2016, the Company has changed the presentation of the agricultural business segments which are reviewed by the CODM for a better alignment with the current business vision and the metrics used to such end. Our Agricultural business is further comprised of three reportable segments:
The "Agricultural production" segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. The new segment “agricultural production” aggregate the old segments crops, cattle, dairy and sugarcane:
40

Our “Crops” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Company is focused on the long-term performance of the land and seeks to maximize the use of the land through crop rotation; the use of technology and techniques. In this way, the type and quantity of harvested crops change in each agricultural campaign. Our Crops Segment had assets of Ps. 2,775 million and Ps. 1,913 million as of June 30, 2016 and 2015, respectively, representing 60% and 58% of our agricultural business assets at such dates, respectively. Our Crops segment generated operating income of Ps. 154 million, operating loss of Ps. 277 million and Ps. 140 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 53%, (90%) and 368%, of our consolidated operating income/loss from Agricultural Business for such years, respectively.
Our “Cattle” segment consists of breeding, purchasing and/or fattening of free-range cattle for sale to meat processors and local livestock auction markets. Our Cattle segment had assets of Ps. 815 million and Ps. 606 million as of June 30, 2016 and 2015, respectively, representing 18% and 18% of our agricultural business assets at such dates, respectively. Our Cattle segment generated operating income of Ps. 103 million, Ps. 36 million and Ps. 31 million for fiscal years ended June 30, 2016, 2015 and 2014 respectively, representing 35%, 12% and (82%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Dairy” segment consists of breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers. Our Dairy segment had assets of Ps. 77 million and Ps. 65 million as of June 30, 2016 and 2015, respectively, representing 2% and 2% of our agricultural business assets at such dates, respectively. Our Dairy segment generated operating loss of Ps. 8 million for fiscal year ended June 30, 2016, representing (3%), of our consolidated operating income from Agricultural Business for such years, respectively and operating income of Ps. 4 million and Ps. 5 million for fiscal year ended June 30, 2015 and 2014, representing 1% and (13%), of our consolidated operating income from Agricultural Business for such year.
Our “Sugarcane” segment consists of planting, harvesting and sale of sugarcane. Our Sugarcane segment had assets of Ps. 713 million and Ps. 410 million as of June 30, 2016 and 2015, respectively, representing 13% and 12% of our agricultural business assets at such dates, respectively. Our Sugarcane segment generated operating income of Ps. 63 million for the fiscal year ended June 30, 2016, representing 22% of our consolidated operating income from Agricultural Business for such year and operating loss of Ps. 13 million and Ps. 23 million for fiscal years ended June 30, 2015 and 2014, respectively, representing (4%) and 61%, of our consolidated operating income from Agricultural Business for such years.
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
The "Other segments" segment includes, principally, agricultural services (for example, irrigation); leasing of the Company's farms to third parties; feedlot farming, slaughtering and processing in the meat refrigeration plant; and brokerage activities, among others. The new segment “Other segments” aggregate the old segments Agricultural Rentals and Services, Agro-industrial and Others:
Our “Agricultural Rentals and Services”segment consists of services (for example: irrigation) and leasing of the Company’s farms to third parties. Our Agricultural Rentals and Services Segment had assets of Ps. 22 million and Ps. 118 million as of June 30, 2016 and 2015, respectively, representing 0% and 4% of our agricultural business assets at such dates, respectively. Our Agricultural Rentals and Services segment generated operating income of Ps. 53 million, Ps. 37 million and Ps. 7 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 18%, 12% and (18%) of our consolidated operating income from Agricultural Business for such years.
Our “Agro-industrial” segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant. Our Agro-industrial segment had assets of Ps. 71 million and Ps. 42 million as of June 30, 2016 and 2015, respectively, representing 2% and 1% of our agricultural business assets at such dates, respectively. Our Agro-Industrial segment generated operating income of Ps. 1 million for the fiscal year ended June 30, 2014, representing (3%) of our consolidated operating income from Agricultural Business for such year, and operating loss of Ps. 63 million and Ps. 35 million for the fiscal years ended June 30, 2016 and 2015, respectively, representing (22%) and (11%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 129 million and Ps.114 million as of June 30, 2016 and 2015, respectively, representing 3% and 3% of our agricultural business assets at such dates, respectively. Our Others segment generated operating income of Ps. 2 million, Ps. 3 million and Ps. 3 million for fiscal years ended June 30, 2016, 2015 and 2014, representing 1%, 1% and (8%) of our consolidated operating income for such years, respectively.
 
SignificantOur Agricultural business is further comprised of eight reportable segments:
·  
Our “Agricultural production” segment consists of planting, harvesting and sale of investment propertiescrops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. Our Agricultural production segment had assets of Ps. 4,380 million and Ps. 2,994 million as of June 30, 2016 and 2015, respectively, representing 95% and 91% of our agricultural business assets at such dates, respectively. Our Agricultural production segment generated operating income of Ps. 312 million, operating loss of Ps. 250 million and operating loss Ps. 127 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 107%, (4%) and (3%), of our consolidated operating income/loss from Agricultural Business for such years, respectively.
 
On November 15, 2013
·  
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
·  
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 222 million and Ps.274 million as of June 30, 2016 and 2015, respectively, representing 5% and 8% of our agricultural business assets at such dates, respectively. Our Others segment generated operating loss of Ps. 8 million, operating income Ps. 5 million and operating income Ps. 11 million for fiscal years ended June 30, 2016, 2015 and 2014, representing (3%), 2% and (29%) of our consolidated operating income from Agricultural Business for such years, respectively.
We have decided to break down reporting of our Urban properties and investment business into an Operation Center in Argentina and an Operation Center in Israel. From the Operation Center in Argentina, the Company, through IRSA signedand its subsidiaries, manages the transfer deedbusinesses in Argentina and the international investments in the Lipstick Building in New York and the Condor hotel REIT. From the Operation Center in Israel, the Company manages IDBD.
Operations Center in Argentina
We operate our business in Argentina through six reportable segments, namely “Shopping Centers”, “Offices and Others”, “Sales and Developments”, “Hotels”, “International” and “Financial Operations and Others” as further described below:
·  
Our “Shopping Centers” segment includes the operating results from our portfolio of shopping centers principally comprised of lease and service revenue from tenants. Our Shopping Centers segment had assets of Ps. 2,365 million and Ps. 2,400 million as of June 30, 2016 and 2015, respectively, representing 47.8% and 37.5% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Shopping Centers segment generated operating income of Ps. 1,637 million, Ps. 1,190 million and Ps. 864 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 60.3%, 47.2% and 69.7%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Offices and Others” segment includes the operating results of our lease and service revenues of office space and other non-retail building properties principally comprised of lease and service revenue from tenants. Our Offices and Others segment had assets of Ps. 941 million and Ps. 1,036 million as of June 30, 2016 and 2015, respectively, representing 19.0% and 16.2% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Offices and Others segment generated operating income of Ps. 219 million, Ps. 99 million and Ps. 160 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 8.1%, 3.9% and 12.9%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Sales and Developments” segment includes the operating results of our acquisition and/or construction of housing and other properties for sale in the ordinary course of business. Our Sales and Developments segment had assets of Ps. 585 million and Ps. 466 million as of June 30, 2016 and 2015, respectively, representing 11.8% and 7.3% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Sales and Developments segment generated operating income of Ps. 864 million, Ps. 1,099 million and Ps. 239 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 31.8%, 43.6% and 19.3%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Hotels” segment includes the operating results of our hotels mainly comprised of room, catering and restaurant revenues. Our Hotels segment had assets of Ps. 174 million and Ps. 182 million as of June 30, 2016 and 2015, respectively, representing 3.5% and 2.8% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Hotels segment generated, operating losses of Ps. 2 million and Ps. 13 million, and operating income of Ps. 10 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), (0.5%) and 0.8%, of our consolidated operating income for the Operations Center in Argentina for such years.
·  
Our “International” segment includes investments that mainly operate in the United States in relation to the lease of office buildings and hotels in that country, and the results arising from investment in IDBD at fair value. We intend to continue evaluating investment opportunities outside Argentina as long as they offer attractive investment and development options. Our International segment generated operating losses of Ps. 2 million and operating income of Ps. 148 million, and operating losses of Ps. 30 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), 5.9% and (2.4%), of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Financial Operations and Others” segment includes principally the income or loss generated by our associates Banco Hipotecario, BACS and Tarshop, and the residual financial operations of Metroshop carried on through Apsamedia. During fiscal year 2015, we decreased equity interest in Banco Hipotecario from 29.99% to 29.91%, held in the form of Class D shares, which are currently entitled to three votes per share. As of June 30, 2016, our investment in Banco Hipotecario generated income for Ps. 257 million. Tarshop’s operations consist primarily of lending and servicing activities related to the credit card offered to consumers at retail venues. Our Financial Operations and Others segment had assets of Ps. 1,709 million and Ps. 1,411 million as of June 30, 2016 and 2015, respectively, representing 34.6% and 22.0% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Financial Operations and Others segment generated operating losses for Ps. 1 million, Ps. 3 million and Ps. 3 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 0.0%, (0.1%) and (0.2%) of our consolidated operating income for the Operations Center in Argentina for such years.

Operations Center in Israel
We operate our business in Israel through six reportable segments, namely “Real Estate”, “Supermarkets”, “Agrochemicals”, “Telecommunications”, “Insurances” and “Others” as further described below:
·  
Our “Real Estate” segment includes mainly assets and operating income derived from business related to the subsidiary PBC. Through PBC, the Company operates rental properties and residential properties in Israel, United States and other parts of the world and carries out commercial projects in Las Vegas. Our Real Estate segment had net assets of Ps. 10,745 million as of June 30, 2016, representing 76.1% of our operating assets for the Operations Center in Israel at such date. Our Real Estate segment generated operating income of Ps. 617 million for fiscal year ended June 30, 2016, representing 85.7%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Supermarkets” segment includes assets and operating income derived from the business related to the subsidiary Shufersal. Through Shufersal, the Company mainly operates a supermarket chain in Israel. Our Supermarkets segment had net assets of Ps. 5,826 million as of June 30, 2016, representing 41.2% of our operating assets for the Operations Center in Israel at such date. Our Supermarkets segment generated operating income of Ps. 424 million for fiscal year ended June 30, 2016, representing 58.9%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Agrochemicals” segment includes income derived from the associate Adama. Adama is a company specialized in agrochemicals, particularly for the production of crops.. Our Agrochemicals segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Telecommunications” segment includes assets and operating income derived from the business related to the subsidiary Cellcom. Cellcom is a provider of telecommunication services and its main activities include the provision of mobile phone services, fixed line phone services, data and Internet, among others. Our Telecommunications segment had net assets of Ps. 5,688 million as of June 30, 2016, representing 40.3% of our operating assets for the Operations Center in Israel at such date. Our Telecommunications segment generated operating losses of Ps. 71 million for fiscal year ended June 30, 2016, representing (9.9%), of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Insurance” segment includes the investment in Clal. This company is one of the most important insurance groups in Israel, and is mainly engaged in pension and social security insurance, among others. As indicated in Note 16 of the Financial Statements, 51% of the controlling shares of Clal are held in a trust following the instructions of the Israel Securities Commission in order to comply with the sale of the 12th floorcontrolling shares of Clal; as a result, Clal is not fully consolidated on a line-by-line basis but rather in a single line as a financial instrument at fair value, as required by the IFRS under the current circumstances where no control is exercised. Our Insurance segment had assets of Ps. 4,602 million as of June 30, 2016, representing 32.6% of our operating assets for the Operations Center in Israel at such date. Our Insurance segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Others” segment includes the assets and income derived from other diverse business activities, such as technological developments, tourism, oil and gas assets, electronics, and others. Our Others segment had negative net assets of Ps. 12,737 million as of June 30, 2016, representing (90.2%) of our operating assets for the Operations Center in Israel at such date. Our Others segment generated operating losses of Ps. 250 million for fiscal year ended June 30, 2016, representing (34.7%), of our consolidated operating income for the Operations Center in Israel for such year.
Agricultural Business
As of June 30, 2016, we owned 27 farms with approximately 622,217 hectares distributed in Argentina, Brazil, Bolivia and Paraguay. Approximately 96,710 hectares of the land we own are used for crop production, approximately 71,937 hectares are for Cattle production, 85,000 hectares are for sheep production, 2,231 hectares are for milk production and approximately 2,435 hectares are leased to third parties for crop and cattle beef production. The remaining 363,904 hectares of land reserves are primarily natural woodlands. In addition, we have the rights to hold approximately 132,000 hectares of land under concession for a 35-year period that can be extended for another 29 years. Out of this total, we have developed 23,196 hectares for crop production. Also, during fiscal year 2016 ended on June 30, 2016, we leased 41,966 hectares to third parties for crop production and 13,455 hectares for Cattle production
The following table sets forth, at the dates indicated, the amount of land used for each production activity (including owned and leased land, and land under concession):
 
2016(1)
2015(1)(6)
2014(1)(6)
2013(1)(6)
2012(1)(6)
Crops (2)
178,617187,438201,648182,513181,079
Cattle (3)
85,39288,64395,16091,05395,995
Milk/Dairy2,2312,8642,8642,7803,022
Sheep85,00085,00085,00085,00085,000
Land Reserves (4)
473,290467,568467,532461,729459,979
Own farmlands leased to third parties2,43510,02613,11131,59325,538
Total (5)
826,965841,539865,315854,668850,613
(1)
Includes 35.72% of approximately 8,299 hectares owned by Agro-Uranga S.A., an affiliated Argentine company in which we own a non-controlling 35.72% interest.
(2)
Includes wheat, corn, sunflower, soybean, sorghum and others, including double crop production.
(3)
Breeding and fattening.
(4)
We use part of our land reserves to produce charcoal, rods and fence posts.
(5)
It includes Brasilagro and our interest in CRESCA at 50%.
(6)
Includes farms owned by Brasilagro and CRESUD sold in 2014 and 2015.

Strategy
We seek to maximize our return on assets and overall profitability by (i) identifying, acquiring and operating agricultural properties having attractive prospects for increased agricultural production and/or medium or long-term value appreciation and selectively disposing of properties as appreciation is realized, (ii) optimizing the yields and productivity of our agricultural properties through the implementation of state-of-the-art technologies and agricultural techniques and (iii) preserving the value of our significant long-term investment in the urban real estate sector through our subsidiary IRSA.
To such end, we seek to:
Focus on maximizing the value of our agricultural real estate assets
We conduct our agricultural activities with a focus on maximizing the value of our agricultural real estate assets. We rotate our portfolio of properties from time to time by purchasing properties which we believe have a high potential for appreciation and selling them selectively as opportunities arise to realize attractive capital gains. We achieve this by relying on the following principles:
Acquiring under-utilized properties and enhancing their land use: We seek to purchase under-utilized properties at attractive prices and develop them to achieve more productive uses. We seek to do so by (i) transforming non-productive land into cattle feeding land, (ii) transforming cattle feeding land into land suitable for more productive agricultural uses, (iii) enhancing the value of agricultural lands by changing their use to more profitable agricultural activities; and (iv) reaching the final stage of the real estate development cycle by transforming rural properties into urban areas as the boundaries of urban development continue to extend into rural areas. To do so, we generally focus on acquisitions of properties outside of highly developed agricultural regions and/or properties whose value we believe is likely to be enhanced by proximity to existing or expected infrastructure.
Applying modern technologies to enhance operating yields and property values. We believe that an opportunity exists to improve the productivity and long-term value of inexpensive and/or underdeveloped land by investing in modern technologies such as genetically modified and high yield seeds, direct sowing techniques, and machinery. We optimize crop yield through land rotation, irrigation and the use of fertilizers and agrochemicals. To enhance our cattle production, we use genetic technology and have a strict animal health plan controlled periodically through traceability systems. In addition, we have introduced state-of-the-art milking technologies in our dairy business.
Anticipating market trends. We seek to anticipate market trends in the agribusiness sector by (i) identifying opportunities generated by economic development at local, regional and worldwide levels, (ii) detecting medium- and long-term increases or decreases in supply and demand caused by changes in the world’s food consumption patterns and (iii) using land for the production of food and energy.
International expansion. We believe that an attractive opportunity exists to acquire and develop agricultural properties outside Argentina, and our objective is to replicate our business model in other countries. Although most of our properties are located in different areas of Argentina, we have begun a process of expansion into other Latin American countries, including Brazil, Bolivia, and Paraguay.
Increase and optimize production yields
We seek to increase and improve our production yields through the following initiatives:
Implementation of technology.
To improve crop production, we use state-of-the-art technology. We invest in machinery and the implementation of agricultural techniques such as direct sowing. In addition, we use high-potential seeds (GMOs) and fertilizers and we apply advanced land rotation techniques. In addition, we consider installing irrigation equipment in some of our farms.
To increase cattle production we use advanced breeding techniques and technologies related to animal health. Moreover, we optimize the use of pastures and we make investments in infrastructure, including installation of watering troughs and electrical fencing. In addition, we have one of the few vertically integrated cattle processing operations in Argentina through Sociedad Anónima Carnes Pampeanas S.A.
In our milking facility, we have implemented an individual animal identification system, using plastic tags for our cattle and “RFID” tags. We use software from Westfalia Co. which enables us to store individual information about each of our dairy cows.
Increased production.
Our goal is to increase our crop, cattle and milk production in order to achieve economies of scale by:
Increasing our owned land in various regions by taking advantage of attractive land purchase opportunities. In addition, we expand our production areas by developing lands in regions where agricultural and livestock production is not developed to its full potential. We believe in the use of technological tools for improving the productivity of our land reserves and enhancing their long-term value. However, current or future environmental regulations could prevent us from fully developing our lands by demanding us to maintain part of them as natural woodlands not allocated to production.
Diversifying our production and the weather risk by leasing farms, thus expanding our product portfolio and optimizing our geographic focus, in particular in areas that are not appealing in terms of land value appreciation but with attractive productivity levels. We believe that this diversification mix mitigates our exposure to seasonality, commodity price fluctuations, weather conditions and other factors affecting the agricultural and livestock sector.
Moreover, we believe that continuing to expand our agricultural operations outside of Argentina will help us improve even more our ability to produce new agricultural products, further diversifying our mix of products, and mitigating our exposure to regional weather conditions and country-specific risks.

Focus on preserving long-term value of our investment in our real estate subsidiary IRSA
As a leading company engaged in acquiring, developing and managing real estate, IRSA seeks to (i) generate stable cash flows through the operation of its real estate rental assets (shopping centers, office buildings, hotels), (ii) achieve long-term appreciation of its asset portfolio by taking advantage of development opportunities, (iii) increase the productivity of its land reserves and enhance the margins of its development and sale of properties segment through partnerships with other developers, and (iv) look for opportunities abroad offering capital gain potential.
Operations Center in Argentina
Shopping Center. Our main purpose is to maximize our shareholders’ profitability. By using our know-how in the shopping center industry in Argentina as well as our leading position, we seek to generate a sustainable growth of cash flow and to increase the long-term value of our real estate assets. We attempt to take advantage of the unsatisfied supply in different urban areas of the region, as well as of our customers’ purchase experience. Therefore, we seek to develop new shopping centers in urban areas with attractive prospects for growth, including Buenos Aires’ Metropolitan area, some cities in the provinces of Argentina and possibly, other places abroad. To achieve this strategy, the close business relationship we have had for years with more than 1,000 retail companies and trademarks composing our selected group of tenants is of utmost importance, as it allows us to offer an adequate mix of tenants for each particular case.
Offices and Others. We seek to purchase and develop premium office buildings in strategically-located business districts in the City of Buenos Aires and other strategic locations that we believe offer return and potential for long-term capital gain. We expect to continue our focus on attracting premium corporate tenants to our office buildings. Furthermore, we intend to consider new opportunities on a selective basis to acquire or construct new rental office buildings.
Sales and Developments. We seek to purchase undeveloped properties in densely-populated areas and build apartment complexes offering green space for recreational activities. We also seek to develop residential communities by acquiring undeveloped properties with convenient access to the City of Buenos Aires, developing roads and other basic infrastructure such as electric power and water, and then selling lots for the construction of residential units. The scarcity of mortgage financing restricted the growth in low class home purchases and, as a result, we mainly focused on the development of residential communities for middle and high-income individuals, who do not need to finance their home purchases. We seek to continue to acquire undeveloped land at locations we consider attractive within and outside Buenos Aires. In each case, our intention is to purchase land with significant development or appreciation potential to resell. We believe that holding a portfolio of desirable undeveloped plots of land enhances our ability to make strategic long-term investments and affords us a valuable pipeline of new development projects for upcoming years.
Hotels. We believe our portfolio of three luxury hotels is positioned to take advantage of the future growth in tourism and business travel in Argentina. We seek to continue with our strategy to invest in high-quality properties that are operated by leading international hotel companies to capitalize on their operating experience and international reputation. We also seek to continue to invest in improvements for our hotels.
International. In this segment, we seek investments that represent an opportunity of capital appreciation potential in the long term. After the international financial crisis in 2008, we took advantage of the price opportunity in the real estate sector in the United States and invested in two office buildings in Manhattan, New York. In 2015, we sold the Madison building and we hold a 49.9% interest in a US company, whose main asset is the so-called “Lipstick” office building located in the City of New York. In addition, jointly with subsidiaries, we hold 49.0% of the voting securities of Condor Hospitality Trust REIT (NASDAQ: CDOR). We intend to continue evaluating -on a selective basis- investment opportunities outside Argentina as long as they offer attractive investment and development options.
Financial Operations and Other. Through our investment in Banco Hipotecario, the main mortgage-lending bank in Argentina, we believe that we are able to achieve good synergies in the long term with a developed mortgage market.
Operations Center in Israel
We hold, through Dolphin, 68.3% of IDBD, which is one of the largest and most diversified investment groups in Israel, which participates, through its subsidiaries, associates and joint ventures, in numerous markets and industry sectors, including real estate, retail, agricultural industry, insurance, telecommunications, among others. We seek to continue to reduce IDBD’s indebtedness level, simplifying its capital structure and nurturing a strategy in each business unit aimed at improving operating margins and the results of our investment.
·  
Real Estate. PBC has partnered with IDBD in two parkingprojects based in Las Vegas, through IDBG Ltd., including commercial and office building project (Tivoli). The first stage of this project has been fully completed. The second stage of the project is undergoing the building and marketing stages, and will include commercial areas with a surface area of approximately 16,000 square meters and office areas with a surface area of approximately 12,000 square meters. We have already entered into lease agreements with an anchor tenant and other tenants covering approximately 66% of the commercial area included in the second stage of the project and around 8% of the office areas. We also expect to develop an additional project encompassing two residential buildings and, during the year under review, have sold all the remaining residential units of these buildings.
·  
Supermarkets. Shufersal continued developing its business plan, with a focus on building a commercial and operating infrastructure to enable growth in the Maipú 1300 Buildingcoming years; strengthening its competitive edge; offering more value to customers; and two parking unitsimproving its service. Under its business plan, Shufersal continues expanding and strengthening its brand; boosting the development of its digital platforms, with “Shufersal Online” at the core; fostering new and supplementary operations in the sectors in which it currently operates; and streamlining its real property, including the closure and downsizing of existing branches and the opening of new ones.
·  
Agrochemicals. As a part of Adama’s long-term strategy, in December 2015, Adama entered into a commercial cooperation agreement, according to which Adama will gradually become the sole distributor of formulated agrochemical products in China of several agrochemical companies controlled by China National Chemical Corporation (“ChemChina”). This cooperation is expected to support the strengthening of Adama’s status in the Chinese market, by combining sales of Adama’s products with products of ChemChina’s companies and setting up a significant distribution platform in China, starting at the beginning of 2016. On July 17, 2016, DIC, reported that it had accepted ChemChina’s offer for 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments”.
·  
Telecommunications. Cellcom operates in a highly competitive environment. The main elements of Cellcom’s business strategy are: offering comprehensive solutions to expand landline and mobile communication services, optimization of costs and expenses, including by means of carrying out streamlining measures.
·  
Insurance. The investment managers make use of an advanced research department and an effective trading execution, to ensure a competitive advantage in order to achieve a fair long-term yield for policy holders, maximizing income from investments in accordance with the company’s risk appetite and the structure of liabilities in the portfolios.
·  
Others. Includes the assets and income from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities.

Our Principal Business Activities
During fiscal year ended June 30, 2016, we conducted our operations on 30 owned farms and 35 leased farms. Some of the Libertador 498 Building. farms we own are engaged in more than one productive activity at the same time.
The pricefollowing chart shows, for fiscal year 2016, the surface area in operation for each line of business:
The following chart illustrates, for the fiscal year ended on June 30, 2016, the surface area in operation and the hectares held as land reserves, classified into own, under lease or under concession:
Agricultural Business
Land Transformation and Sales
Land Acquisitions
We intend to increase our farmland portfolio by acquiring large extensions of land with high appreciation potential. We also intend to transform the land acquired from non-productive to cattle breeding, from cattle breeding to farming, applying state-of-the-art technology to improve farming yields so as to generate higher land appreciation.
In our view, the sector’s potential lies in developing marginal areas and/or under-utilized areas. Thanks to the current technology, we may achieve similar yields with higher profitability than core areas, resulting in the appreciation of land values.
Over the past 15 years, prices of farmlands intended for agricultural production have increased in the southern hemisphere (mainly South America) but continue to be relatively low compared to the northern hemisphere (U.S. and Europe). Our financial strength relative to other Argentine producers gives us the chance to increase our land holdings at attractive prices, improve our production scale and create potential for capital appreciation.
Several important intermediaries, with whom we usually work, bring farmlands available for sale to our attention. The decision to acquire farmlands is based on the assessment of a large number of factors. In addition to the land’s location, we normally carry out an analysis of soil and water, including the quality of the transaction was Ps. 9.0 million (US$ 1.5 million)soil and its suitability for our intended use (crops, cattle, or milk production), classify the various sectors of the lot and the prior use of the farmland; analyze the improvements in the property, any easements, rights of way or other variables in relation to the property title; examine satellite photographs of the property (useful in the survey of soil drainage characteristics during the different rain cycles) and detailed comparative data regarding neighboring farms (generally covering a 50-km area). Such transaction generated a profit before taxBased on the foregoing factors, we assess the farmland in terms of approximately Ps. 7.2 million.the sales price compared against the production potential of the land and capital appreciation potential. We consider that competition for the acquisition of farmlands is, in general, limited to small farmers for the acquisition of smaller lots, and that there is scarce competition for the acquisition of bigger lots.
 
On January 14, 2014, IRSA signedIn addition, we may consider the transfer deedacquisition of farmlands in marginal zones and their improvement by irrigation in non-productive areas as well as the installation of irrigation devices in order to obtain attractive production yields and create potential for capital appreciation.

The following chart shows certain information concerning our land acquisitions for each of the last 10 fiscal years ended on June 30:
Fiscal Year
Number of Farmlands
Amount of Acquisitions
(Ps. million)
2006 (1)
145.9
2007 (2)
17.3
2008 (3)
24.5
2009 (4)
7133.2
2010 (5)
15.0
2011 (6)
361.5
2012--
2013--
2014--
2015--
2016--
   
(1)  
Includes the acquisition of “San Pedro” farmland of 6,022 hectares.
(2)  
Includes the acquisition of “8 de Julio” farmland of 90,000 hectares.
(3)  
Includes the acquisition of the remaining 25% of “La Adela” farmland of 18 hectares and 80% of “La Esperanza” farmland of 980 hectares.
(4)  
Includes the acquisition of "Estancia Carmen", "Puertas de Luján", "Las Londras", "San Cayetano", "San Rafael", and "La Fon Fon" farmlands and 50% of "Jerovia" farmland, of 10,911, 115, 4,566, 883, 2,969, 3,748 and 20,966 hectares, respectively.
(5)  
Includes exercise of the option over 50% of the “Jerovía” farmland of 3,646 hectares.
(6)  
Includes the acquisition of “La Primavera” and “4 Vientos” farmlands of 2,341 hectares and 2,659 hectares, respectively. In addition, it includes the acquisition of 943 hectares of the Mendoza farmland.
Land Sales
We periodically sell properties that have reached a considerable appraisal to reinvest in new farms with higher appreciation potential. We analyze the possibility of selling based on a number of factors, including the expected future yield of the farmland for continued agricultural and livestock exploitation, the availability of other investment opportunities and cyclical factors that have a bearing on the global values of farmlands.
The following chart shows certain information concerning our land sales for each of the last 10 fiscal years ended on June 30:
Fiscal Year
Number of Farmlands
Gross Proceeds from Sales
(Ps. million)
Profit(1)
(Ps. million )
          2006 (2)
116.19.9
         2007 (3)
329.922.3
         2008 (4)
223.020.0
        2009 (5)
22.01.9
        2010 (6)
118.613.7
2011 (7)
284.554.6
2012 (8)
3118.363.2
2013 (9)
4332.6149.6
 2014 (10)
2148.591.4
     2015(11)(12)
4814.3569.6
                                                   2016---
(1)  
Includes the difference between the gross proceeds from sales (net of all taxes and commissions) and the book value of the assets sold.
(2)  
Includes the sale of the 11th floor and seven parking units“El Gualicho” farmland of the Maipú 1300 Building. The total price of the transaction was Ps. 9.6 million (US$ 1.4 million). Such transaction generated a profit before tax of approximately Ps. 7.6 million.5,727 hectares.
(3)  
On January 24, 2014, IRSA signed the transfer deed forIncludes the sale of 20,833 hectares of “Tapenagá” farmland and the 7th floorpartial sale of 14,516 hectares of “Los Pozos” farmland and 28 parking units50 hectares of “El Recreo” farmland.
(4)  
Includes the Bouchard 551 Building. The total pricepartial sale of 4,974 hectares of “Los Pozos” farmland and the transaction was Ps. 124.6 million equivalents to US$ 16.0 million. Such transaction generated a profit before taxpartial sale of approximately Ps. 98.8 million.2,430 hectares of “La Esmeralda” farmland.
(5)  
On April 1, 2014, IRSA signedIncludes the transfer deed forpartial sale of 1,658 hectares of “Los Pozos” farmland and the partial sale of 1,829 hectares of “El Recreo” farmland.
(6)  
Includes the sale of the 5th and 6th floor and complementary units in the Costeros Dique IV Building. The total price12,071 hectares of the transaction was Ps. 12.4 million (US$ 1.5 million). Such transaction generated a profit before tax of approximately Ps. 10.3 million.“Tali Sumaj.”
(7)  
On April 7, 2014, IRSA signed the transfer deed forIncludes the sale of “La Juanita” farmland, of 4,302 hectares, and the 21th and 22th floors and two parking unitspartial sale of the Maipú 1300 Building and four parking units910 hectares of the Libertador 498 Building. The price of the transaction was Ps. 24.1 million (US$ 3.0 million). Such transaction generated a profit before tax of approximately Ps. 19.6 million.“La Fon Fon.”
(8)  
On April 10, 2014, IRSA signed the transfer deed forIncludes the sale of 2,447 hectares of “San Pedro” farmland, the 2nd floorpartial sale of 1,194 hectares of “La Fon Fon” farmland, and the Avenidapartial sale of 115 hectares of “Puerta de Mayo 589 Building and ten parking units of the Rivadavia 565 Building. The total price of the transaction was Ps. 24.2 million (US$ 3.0 million). Such transaction generated a profit before tax of approximately Ps. 19.9 million.Lujan” farmland.
(9)  
On May 6, 2014, IRSA signed the transfer deed forIncludes the sale of 14,359 hectares of “Horizontina” farmland, the Constitución 1159 Building. partial sale of 394 hectares of “Araucaria” farmland, the partial sale of “Cremaq” farmland of 4,985 hectares, and the partial sale of 5,613 hectares of La “Suiza” farmland.
(10)  
Includes the sale of 883 hectares of “San Cayetano” farmland and the partial sale of 1,164 hectares of “Araucaria” farmland.
(11)  
Includes the sale of 1,058 hectares of “La Adela” farmland, 24,624 hectares of “Chaco Paraguayo” farmland, 1,643 hectares of “Fon Fon” farmland and the remainder sale of 27,745 hectares of “Cremaq” farmland.
(12)  
The pricesale of “La Adela” to our subsidiary IRSA was a transaction between related parties and generated therefore no results under the IFRS and it was not included in the gain from disposition of farms for Ps. 569.5 million.
After recording farm sales for Ps. 814 million in 2015, we did not close any transactions during fiscal year 2016. Specifically in Argentina, the farmland sale market was affected during the last years by the controls on capitals that prevailed until December 2015 and the profitability conditions of the transaction was Ps. 23.3business. With the new administration and new government policies for the farming industry we have seen a positive change in this market’s prospects. In this regard, after year-end we sold the “El Invierno” and “La Esperanza” farms, comprising 2,615 hectares used for agriculture and located in the district of “Rancul”, province of La Pampa, for US$ 6 million (US$ 2.9 million)2,294 per hectare). Such transaction generated a profit before tax ofThese farms’ book value was approximately Ps. 13.4 million.13.5 million; therefore, the transaction will result in a gain of Ps. 72 million, which will be recorded in the first quarter of fiscal year 2017.
 
On May 14, 2014, IRSA signed the transfer deed for the sale to Transportadora de Caudales Juncadella of the unit 449 of the 8th floor of the Bouchard 551 Building. The price of the transaction was Ps. 61.8 million (US$ 7.7 million). Such transaction generated a profit before tax of approximately Ps. 49.2 million.
 
On May 19, 2014, IRSA signedFarmland Development
We consider that there is great potential in farmland development where, through the transfer deeduse of current technology, we may achieve similar yields with higher profitability than in core areas.
As of June 30, 2016, we owned land reserves in the region extending over more than 365,306 hectares of own farmlands that were purchased at very attractive prices. In addition, we have a concession 107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farms and, therefore, achieve appreciation in the salelong term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to Inco Sociedad Anónima de Inversión, Industria y Comerciobe used for production purposes.
During fiscal year 2016, we conducted our land development business in Argentina mainly in Los Pozos, where we developed 2,486 hectares in La Paz and Don Mario modules. Moreover, we developed 548 hectares in La Suiza intended for agricultural production.
Our developments in Brazil, through our subsidiary Brasilagro, consisted of the unit 14,416 hectares of the ground floor of the Maipú 1300 Building. The price of the transaction was Ps. 6.5 million (US$ 0.8 million). Such transaction generated a profit before tax of approximately Ps. 5.2 million.developed land intended for agriculture.
In connection with our business in Paraguay, we developed, through CRESCA, 1,400 hectares for agricultural production.
Results
 
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year  2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
Revenues----
Costs(9)(9)(8)0.0%
Gross Loss(9)(9)(8)0.0%
(Loss)/Gain from disposition of farmlands(2)57091-
Profit/(Loss) from operations(12)55278-
Segment Profit/(Loss)(12)55278-
Area under Development (hectares)Developed 2014/2015Developed 2015/2016
Argentina                               1,703                               3,034
Brazil                               7,475                               4,416
Paraguay (1)                               2,367                               1,400
Total                             11,545                             8,850
(1) Includes the farms of Cresca S.A. at 100%.
Agricultural Production
Crops and Sugarcane
Our crop production is mainly based on grains, oilseeds and sugarcane. Our main crops include soybean, wheat, corn, and sunflower. Other crops, such as sorghum and peanut, are sown occasionally and represent only a small percentage of total sown land.
Production
The following table shows, for the fiscal years indicated, our crop production volumes measured in tons:
Production Volume(1)
FY 2016FY2015FY2014FY2013FY2012
Corn229,893             310,874                 155,759           194,870           247,839
Soybean168,916             279,608                 242,349           220,540           196,515
Wheat16,186               15,990                   12,373               4,392             18,625
Sorghum1,127                 1,740                     4,502               6,709               7,791
Sunflower3,053               11,992                     5,803             12,437             14,503
Other6,432                 6,999                     2,476               5,002               6,774
Total Crops (tons)425,607             627,203                 423,262           443,950           492,047
Sugarcane  (tons)1,228,830             928,273                 657,547        1,156,848           576,048
Cattle herd7,714                 7,812                     6,970               7,723               8,936
Milking cows491                    524                        489                  470                  445
Cattle (tons)8,205                 8,336                     7,459               8,193               9,381
Milk (thousand of liters)16,723        17,526            19,320      18,459      16,563
(1)  
Includes CRESCA at 50%. Does not include Agro-Uranga S.A.
Below is the geographical distribution of our agricultural production for the last five seasons (in tons):
2016 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn189,70819,98213,2336,969229,893
Soybean117,74426,25215,4169,505168,916
Wheat15,525-661-16,186
Sorghum56-7732981,127
Sunflower3,053---3,053
Other5,3671,065--6,432
Total Grains and Other331,45347,29930,08316,772425,607
Sugarcane-1,075,183153,648-1,228,830

2015 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         253,929           40,102           10,199             6,644         310,874
Soybean         132,101         111,751           30,471             5,285         279,608
Wheat           15,990                  -                  -                  -           15,990
Sorghum                538                  -                406                796             1,740
Sunflower           11,992                  -                  -                  -           11,992
Other             6,917                  -                  -                  82             6,999
Total Grains and Other         421,467         151,853           41,076           12,807         627,203
Sugarcane                  -         830,204           98,069                  -         928,273
2014 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn           93,388           50,102           11,445                826         155,761
Soybean         108,088         108,107           20,821             5,334         242,350
Wheat           12,373                  -                  -                  -           12,373
Sorghum             1,367                  -             2,487                648             4,502
Sunflower             5,756                  -                  47                  -             5,803
Other             1,926                534                  -                  16             2,476
Total Grains and Other         222,898         158,743           34,800             6,824         423,265
Sugarcane                  -         570,820           86,727                  -         657,547
2013 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         145,949           34,630           14,291                  -         194,870
Soybean           82,476         106,276           31,601                187         220,540
Wheat             3,111                  -             1,281                  -             4,392
Sorghum             3,766                  -             2,638                305             6,709
Sunflower           12,090                  -                347                  -           12,437
Other             2,644             2,358                  -                  -             5,002
Total Grains and Other         250,036         143,264           50,158                492         443,950
Sugarcane                  -      1,014,234         142,614                  -      1,156,848
2012 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         153,889           72,387           21,563                  -         247,839
Soybean           83,221           83,319           29,976                  -         196,516
Wheat           17,637                  -                988                  -           18,625
Sorghum             3,360                  -             4,431                  -             7,791
Sunflower           13,210                  -             1,293                  -           14,503
Other             5,494             1,280                  -                  -             6,774
Total Grains and Other         276,811         156,986           58,251                  -         492,048
Sugarcane                  -         576,030                  18                  -         576,048
Sales
Below is the total volume of grains and sugarcane sold broken down into geographical areas, measured in millions of tons:
Volume of Sales(3)
FY2016FY2015FY2014FY2013FY2012
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
Corn217.337.9255.2269.70.0269.7179.90.0179.9233.337.8271.1 202.321.8 224.1
Soybean182.515.8198.3172.977.2250.1188.933.2222.1153.455.4208.8 228.623.0 251.6
Wheat17.329.346.67.00.17.111.40.011.410.70.010.7   15.25.5   20.7
Sorghum1.00.01.01.60.01.63.80.03.85.80.05.8     8.50.0     8.5
Sunflower10.40.010.45.20.05.29.70.09.710.60.010.6   18.10.0   18.0
Other5.90.05.91.90.01.96.20.36.514.00.114.1   12.00.0   12.0
Total
Grains (tons)
434.483.0517.4458.377.3535.6399.933.5433.4427.893.3521.1484.2503534.5
Sugarcane (tons)1,219.70.01,219.7924.5-924.5675.7-675.71,179.9-1,179.9636.3-636.3
Cattle herd8.30.08.38.90.08.98.80.08.89.60.09.6   15.0-   15.0
Milking cows0.70.00.70.90.00.90.50.00.50.50.00.5        0.5-        0.5
Beef-Cattle (tons)9.00.09.0     9.8-     9.8     9.3           -     9.3      10.1-      10.1   15.5-   15.5
Milk (in millions of liters)15.50.015.5   16.9-   16.9   18.8           -   18.8      17.9-      17.9   16.3-   16.3
(1) Domestic Market.
(2) Foreign Market.
(3) Includes Brasilagro and CRESCA at 50%, Acres del Sud, Ombú, Yatay and Yuchán. Does not include Agro-Uranga.
The following table shows the sown surface area assigned to crop production, classified into owned, under lease, under concession and leased to third parties for the fiscal years indicated below, measured in hectares:
 
2016(1)(2)
2015(1)(2)
2014(1)(2)
2013(1)(2)
2012(1)(2)
Own112,112128,795122,632127,952127,793
Under lease43,30958,16758,03045,62444,508
Under concession23,19621,54720,9868,9378,778
Leased to third parties2,3653,2677,61618,22323,595
Total180,982211,776209,264200,736204,674
(1)  
Sown land may differ from that indicated under “Uses of Land”, since some hectares are sown twice in the same season and therefore are counted twice.
(2)  
Includes CRESCA at 50%. Does not include Agro-Uranga.
Stock2016 Season2015 Season2014 SeasonYoY var 2016/2015YoY var 2015/2014
Corn        21,233        61,157        17,604(65.3%)247.4%
Soybean        69,665        99,972        75,885(30.3%)31.74%
Sunflower             913          8,594          1,825(89.4%)370.9%
Sorghum             369             198             52286.4%(62.1%)
Wheat          4,964          9,377             681(47.1%)1,276.9%
Cotton               -               -               -0.0%0.0%
Sugarcane               -               -               -0.0%0.0%
Other          2,975          4,500        32,608(33.9%)(86.2%)
Total      100,119      183,798      129,125(45.5%)42.3%

We seek to diversify our mix of products and the geographic location of our farmlands to achieve an adequate balance between the two principal risks associated with our activities: weather conditions and the fluctuations in the prices of commodities. In order to reduce such risks, we own and lease land in several areas of Argentina with different climate conditions that allow us to sow a diversified range of products. Our leased land for crops is mostly located in the Pampas region, a favorable area for crop production. The leased farms are previously studied by technicians who analyze future production expectations based on the historic use of the land. The initial duration of lease agreements is typically one or three seasons. Leases of farms for production of crops generally consist of lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. The principal advantage of leasing farms is that leases do not require us to commit large amounts of capital to the acquisition of lands but allow us to increase our scale in the short term and reduce the risk of inclement weather. The disadvantage of this strategy is that the cost of leasing can increase over time, in part, because increased demand for leased land increases the price of leased land.
In order to increase our production yields, we use, besides state-of-the-art technology, labor control methods which imply the supervision of the seeding’s quality (density, fertilization, distribution, and depth), crop monitoring (determination of natural losses and losses caused by harvester) and verification of bagged crop quality. In this way, we work jointly with our suppliers to achieve the best management of inputs, water and soil.
Wheat seeding takes place from June to August, and harvesting takes place from December to January. Corn, soybean and sunflower are sown from September to December and are harvested from February to August. Grains are available to be sold as commodities after the harvest from December to June and we usually store part of our production until prices recover after the drop that normally takes place during the harvesting season. A major part of production, especially soybean, wheat, corn and sorghum, is sold and delivered to buyers pursuant to agreements in which price conditions are fixed by reference to the market price at a specific time in the future that we determine. The rest of the production is either sold at current market prices or delivered to cover any futures contract that we may have entered into.
Agro-Uranga S.A.
We have a 35.72% interest in Agro-Uranga S.A. (“Agro-Uranga”). This company optimizes production processes and attains excellent results, with special emphasis in soil conservation, the application of rational techniques and care of the environment.
At present, with the assistance of its foreign trade team it is seeking to develop new products so as to significantly increase export volumes, encouraged by the world’s growing demand.
Lease of Farmlands
We conduct our business on owned and leased land. Rental payments increase our production costs, as the amounts paid as rent are accounted for as operating expenses. As a result, production costs per hectare of leased land are higher than for the land owned by us.
Our land leasing policy is designed to supplement our expansion strategy, using our liquidity to make production investments in our principal agricultural activities. On the other hand, our leasing strategy provides us with an added level of flexibility in the share of each of our products in total production, providing for greater diversification.
The initial duration of lease agreements is typically one crop season. Leases of farms for production of crops consist in lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. Leases of farmlands for cattle breeding consist in lease agreements with fixed payments based on a fixed amount of Pesos per hectare or steer kilograms or capitalization agreements with payments in kind or in cash based on the weight gain in kilograms.
During fiscal year 2016, we leased to third parties a total of 35 farmlands, covering 56,003 hectares, including 11,718 hectares in Brazil. Out of the total leased area, 43,309 hectares were assigned to agricultural production, including double crops, and 12,635 hectares to cattle raising. The properties mentioned abovefor agricultural production were classified as investment properties untilleased, primarily, for a fixed price prior to harvest and only a small percentage consisted of sharecropping agreements.
The following table shows a breakdown of the above mentioned transactions were executed,number of hectares of leased land used for each of our principal production activities:
 20162015201420132012
Crops(1)
43,30958,16758,03045,62444,508
Cattle12,63513,50118,54912,63512,635
(1)  
Includes Brasilagro.
Due to the rise in the price of land, we adopted a policy of not validating excessive prices and applying strict criteria upon adopting the decision to lease, selecting those lands with values that would ensure appropriate margins.

Results
The following table shows the Company’s results for fiscal year 2016, compared to the two preceding fiscal years:
Crops
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues 1,152      98783716.8%17.9%
Costs (1,813)  (1,819)(1,539)(0.3%)18.1%
Initial recognition and changes in the fair value of biological assets and agricultural products  at the point of harvest 1,071      91886816.6%5.8%
Changes in the net realizable value of agricultural products after harvest208       (34)(17)-100%
Gross profit618      521491088.5%(65.1%)
General and administrative expenses(174)     (159)(147)9.4%8.2%
Selling expenses(216)     (161)(115)34.2%40.0%
Other operating results, net(74)       (9)(27)722.2%(66.6%)
Profit/(Loss) from operations154     (277)(140)--
Share of profit/(loss) of associates and joint ventures26        111(2500.0%)(90.9%)
Segment Profit/(Loss)180     (276)(129)--
Sugarcane
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues29419812448.5%59.7%
Costs(511)(368)(207)38.8%77.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest3181879670.5%94.8%
Gross profit1011713494.1%30.8%
General and administrative expenses(34)(20)(28)70.0%(28.6%)
Selling expenses(8)(8)(8)--
Other operating results, net4(2)---
(Loss)/Profit from operations63(13)(23)--
Segment (Loss)/Profit63(13)(23)--
Cattle
Our cattle production involves the breeding and fattening of our own animals. In some cases, if market conditions are favorable, we also purchase and fatten cattle which representswe sell to slaughterhouses and supermarkets.  As of June 2016, our cattle aggregated 69,873 heads, and we had a gross leasetotal surface area of approximately 10,816 square meters.
All sales85,392 hectares of the year ledown and leased lands devoted to a combined profit for the Company of Ps. 230.9 million, disclosed within the line “Gain from disposal of investment properties” in the income statement.
On May 22, 2014 IRSA Commercial Properties acquired commercial premises with an area of 40 m2, nextthis business activity.  In addition, we have leased to our shopping Alto Palermo, located on the ground floor of the building located in Av. Santa Fe 3255/57/59 in an amount of US$ 3.8 million.
Transactions with non-controlling interest
IRSA Commercial Propertiesthird parties 70 hectares assigned to these activities.
 
During the fiscal year ended June 30, 2014,2016, our production was 7,714 tons, a 1.2% year-on-year decrease.
The following table sets forth, for the Company,fiscal years indicated below, the cattle production volumes measured in tons:
 
2016(1)
2015(1)
2014(1)
2013(1)
2012(1)
Cattle production7,7147,8126,9707,7238,936
(1)
Production measured in tons of live weight.  Production is the sum of the net increases (or decreases) during a given period in live weight of each head of cattle owned by us.
Our cattle breeding activities are carried out with breeding cows and bulls and our fattening activities apply to steer, heifers and calves. Breeding cows calve approximately once a year and their productive lifespan is from six to seven years. Six months after birth, calves are weaned and transferred to fattening pastures. Acquired cattle are directly submitted to the fattening process. Upon starting this process, cattle have been grazing for approximately one year to one and a half year in order to be fattened for sale. Steer and heifers are sold when they have achieved a weight of 380–430 kg and 280–295 kg, respectively, depending on the breed.
Pregnancy levels, which have been improving over the years, showed satisfactory levels of efficiency notwithstanding the adverse weather conditions. Genetics and herd management are expected to further improve pregnancy levels in the coming years. Reproductive indicators improved thanks to the implementation of technologies, which have included handling techniques and females artificial insemination with cattle genetics especially selected for the stock which is purchased from specialized companies in quality semen elaboration for meat production. We use veterinarian products manufactured by leading national and international laboratories. It is important to emphasize the work of a veterinarian advising committee, who are external to us and visit each establishment monthly to control and agree tasks.
Currently, the cattle raising farms are officially registered as export farmlands pursuant to the identification and traceability rules in force in Argentina. Animals are individually identified, thus allowing for the development of special businesses in this area.
Our cattle stock is organized into breeding and fattening activities. The following table shows, for the fiscal years indicated, the number of head of cattle for each activity:
 201620152014
Breeding stock58,74752,05254,808
Winter grazing stock11,12612,10210,932
Total Stock (heads)69,87364,15465,740
We seek to improve cattle production and quality in order to obtain a higher price through IRSA, acquired an additional 0.02% interestadvanced breeding techniques. We cross breed our stock of Indicus, British (Angus and Hereford) and Continental breeds to obtain herds with characteristics better suited to the pastures in IRSA Commercial Properties for a total amountwhich they graze. To enhance the quality of Ps. 1.2 million. This resultedour herds even further, we plan to continue improving our pastures through permanent investment in a decrease in non-controlling interests of Ps. 0.2 millionseeds and fertilizers, an increase in equity attributablethe watering troughs available in pastures, and the acquisition of round bailers to holderscut and roll grass for storage purposes.
Our emphasis on improving the quality of our herd also includes the parentuse of Ps. 1.0 million. animal health-related technologies. We comply with national animal health standards that include laboratory analyses and vaccination aimed at controlling and preventing disease in our herd, particularly FMD.
Direct costs of beef production consist primarily of crops for feeding and dietary supplementation purposes, animal health and payroll costs, among others.

Results
The effect on shareholders’ equityfollowing table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues1781439024.5%58.9%
Costs(268)(225)(161)19.1%39.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest25416714552.1%15.2%
Changes in the net realizable value of agricultural products after harvest-----
Gross Profit164857492.9%14.9%
General and administrative expenses(40)(26)(27)53.8%(3.7%)
Selling expenses(19)(20)(14)(5.0%)42.9%
Other operating results, net(2)(3)(2)(33.3%)50.0%
Profit/ (Loss) from operations1033631186.1%16.1%
Segment Profit / (Loss)1033631186.1%16.1%
Dairy
As of this changeJune 30, 2016, we conducted our milk business in the equity interestdairy facility located in IRSA Commercial Properties is summarized as follows:“El Tigre” farm in the Province of La Pampa, Argentina. We have a milking capacity of 1,788 cows per day and seek to increase total productivity through the application of new technologies including improved genetic management for milk production, strategic feeding plans, based on cattle specific requirements and the use of individual traceability to know the productivity history of each animal. We also use computer science applied to the milk business to make more efficient the manual labor by surveying the information supplied by the farm.
 
Ps. (million)
Carrying amount of Company’s interest acquired of0.18
Consideration paid for non-controlling interests(1.21)
Reserve recorded in shareholders’ equity(i) (1.03)
Within the process of de-commoditization and technological innovation, we implemented an identification and tracking system in compliance with European and SENASA standards. We also obtained Global Gap and HCCP certification. Our goal in this respect is to distinguish our production and obtain higher prices in production sales.
 
(i)  The Reserve includes Ps. 0.36 million for non-controlling interest
Our milk production is based on a herd of Holando Argentina dairy cows, genetically selected through the use of imported frozen semen of North American Holando bulls. Male calves are sold, at calving, for a given amount per head, whereas female calves are weaned after 24 hours, spend approximately 60 days in raising and approximately 100 days being fed on the basis of grass, grains and supplements. Young heifers then graze for an additional 12 to 15 month period, prior to artificial insemination at the age of 18 to 20 months and they calve nine months later. Heifers are subsequently milked for an average of 300 days. Milking dairy cows are once again inseminated during the 60 to 90 day subsequent period. This process is repeated once a year during six or seven years. The pregnancy rate for our dairy cows is 80-90%.
 
Futuros y Opciones.com S.A.Our dairy herd is milked mechanically twice a day. The milk obtained is cooled to less than five degrees centigrade to preserve quality and is then stored in a tank for delivery once a day to trucks sent by buyers. Dairy cows are fed mainly with grass, supplemented as needed with grains, hay and silage. We have invested in certain technologies that focus on genetic improvement, animal health and feeding in order to improve our milk production. These investments include imports of top quality frozen semen from genetically improved North American Holstein bulls, agricultural machinery and devices such as feed-mixer trucks, use of dietary supplements and the installation of modern equipment to control milk cooling. We are currently acquiring dietary supplements for our dairy cows and have made investments with the aim of increasing the quantity and quality of forage (pasture, alfalfa and corn silage) in order to reduce feeding costs.
 
On December 20, 2013 we sold 14,812 non-transferable nominative common shares, with a nominal valueThe following table sets forth, for the periods indicated, the average number of Ps. 1 eachour dairy cows and entitled to one voteaverage daily production per share, representing a 0.9075% interest of Futuros y Opciones.com S.A. (“FyO”) for a total amount of Ps. 0.1 million.cow:
 
Ps. (million)
Sale’s collected value                                                                                                          0.11
Increase in non-controlling interest                                                                                                          (0.21)
Reserve recorded in shareholders’ equity                                                                                                          (0.10)
 201620152014
Average dairy cows per day (heads)1,788               2,189               2,439
Milk Production/Dairy Cow/Day (liters)23.81               21.48               19.69
At the closing of fiscal year 2016, we had 5,047 heads of cattle on 2,231 hectares involved in the production of milk; whereas as of June 30, 2015, we had 5,658 heads of cattle on 2,864 hectares.
 
Brasilagro
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues657254(9.7%)33.3%
Costs(135)(133)(104)1.5%27.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest747563(1.3%)19.0%
Gross Profit41413(71.4%)7.7%
General and administrative expenses(8)(5)(6)60.0%(16.7%)
Selling expenses(4)(4)(2)--
Other operating results, net-(1)---
Profit / (Loss) from operations(8)45--
Segment Profit / (Loss)(8)45--
Agro-industrial Activities
This segment consists in the slaughtering and processing of beef in meat packing plants.
Through our subsidiary Sociedad Anónima Carnes Pampeanas S.A. (“Carnes Pampeanas”) we own a meat packing plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,600 cattle heads per month.
 
During the currentlast years, the smaller supply of cattle has adversely affected the value chain by reducing cold-storage plant utilization. This has left several plants struggling to remain operational in view of the poor returns and shortage of raw materials. Our investment in Carnes Pampeanas has not escaped unscathed of this situation.
During fiscal year we sold 10,400 shares of Brasilagro, representing2016, this segment recorded a 0.02% interest, for a total amountnet loss of Ps. 0.27 million. Consequently, we recognized an increase in non-controlling interest for an amount63.0 million compared to a net loss of Ps. 0.2535.0 million and a decrease in equity attributable to holders of the parent of Ps. 0.02 million. The effect on shareholders’ equity of this change in the equity interestprevious fiscal year. Although the business was favored by the new government policies consisting in Brasilagro is summarizedraising the exchange rate and lowering withholding taxes on beef exports, the positive impact of these measures was offset by a deterioration in the input/product ratios, explained by the fact that livestock prices and labor costs significantly outpaced the rise in beef prices for domestic consumption and in the international markets, as follows:well as the prices of leather, this business’ main by-product.
 
Ps. (million)
Carrying amount of the non-controlling interests sold by Cresud                                                                                                          (0.25)
Consideration collected                                                                                                          0.27
Reserve recorded in shareholders’ equity                                                                                                          0.02

 

Results
 
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
41

 
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues96680655419.8%45.4%
Costs(925)(739)(480)25.2%54.0%
Gross profit416774(38.8%)(9.5%)
General and administrative expenses(38)(25) (17)52.0%47.1%
Selling expenses(67)(77) (55)(13.0%)40.0%
Other operating results, net1- (1)-100.0%
(Loss)/Profit from operations(63)(35)180.0%3,600%
Segment (Loss)/Profit(63)(35)180.0%3,600%
Leases andAgricultural Services
We lease own farms to third parties for agriculture, cattle breeding and seed production, mainly in two types of farms. On the one hand, we lease our farms under irrigation in San Luis (Santa Bárbara and La Gramilla) to seed producers. These farms are ideal for obtaining steady production levels, given the quality of their soil and the weather conditions of the area, along with the even humidity provided by irrigation.
 
On the other hand, on Septemberwe lease farms recently put into production after agricultural development. In this way we manage to reduce our production risk, ensuring fixed rental income until the new farms reach stable productivity levels.
In addition, in this segment we include the irrigation service we provide to our own farms leased to third parties.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues78612927.9%110.3%
Costs(20)(21)(17)4.8%23.5%
Gross Profit58401245.0%233.4%
General and administrative expenses(4)(2)(4)100%(100.0%)
Selling expenses(1)(1)(1)--
Other operating results, net-----
Profit from operations5337743.2%428.6%
Segment Profit5337743.2%428.6%
Other
This segment includes part of our business through Futuros y Opciones (FyO), as grain trading is reflected in the Grains segment.
Futuros y Opciones.Com S.A. (FyO)
Futuros y Opciones.com’s main business is grain trading (grain brokerage, storage, futures and options, consulting and logistics services) and sale and distribution of own inputs and third-party products.
During this fiscal year FyO sold its website to Agrofy S.A., a company in which Cresud holds an equity interest.
As concerns the Grains business, revenues grew thanks to the increase in traded volumes as compared to the previous fiscal year, the effect of the devaluation and strong growth in trading revenues. The inputs business started to recover, and invoicing increased 6% as compared to the previous fiscal year.
During this fiscal year, financial income increased as compared to the previous year as a result of the investments made in mutual investment funds, LEBACS and government securities.
FyO continues to invest in systems for the inputs and grains businesses.
Concerning the goals for next year, the Grains business is expected to keep growing at the same pace as in the past years, aspiring to lead the grain trading business and to consolidate storage operations. As concerns inputs, FyO’s goals include consolidating its suite of products, increasing sales and improving margins. Other objectives include becoming a leading company in the knowledge of the grains markets, offering all businesses and services related to grain trading, and being digital innovators.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues17912812539.8%2.4%
Costs(140)(105)(101)33.3%3.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest-----
Gross Profit39232469.6%(4.2%)
General and administrative expenses(15)(8)(11)87.5%(27.3%)
Selling expenses(23)(13)(11)76.9%18.2%
Other operating results, net111--
Profit from operations23333.3%-
Share of Profit/(loss) of associates and joint ventures(3)----
Segment Profit(1)33--



1 Note that the shareholders’ agreement was originally signed between Dolphin and ETH MBA Extra Holdings. On April 2014, Dolphin and CAA Extra Holding received the rights to become holders of the shares.

2 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 2,040 million according to the Statement of cash flows, and non-cash transactions for Ps. 418 million as described in Note 20 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2016.

3 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 486 million according to the Statement of cash flows, and non-cash transactions for Ps. 2 2013, Brasilagro approved a share repurchase programmillion as described in Note 21 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2015.

4 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for upacquisition of property, plant and equipment for Ps. 435 million according to 3,511,130 common shares andthe Statement of cash flows, non-cash transactions for up to an aggregate amount not to exceedPs. 1 million as described in Note 21 - Cash flow information of the balanceConsolidated Financial Statements as of profits or available reserves disclosed in Brasilagro’s latest financial statements. June 30, 2014.
55
Farmland Portfolio
As of June 30, 2014, Brasilagro purchased 99,900 common shares2016, we owned, together with our subsidiaries, 27 farms, with a total surface area of 622,217 hectares.
The following table sets forth our farm portfolio as of June 30, 2016:
Use of Farmlands Owned and under Concession as of June 30, 2016
 LocalityProvinceDate ofSurface AreaMain BusinessCattleSheepDairyAgricultureCattle
   Acquisition(has) (has)(has)(has)(has)(head)
El RecreoRecreoCatamarcaMay 9512,395Natural woodlands     
Los PozosJV GonzálezSaltaMay ’95239,639Cattle/ Agriculture/ Natural woodlands44,010  13,93844,914
San Nicolás (1)
RosarioSanta FeMay ‘971,431Agriculture   1,409 
Las Playas (1)
IdiazabalCórdobaMay ‘971,534Agriculture/ Dairy   1,534 
La Gramilla/ Santa BárbaraMerloSan LuisNov ‘977,072Agriculture Under irrigation   4,294 
La SuizaVilla AngelaChacoJun ‘9836,380Agriculture/ Cattle26,700  3,41415,300
La EsmeraldaCeresSanta FeJun ‘989,370Agriculture/ Cattle   7,885 
El TigreTrenelLa PampaApr ‘038,360Agriculture/ Dairy  2,2315,2395,047
El Invierno(4)
RanculLa PampaJun ‘051,946Agriculture   1,839 
San PedroConcepción de UruguayEntre RiosSep ‘056,022Agriculture   4,083 
8 De Julio/ Estancia CarmenPuerto DeseadoSanta CruzMay ‘07/ Sep ‘08100,911Sheep 85,000   
Cactus ArgentinaVilla MercedesSan LuisDec ‘97171Natural woodlands171    
Las VertientesLas VertientesCordoba-4Silo     
La Esperanza(4)
RanculLa PampaMar ‘08980Agriculture   402 
Las LondrasSanta CruzBoliviaNov ‘084,566Agriculture   3,736 
San RafaelSanta CruzBoliviaNov ‘082,969Agriculture   2,269 
La PrimaveraSanta CruzBoliviaJun ‘112,340Agriculture   636 
Cuatro VientosSanta CruzBoliviaJun ‘112,658Agriculture   1,844 
Jeroviá/Marangatú/Udra (2)
Mariscal EstigarribiaParaguayFeb ‘0958,754Agriculture/ Natural woodlands1,126  5,870 
Finca MendozaLujan de CuyoMendozaMar ‘11389Natural woodlands     
Establecimiento MendozaFinca LavalleMendozaNov’039Natural woodlands     
JatobaJaborandi/BABrazilOct ‘0631,606Agriculture   12,510 
Alto TaquariAlto Taquari/MTBrazilAug ‘075,395Agriculture   3,190 
AraucariaMineiros/GOBrazilMar ‘078,124Agriculture   4,020 
ChaparralCorrentina/BABrazilNov ‘0737,182Agriculture   14,398 
Nova BurutiJanuária/MGBrazilDec ‘0724,211Forestry     
PreferenciaBarreiras/BABrazilSep ‘0817,799Cattle   6,566 
Subtotal Own Farms   622,217 72,00785,0002,23199,07665,261
Agropecuaria Anta SA(3)
Las LajitasSalta 132,000 820  23,5472,460
Subtotal Farms under Concession   132,000 820  23,5472,460
Total   754,217 72,82785,0002,231122,62367,721
           
(1)      Hectares in proportion to our 35.72% interest in Agro-Uranga S.A.
(2)
Hectares in proportion to our 50.0% interest in CRESCA through Brasilagro.
(3)    Hectares in concession. They include 2,000 hectares operated by third parties.
(4)    On July 2016, we sold these farmlands.
56
Additional information about our Farmlands
Argentina
El Recreo
“El Recreo” farm, located 970 kilometers northwest of Buenos Aires, in the Province of Catamarca, was acquired in May 1995. It has semi-arid climate and annual rainfall not in excess of 400 mm. This farm is maintained as a productive reserve.
Los Pozos
The “Los Pozos” farm, located 1,600 kilometers northwest of Buenos Aires, in the Province of Salta, was acquired in May 1995. This property is located in a semi-arid area with average annual rainfall of 500 mm. The area is naturally suited to cattle raising and forestry activities (poles and fence posts), and it has agricultural potential for an aggregate amountsummer crops such as sorghum and corn, among others. For the fiscal year ended June 30, 2016, we used 13,938 hectares in agricultural production. As of Rs. 1.9 million. BelowJune 30, 2016, there were 41,914 heads of cattle in this farm.
San Nicolás
“San Nicolás” is a summary4,005 hectares farm owned by Agro-Uranga S.A., and is located in the Province of Santa Fe, approximately 45 kilometers from the Port of Rosario. As of June 30, 2016, 5,918 hectares were planted for agricultural production, including double crops. The farm has two plants of silos with a storage capacity of 14,950 tons.
Las Playas
The “Las Playas” farm has a surface area of 4,294 hectares and is owned by Agro-Uranga S.A. It is located in the Province of Córdoba, and it is used for agricultural purposes. As of June 30, 2016, the farm had a sown surface area, including double crops, of 7,079 hectares for grain production.
La Gramilla and Santa Bárbara
These farms have a surface area of 7,072 hectares in Valle de Conlara, in the Province of San Luis. Unlike other areas in the Province of San Luis, this valley has a high quality underground aquifer which makes these farms well suited for agricultural production after investments were made in the development of lands, wells and irrigation equipment. In the course of the effects2015/2016 farm season, a total of such transaction on shareholders’ equity:4,294 hectares were sown, 513 hectares of which were sown under contractual arrangements with seed producers. We leased, in turn, 1,259 hectares to third parties. The remaining hectares are kept as land reserves.
 
Ps. (million)
Amount paid for repurchase                                                                                                          (4.94)
Decrease in non-controlling interest                                                                                                          4.92
Reserve recorded in shareholders’ equity                                                                                                          (0.02)
La Suiza
 
IRSA The “La Suiza” farm has a surface area of 36,380 hectares and is located in Villa Ángela in the Province of Chaco. It is used for raising cattle. As of June 30, 2016, “La Suiza” had a stock of approximately 15,300 heads of cattle. During the 2015/16 season, we used 3,414 hectares for agricultural production and 200 hectares for timber production.
 
On July 25, 2013, IRSA’s BoardLa Esmeralda
The “La Esmeralda” farm has a surface area of Directors set forth the terms9,370 hectares and conditions governing the purchase of the Company's own stock pursuant to Section 64 of Law N° 26,831 and the CNV’s regulations, for up to an aggregate amount of Ps. 200.0 million and up to 5% of the capital stock,is located in Ceres in the formProvince of common shares or Global Depositary Shares (GDS) representing 10 common shares each,Santa Fe. This farm was acquired in June 1998. During the 2015/16 farm season, we used 7,885 hectares for production of corn, soybean, wheat, sunflower and upsorghum.
El Tigre
The “El Tigre” farm was acquired on April 30, 2003 and has a surface area of 8,360 hectares. This farm has a high-tech dairy facility where we develop our milk production business in compliance with the highest quality standards. It is located in Trenel in the Province of La Pampa. As of June 30, 2016, 5,239 hectares were assigned to a daily limitcrop production, including double crops, and 2,231 hectares were assigned to milk production. This farm produced 16.2 million liters of 25%milk in the fiscal year ended June 30, 2016, with an average of the1,838 cows being milked and an average daily transaction volume experienced byproduction of 24.16 liters per cow.
El Invierno
The “El Invierno” farm was acquired on June 24, 2005 and has a surface area of 1,946 hectares.  It is located in Rancul in the Company’s shares, along with the markets where they are listed, during the prior 90 business days, and at a price ranging from a minimumProvince of Ps. 1 up to Ps. 8 per share. On September 18, 2013 the Board of Directors approved an increaseLa Pampa, 621 kilometers to the maximum price, raising it to Ps.10 per common share and US$ 10.50 per GDS. On October 15, 2013, the Boardwest of Directors approved a new increase to the maximum price, raising it to Ps.11.00 per common share and US$ 11.50 per GDS. On October 22, 2013 the Board of Directors approved a new increase to the maximum price, raising it to Ps.14.50 per common share and US$ 15.00 per GDS.Buenos Aires. During the fiscal year ended June 30, 2014,2016, we used the land exclusively for crop production and planted 1,839 hectares. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 90.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
San Pedro
 The “San Pedro” farm was purchased on September 1, 2005. It has a surface area of 6,022 hectares and is located in Concepción del Uruguay, Province of Entre Ríos, which is 305 kilometers north of Buenos Aires. In the course of the 2015/2016 farm season, 4,083 hectares were used for agricultural production, including double crops.
8 de Julio and Estancia Carmen
The “8 de Julio” farm was acquired on May 15, 2007 and has a surface area of 90,000 hectares. It is located in the department of Deseado in the Province of Santa Cruz. Due to its large surface area, this farm offers excellent potential for sheep production. In addition, we believe the land has potential for future tourism and recreational activities, as the southeast border of the farm stretches over 20 kilometers of coast. "Estancia Carmen" was acquired on September 5, 2008 and has a surface area of 10,911 hectares. It is located in the Province of Santa Cruz, next to our "8 de Julio" farm.

Cactus
The feedlot has a surface area of 171 hectares. It is located in Villa Mercedes, Province of San Luis. Given its degree of urban development and closeness to the city, we decided to discontinue fattening activities in this facility.
Las Vertientes
The “Las Vertientes” storage facility has a surface area of 4 hectares and 10,000 tons capacity, and is located in Las Vertientes, Río Cuarto, in the Province of Córdoba.
La Esperanza
In 2008 we acquired “La Esperanza” farm located in the Province of La Pampa with a surface area of 980 hectares. The transaction was agreed for a price of US$ 1.3 million that has been paid in full. During the year ended June 30, 2015, we used this farm solely for crop production. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 90.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
Finca Mendoza
On March 2, 2011, the Company purchased, 533,947 common shares (N.V. Ps. 1 per share)jointly with Zander Express S.A., a rural property composed of thirteen plots of land located in the District of Perdriel, Luján de Cuyo Department, in the Province of Mendoza. As a result of this acquisition, CRESUD has become owner of a 40% undivided estate in all and each of the properties, while Zander Express S.A. holds the remaining 60%. The total agreed price for a total amount of Ps. 5.2 million and 437,075 GDS (representing 4,370,750 common shares) for a totalthis transaction was US$ 4.0 million; therefore, the amount of US$ 5.2 million.1.6 million was payable by CRESUD.
Bolivia
Las Londras
On January 22, 2009, the bill of purchase for "Las Londras" farm was cast into public deed; it has a surface area of 4,566 hectares, and is located in the Province of Guarayos, Republic of Bolivia. During the 2015/2016 farm season it was used for crop production.
San Rafael
On November 19, 2008, the bill of purchase for "San Rafael" farm was cast into public deed. This farm is located in the Province of Guarayos, Republic of Bolivia, and has a surface area of 2,969 hectares, which were used for crop production during the 2015/2016 farm season.
Cuatro Vientos
 
On June 10, 2014,3, 2011, we executed the Boardpurchase agreement for the “Cuatro Vientos” farm, with a surface area of Directors of IRSA resolvedapproximately 2,658 hectares, allocated to terminate the stock repurchase plan thatsugarcane production. Its purchase price was approved by resolution of the Board on July 25, 2013, and modified by resolutions adopted on September 18, 2013, October 15, 2013 and October 22, 2013. During the term of the Stock Repurchase Plan, IRSA has repurchased 4,904,697 shares for an aggregate amount of Ps. 37,905,631.US$ 8.4 million.
 
Year ended June 30, 2013
Sale of farmlandsLa Primavera
 
On June 19, 2013, Cresud executed7, 2011 we acquired “La Primavera” farm, with a title deed by meanssurface area of approximately 2,340 hectares. During the 2015/2016 season, this farm was used for crop production.
Brazil (through our subsidiary Brasilagro)
Jatobá
Jatobá is a farm in the northeastern region of Brazil, with a total surface area of 31,606 hectares, 12,510 of which Cresud soldare intended for agriculture. Jatobá was acquired in March 2007 for BRL 33 million. We consider that this farm is in a very advantageous location for the movement of crops, as it is close to Vargas Derka SH 5,613 hectaresthe Candeias Port, in the State of “La Suiza” ranch, which is engaged in livestock activities located near “Villa Angela”, Province of Chaco, remaining in this establishment 36,380 hectares used by the Company to cattle and crop activities.Bahia.
 
The offer price for this transaction amounted to US$ 6.7 million, and was totally collected on the date of the execution of the title deed, generating a gain of Ps. 29.8 million.Araucária
 
On October 11, 2012 Brasilagro sold Horizontina,Araucária is a field of land located in Tasso Fragoso, State of Maranhão, Brazil for a total amount of Rs. 75 million (Ps. 174.8 million). The payments were collected as follows: an initial payment of Rs. 1 million, Rs. 26 million in October, 2012 and Rs. 45 million upon execution of the conveyance, on January 22, 2013. The remaining balance as of June 30, 2015 amounts to Rs. 3 million, and its collection is subject to compliance with certain conditions. The gain of the sale was Ps. 53.9 million less commission, expenses and taxes.
The Horizontina field had an area of 14,359 hectares and was acquired on March 10, 2010 by the subsidiary Inmobiliaria Ceibo for a total amount of Rs. 37.7 million.
On April 25, 2013, Brasilagro sold a total area of 394 hectares of Araucaria field. The establishment,farm located in the municipalitymunicipal district of Mineros – GOMineiros, in the State of Goiás, and it has a total surface area of 8,124 hectares, 4,020 of which are used for agriculture. Araucaria was acquired in 2007 for BRL 70.4 million. Before we purchased it, Araucária had been used for grain planting. The farm was transformed, and had, at the time of sale, a total area of 9,862 hectares.present it is planted with sugarcane.
 
The sale was priced at Rs. 11.7 million (Ps. 26.6 million). The buyer made an initial payment of Rs. 1.7 million and the remaining balance will be collected in eight installments every six months. The first installment of Rs. 2.1 million was collected in August, 2013, the second, of Rs 2.0 million in March 2014, the third, of Rs.1.9 million, in August 2014 and the fourth, of Rs. 1.9 million, in March 2015. The remaining balance as of June 30, 2015 will be collected in three semi-annual installments. The last installment is due at the moment of the execution of the title deed, in August, 2016. The Company recognized a profit before tax for the sale of the Araucaria field for an amount of Rs. 6.7 million (equivalent to Ps. 12.6 million).Alto Taquarí
 
On May 10, 2013, Brasilagro sold a total area of 4,895 hectares of Cremaq field. The establishment,Alto Taquarí is located in the municipalitymunicipal district of Ribeiro Gonçalves-PI, Brazil was purchased in 2007Alto Taquarí, State of Mato Grosso, and had, at the time of sale,it has a total surface area of 32,702 hectares.5,395 hectares, 3,190 of which are used for agriculture. The farm was acquired in August 2007 for BRL 33.2 million. Before we purchased it, the farm had been used for agriculture and Cattle raising. Following its transformation, it is being used for sugarcane production.
 
On February 20, 2015, while studying the acquired zone,Chaparral
Chaparral is a difference of 6237,182hectare farm, with 14,398 hectares between measures and the sales agreement, dated May 11, 2013, was verified. This resulted into an increase of 11,166 bagsused for agriculture. It is located in the sales price.municipal district of Correntina, State of Bahia. The farm was acquired in November 2007 for BRL 47.9 million.
 
The sale was priced at Rs. 42.6 million (Ps. 97.6 million). The buyer made an initial installment of Rs. 4.6 million and the remaining balance was agreed to be collected in five installments. The first installment of Rs. 4.3 million was collected in August, 2013, the second, of Rs 4.0 million was collected in October 2013, the third, of Rs.17.5 million, in June 2014 and the fourth, of Rs. 17.1 million, in June 2015. The remaining balance will be collected upon execution of the conveyance deed, in June, 2016. The Company recognized a profit before tax for the sale Cremaq field of Rs. 26.5 million (Ps. 53.2 million).Nova Buriti
 
Transactions with non-controlling interests
IRSA
During the fiscal year ended June 30, 2013, the Company acquired an additional 1.25% interest in IRSA for a total consideration of Ps. 45.8 million. This resulted in a decrease in non-controlling interests of Ps. 33.9 million and an increase in equity attributable to holders of the parent of Ps. 11.9 million. The effect on shareholders’ equity of this changeLocated in the equity interestmunicipal district of Januária, State of Minas Gerais, Nova Buriti has a surface area of 24,211 hectares. Nova Buriti was acquired in IRSADecember 2007 for BRL 21.6 million. It is summarized as follows:located in the southeastern region of Brazil and it is close to the large iron industries. At present, it is undergoing proceedings for obtaining the environmental licenses required for starting operations.
 

42

Preferencia
 
Ps. (million)
Carrying amount of IRSA’s interest acquired of33.9
Consideration paid for non-controlling interests(45.8)
Reserve recorded in shareholders’ equity(11.9)
Preferencia is located in the municipal district of Barreiras, in the State of Bahia. It has a total surface area of 17,799 hectares, 6,566 of which are used for cattle activities. It was acquired for R$ 9.6 million in September 2008. The farm is being transformed into a pasturing area and will be later developed for agricultural purposes.
 
IRSA Commercial Properties
Paraguay (through our subsidiary Brasilagro)
Jeroviá / Marangatú /Udra
Cresud, through Brasilagro, who is in turn shareholder of CRESCA, holds a 50% undivided interest in the “Jeroviá”, “Marangatú” and “UDRA” farms and related undeveloped plots of land, all of them located in Mariscal José Félix Estigarribia, Department of Boquerón, Paraguayan Chaco, Republic of Paraguay, totaling 117,508 hectares.
Silos
As of June 30, 2016, we had a storage capacity of approximately 25,620 tons (including 35.723% of the storage capacity of over 14,950 tons available at Agro-Uranga S.A.).
The following table shows, for the fiscal years presented, our storage facilities:
 
As of year ended June 30,
 
2016(2)
2015(2)
2014(2)
2013(2)
2012(2)
Las Vertientes (1)
10,00010,00010,00010,00010,000
San Nicolás (1)
5,3415,3415,3415,3415,341
Brasilagro10,27910,27990,20090,20090,200
Total25,62025,620105,541105,541105,541
(1)Owned by us through Agro-Uranga (which represents 35.723% of the total capacity).
(2)Includes Brasilagro.
Land Management
In contrast to traditional Argentine farms, run by families, we centralize policy making in an Executive Committee that meets on a weekly basis in Buenos Aires. Individual farm management is delegated to farm managers who are responsible for farm operations. The Executive Committee lays down commercial and production rules based on sales, market expectations and risk allocation.
We rotate the use of our pasture lands between agricultural production and cattle feeding and the frequency depends on the location and characteristics of the farmland. The use of preservation techniques (including exploitation by no till sowing) frequently allows us to improve farm performance.
Subsequent to the acquisition of the properties, we make investments in technology in order to improve productivity and increase the value of the property. It may be the case that upon acquisition, a given extension of the property is under-utilized or the infrastructure may be in need of improvement. We have invested in traditional fencing and in electrical fencing, watering troughs for cattle herds, irrigation equipment and machinery, among other things.
Principal Markets
Crops
Our crop production is mostly sold in the domestic market. The prices of our grains are based on the market prices quoted in Argentine grains exchanges such as the Buenos Aires Grains Exchange (Bolsa de Cereales de Buenos Aires) and the cereal exchanges in each country, that take as reference the prices in international grains markets. The largest part of this production is sold to exporters who offer and ship this production to the international market. Prices are quoted in relation to the month of delivery and the port in which the product is to be delivered. Different conditions in price, such as terms of storage and shipment, are negotiated between the end buyer and ourselves.
Cattle
Our beef cattle production is sold in the local market. The main buyers are slaughterhouses and supermarkets.
Prices in the beef cattle market in Argentina are basically fixed by local supply and demand. The Liniers Market (on the outskirts of the City of Buenos Aires) provides a standard in price formation for the rest of the domestic market. In this market live animals are sold by auction on a daily basis. At Liniers Market, prices are negotiated by kilogram of live weight and are mainly determined by local supply and demand. Prices tend to be lower than in industrialized countries. Some supermarkets and meat packers establish their prices by kilogram of processed meat; in these cases, the final price is influenced by processing yields.
Dairy
 
During fiscal year 2016 we sold our entire milk production to the largest Argentine dairy company, Mastellone S.A., which in turn manufactures a range of mass consumption dairy products sold in Argentina and abroad. The price of the milk we sell is mainly based on the percentage of fat and protein that it contains and the temperature at which it is cooled. The price we obtain from our milk also rises or drops based on the content of bacteria and somatic cells.

Customers
For the fiscal year ended June 30, 2013,2016 our sales from the Company,agribusiness segment (excluding sales of farms) were made to approximately 850 customers. Sales to our ten largest customers represented approximately 70% to 75% of our net sales. Of these customers, our biggest three customers were Bunge Argentina S. A., Cargill S.A.C.I. and Vicentin S.A.I.C. We have signed non-binding letters of intent with some of our largest customers that allow us to estimate the volume of the demand for certain products and to plan production accordingly. We generally enter into short-term agreements with a term of less than a year.
Marketing Channels and Sales Methods
Crops
We normally work with grains brokers and other intermediaries to trade in the exchanges. We sell part of our production in advance through IRSAfutures contracts and E-Commerce Latinabuy and sell options to hedge against a drop in prices. Approximately 87% of the futures and options contracts are closed through the Buenos Aires Grains Exchange and 13% in the Chicago Board of Trade for hedging purposes.
Our storage capabilities allow us to condition and store grains with no third-party involvement and thus to capitalize the fluctuations in the price of commodities. Our largest storage facilities in Argentina, with capacity for 10,000 tons, are located in “Las Vertientes”, close to Río Cuarto, Province of Córdoba. In addition, we store grains in silo bags.
Cattle
We have several marketing channels. We sell directly to local meat processors and supermarkets, as well as in markets and auctions. Our customers include Arre Beef S.A., acquired an additional 0.1% interestFrigorífico Bermejo, Quickfood S.A., Frigorífico Forres Beltrán S.A., Madelán S.A., Colombo y Colombo S.A., Iván O’Farrell S.R.L. and Colombo y Magliano S.A., for prices based on the price at Liniers Market.
We usually are responsible for the costs of the freight to the market and, in IRSA Commercial Properties forgeneral, we pay commissions on our transactions.
Inputs
The current direct cost of our production of grains varies in relation to each crop and normally includes the following costs: tillage, seeds, agrochemicals and fertilizers. We buy in bulk and store seeds, agrochemicals and fertilizers to benefit from discounts offered during off-season sales.
Competition
The agricultural and livestock sector is highly competitive, with a huge number of producers. We are one of the leading producers in Argentina and the region. However, if we compare the percentage of our production to the country’s total considerationfigures, our production would appear as extremely low, since the agricultural market is highly atomized. Our leading position improves our bargaining power with suppliers and customers. In general, we obtain discounts in the region in the acquisition of Ps. 2.3 million. This resulted in a decrease in non-controlling interests of Ps. 0.8 millionraw materials and an increaseexcess price in equity attributableour sales.
Historically, there have been few companies competing for the acquisition and leases of farmlands for the purpose of benefiting from land appreciation and optimization of yields in the different commercial activities. However, we anticipate the possibility that new companies, some of them international, may become active players in the acquisition of farmlands and the leases of sown land, which would add players to holdersthe market in coming years.
Seasonality
As is the case with any company in the agro-industrial sector, our business activities are inherently seasonal. Harvest and sales of corn and soybean in general take place from March to September. Sunflower is harvested from December to May. Wheat is harvested from October to January. Peanut is harvested from April to July. With respect to our international market, in Bolivia climate conditions allow a double season of soybean, corn and sorghum production and, accordingly, these crops are harvested in March and October, while wheat and sunflower are harvested between August and September. In Brasil, our crops are harvested from March to May and our sugarcane is harvested from April to November. Other segments of our activities, such as our sales of cattle and milk and our forestry activities tend to be more of a successive character than of a seasonal character. However, the production of beef and milk is generally higher during the second quarter, when pasture conditions are more favorable. In consequence, there may be significant variations in results from one quarter to the other.
Regulation and Governmental Supervision of our Agricultural Business
Farming and Animal Husbandry Agreements
Agreements relating to farming and animal husbandry activities are regulated by Argentine law, the Argentine Civil and Commercial Code and local customs.
According to Law No. 13,246, as amended by Law No. 22,298, all lease agreements related to rural properties and land are required to have a minimum duration of 3 years. Upon death of the parenttenant farmer, the agreement may continue with his successors. Upon misuse of Ps. 1.5 million. The effectthe land by the tenant farmer or default on shareholders’ equitypayment of this change in the equity interest in IRSA Commercial Properties is summarized as follows:rent, the land owner may initiate an eviction proceeding.
 
Ps. (million)
Carrying amount of IRSA Commercial Properties’s interest acquired of0.8
Consideration paid for non-controlling interests(2.3)
Reserve recorded in shareholders’ equity(i) (1.5)
Law No. 13,246, amended by Law No. 22,298, also regulates agreements for crop sharing pursuant to which one of the parties furnishes the other with farmland animals or land with the purpose to share benefits between tenant farmer and land owner. These agreements are required to have a minimum term of duration of 3 years. The tenant farmer must perform the obligations under the agreement himself and may not, assign it under any circumstances. Upon death, incapacity of the tenant farmer or other impossibility, the agreement may be terminated.

Quality control of Crops and Cattle
 
(i)The Reserve includes Ps. 0.5 million for non-controlling interestquality of the crops and the health measures applied on the cattle are regulated and controlled by the Servicio Nacional de Sanidad y Calidad Agroalimentaria (“SENASA”), which is an entity within the Ministry of Economy and Public Finance that over sees the farming and animal sanitary activities.
 
Arcos del Gourmet S.A. (“Arcos”)Argentine law establishes that the brands should be registered with each provincial registry and that there cannot be brands alike within the same province.
 
On June 07, 2013,
Sale and Transportation of Cattle
Even though the Company, through IRSA Commercial Properties, acquired an additional 1.815% equity interestsale of cattle is not specifically regulated, general contract provisions are applicable. Further, every province has its controlled company Arcosown rural code regulating the sale of cattle.
Argentine law establishes that the transportation of cattle is lawful only when it is done with the respective certificate that specifies the relevant information about the cattle. The required information for a total amountthe certificate is established by the different provincial regulations, the inter-provinces treaties and the regulations issued by the SENASA.
Export Restriction of US$ 0.8 million. The carrying amountBeef
In addition, the Secretary of Agriculture, Livestock, Fishing and Food Products, within the orbit of the non-controlling interestMinistry of Economy and Public Finance, oversees the farming and animal sanitary activities.
The Secretary of Agriculture, Livestock, Fishing and Food Products is in Arcoscharge of distributing the annual regular quota of top quality chilled beef without bones, the “Cuota Hilton.” The destination of the Cuota Hilton is the European Union.
The Secretary of Agriculture, Livestock, Fishing and Food Products granted to our subsidiary Sociedad Anónima Carnes Pampeanas up to 1,400 tons to export beef under the Cuota Hilton for the July 2015-June 2016 period.
Environment
The development of our agribusiness activities depends on a number of federal, provincial and municipal laws and regulations related to environmental protection.
We may be subject to criminal and administrative penalties, including taking action to reverse the adverse impact of our activities on the dateenvironment and to reimburse third parties for damages resulting from contraventions of acquisition was Ps. 7,357 (representing an 11.815% interest). This resultedenvironmental laws and regulations. Under the Argentine Criminal Code, persons (including directors, officers and managers of corporations) who commit crimes against public health, such as poisoning or dangerously altering water, food or medicine used for public consumption and selling products that are dangerous to health, without the necessary warnings, may be subject to fines, imprisonment or both. Some courts have enforced these provisions in the Argentine Criminal Code to sanction the discharge of substances which are hazardous to human health. At the administrative level, the penalties vary from warnings and fines to the full or partial suspension of the activities, which may include the revocation or annulment of tax benefits, cancellation or interruption of credit lines granted by state banks and a decrease in non-controlling interestprohibition against entering into contracts with public entities.
The Forestry Legislation of Ps. 857Argentina prohibits the devastation of forests and an increase in equity attributable toforested lands, as well as the irrational use of forest products. Landowners, tenants and holders of natural forests require an authorization from the parentForestry Competent Authority for the cultivation of Ps. 3,687.forest land. The effect on shareholder´s equitylegislation also promotes the formation and conservation of the parent of this changenatural forests in the equity interest in Arcos during year 2013, is summarized as follows:properties used for agriculture and farming purposes.
 
Ps. (million)
Carrying amount of Arcos del Gourmet’s interest acquired of0.8
Consideration paid for non-controlling interests(4.5)
Reserve recorded in shareholders’ equity(i) (3.7)
As of June 30, 2016, we owned land reserves extending over 365.306 hectares, which are located in under-utilized areas where agricultural production is not yet fully developed. We also have 107,984 hectares under concession as reserves for future developments. We believe that technological tools are available to improve the productivity of such land and enhance its long-term value. However, existing or future environmental regulations may prevent us from developing our land reserves, requiring us to maintain a portion of such land as unproductive land reserves.
 
(i)     The reserve includes Ps. 1.4 millionIn accordance with legislative requirements, we have applied for non-controlling interest
Acquisitionapproval to develop certain parts of joint ventureour land reserves and were authorized to develop them partially and to maintain other areas as land reserves. We cannot assure you that current or future development applications will be approved, and if so, to what extent we will be allowed to develop our land reserves. We intend to use genetically modified organisms in our agricultural activities. In Argentina, the development of genetically modified organisms is subject to special laws and regulations and special permits.
 
On November 29, 2012, IRSA28, 2007, Argentine Congress passed a law known as the Forest Law which sets minimum standards for the conservation of native forests and incorporates minimum provincial expenditures to promote the protection, restoration, conservation and sustainable use of native forests. The Forest Law prevents landowners, including owners of native forests, from deforesting or converting forested areas into non-forested land for other commercial uses without prior permission from each local government that gives the permit and requires the preparation, assessment and approval of an environmental impact report. The Forest Law also provides that each province should adopt its own legislation and regional regulation map within a term of one year. Until such provincial implementation is carried into effect, no new areas may be deforested. In addition, the Forest Law also establishes a national policy for sustainable use of native forests and includes the recognition of native communities and aims to provide preferential use rights to indigenous communities living and farming near the forest. In case a project affects such communities, the relevant provincial authority may not issue permits without formal public hearings and written consent of the communities.
In addition, the Rules issued by the CNV provide that publicly traded companies whose corporate purpose includes environmentally hazardous activities should report to their shareholders, investors and the general public their compliance with the applicable environmental laws and risks inherent to such activities, so as to be able to reasonably assess such hazards.

Our activities are subject to a number of national, provincial and municipal environmental regulations. Section 41 of the Argentine Constitution, as amended in 1994, provides that all Argentine inhabitants have the right to a healthy and balanced environment fit for human development and have the duty to preserve it. Environmental damage shall bring about primarily the obligation to redress it as provided by applicable law. The authorities shall protect this right, the rational use of natural resources, the preservation of the natural and cultural heritage and of biodiversity, and shall also provide for environmental information and education. The National Government shall establish minimum standards for environmental protection and Provincial and Municipal Governments shall determine specific standards and issue the applicable regulations.
On November 6, 2009, the Argentine Congress passed Law No. 25,675. This law regulates the minimum standards for the achievement of a sustainable environment and the preservation and protection of biodiversity and sets environmental policy goals. Moreover, Law No. 25,675 establishes the activities that will be subject to an environmental impact assessment procedure and certain requirements applicable thereto. In addition, the Law sets forth the duties and obligations that will be triggered by any damage to the environment and imposes the obligation to restore it to its former condition or, if that is not technically feasible, to pay a compensation in lieu thereof. The Law also fosters environmental education and provides for certain minimum obligations to be fulfilled by natural and artificial persons.
The new Argentine Civil and Commercial Properties acquired sharesCode has introduced as a novel feature the acknowledgement of common stock, representing 50%collective rights, including the right to a healthy and balanced environment. Accordingly, the Argentine Civil and Commercial Code expressly sets forth that the law does not protect an abusive exercise of Entertainment Holdings S.A. (“EHSA”)’s capital stockindividual rights if such exercise could have an adverse impact on the environment and votesthe rights with a collective impact in general.
Other Regulations
Consumer Relationship. Consumer or End User Protection. The Argentine Constitution expressly establishes in Article 42 that consumers and users of goods and services have a right to protection of health, safety and economic interests in a consumer relationship. Consumer Protection Law No. 24,240, as amended, regulates several issues concerning the protection of consumers and end users in a consumer relationship, in the arrangement and execution of contracts.
The Consumer Protection Law, and the applicable sections of the Argentine Civil and Commercial Code are intended to regulate the constitutional right conferred under the Constitution on the weakest party of the consumer relationship and prevent potential abuses deriving from the stronger bargaining position of vendors of goods and services in a mass-market economy where standard form contracts are widespread.
As a result, the Consumer Protection Law and the Argentine Civil and Commercial Code deem void and unenforceable certain contractual provisions included in consumer contracts entered into with consumers or end users, including those which:
·  
deprive obligations of their nature or limit liability for Ps. 32.0 million. Underdamages;
·  
imply a waiver or restriction of consumer rights and an extension of seller rights; and
·  
impose the acquisition agreement, IRSAshifting of the burden of proof against consumers.
In addition, the Consumer Protection Law imposes penalties ranging from warnings to the forfeiture of concession rights, privileges, tax regimes or special credits to which the sanctioned party was entitled, including closing down of establishments for a term of up to 30 days.
The Consumer Protection Law and the Argentine Civil and Commercial Properties isCode define consumers or end users as the individuals or legal entities that acquire or use goods or services free of charge or for a price for their own final use or benefit or that of their family or social group. In addition, both laws provide that those who though not being parties to a consumer relationship as a result thereof acquire or use goods or services, for consideration or for non-consideration, for their own final use or that of their family or social group are entitled to exercisesuch protection rights in a manner comparable to those engaged in a consumer relationship.
In addition, the Consumer Protection Law defines the suppliers of goods and services as the individuals or legal entities, either public or private, that in a professional way, even occasionally, produce, import, distribute or commercialize goods or supply services to consumers or users.
The Argentine Civil and Commercial Code defines a consumer agreement as such agreement that is entered into between a consumer or end user and an individual or legal entity that acts professionally or occasionally or a private or public company that manufactures goods or provides services, for the purpose of acquisition, use or enjoyment of goods or services by consumers or users for private, family or social use.
It is important to point out that the protection under the laws afforded to consumers and end users encompasses the entire consumer relationship process (from the offering of the product or service) and it is not only based on a contract, including the consequences thereof.
In addition, the Consumer Protection Law establishes a joint control over EHSA. EHSA is an Argentine company whose main asset consists of an indirect interest of 50%and several liability system under which for any damages caused to consumers, if resulting from a defect or risk inherent in the capitalthing or the provision of a service, the producer, manufacturer, importer, distributor, supplier, seller and voting rights of La Rural S.A. (“LRSA”), whereby itanyone who has joint control over this Company together with Sociedad Rural Argentina (“SRA”), who owns the remaining 50%. Thus, IRSA Commercial Properties is the owner of an indirect interest of 25% in LRSA, whose main asset consists of an usufruct agreementplaced its trademark on the Predio Ferialthing or service shall be liable.
The Consumer Protection Law excludes the services supplied by professionals that require a college degree and registration in officially recognized professional organizations or by a governmental authority. However, this law regulates the advertisements that promote the services of such professionals.
The Consumer Protection Law determines that the information contained in the offer addressed to undetermined prospective consumers, binds the offeror during the period in which the offer takes place and until its public revocation. Further, it determines that specifications included in advertisements, announcements, prospectuses, circulars or other media bind the offeror and are considered part of the contract entered into by the consumer.

Pursuant to Resolution No. 104/05 issued by the Secretariat of Technical Coordination reporting to the Argentine Ministry of Economy, the Consumer Protection Law adopted Resolution No. 21/2004 issued by the Mercorsur's Common Market Group which requires that those who engage in commerce over the Internet (E-Business) shall disclose in a precise and clear manner the characteristics of the products and/or services offered and the sale terms. Failure to comply with the terms of the offer is deemed an unjustified denial to sell and gives rise to sanctions.
On September 17, 2014, the Consumer Protection Law was modified by the enactment of Law Nº 26,993, which is called “System for Conflict Resolution in Consumer Relationships” as it provides for the creation of new administrative and judicial procedures for this field of Law. It has created a two-instance administrative system: the Preliminary Conciliation Service for Consumer Relationships (Servicio de Buenos Aires, locatedConciliación Previa en las Relaciones de Consumo, COPREC) and the Consumer Relationship Audit, and a number of courts assigned to resolution of conflicts between Cerviño, Sarmiento, Santa Fe Avenuesconsumers and Oro street,producers of goods and services (Fuero Judicial Nacional de Consumo). In order to file a claim, the amount so claimed should not exceed a fixed amount equivalent to 55 adjustable minimum living wages, which are determined by the Ministry of Labor, Employment and Social Security. The claim is required to be filed with the administrative agency. If an agreement is not reached between the parties, the claimant may file the claim in court. The administrative system known as Preliminary Conciliation Service for Consumer Relationships (COPREC) is currently in full force and effect. However, the court system (fuero judicial nacional de consumo) is not in force yet, therefore, any court claims should be currently filed with the existing applicable courts. A considerable volume of claims filed against us are expected to be settled pursuant to the system referred to above, without disregarding the full force and effect of different instances for administrative claims existing in the provincial sphere and the City of Buenos Aires, (the “Predio Ferial”) enteredwhich remain in 1999 into with SRA, owner of such Predio Ferial.full force and effect, where potential claims related to this matter could also be filed.
 
The amount of Ps. 6.1 million has been included as an asset, in the line trade and other receivables together with accrued interests.
The fair value of the IRSA Commercial Properties’  investment in the joint venture was determined based on the fair value of EHSA’s net assets, with the rights of use being the main asset. IRSA Commercial Properties has allocated the price paid at the fair value of the net assets acquired. Such fair value amounted to Ps. 15.2 million, which means a goodwill amount of Ps. 10.7 million recognized under the line “Investments in associates and joint venture” in the statement of Financial position as of June 30, 2013.
The fair value of the right of use has been determined by the application of the discounted cash flow method. This estimate considered a discount rate that reflects the market assessments regarding uncertainties in terms of the cash flow amount and timing. The amount of net future cash flows was estimated based on the specific features of the property, the agreements in force, market information and future forecasts as of the valuation date. Net income forecasts, revenues growth rates and discount rates are among the most important assumptions used in the valuation.
Disposal of financial assets
During fiscal year ended June 30, 2013, the Company sold 17,105,629 ordinary shares of Hersha’s Hospitality Trust (Hersha) for a total amount of US$ 92.5 million, with a decrease on the equity interest from 9.13% (at the beginning of the year) to 0.49%.
In November and December 2012, IRSA sold all of its shareholdings in NH Hoteles S.A. (138,572 shares for a consideration of € 0.38 million) and in NH Hoteles S.A. (387,758 shares for a total consideration of US$ 1.4 million).
In December 2012, IRSA sold all of its shareholdings in Metrovacesa F (1,238,990 shares for a consideration of € 2.7 million); Metrovacesa SM (229,995 shares for a total consideration of € 0.5 million) and Metrovacesa F (919,087 shares for a consideration of US$ 2.7 million).
Significant sales of investment properties
On August 31, 2012, the Company sold through IRSA certain functional units of the “Libertador 498 Building” of the Autonomous City of Buenos Aires. The total price of the transaction amounted to Ps. 15 million and was collected upon the execution of the title conveyance deeds. This transaction generated a profit before tax of Ps. 12.3 million.
On September 14, 2012, IRSA sold certain functional units on floors 18 and 19, as well as parking areas, of the Bouchard 551 Building. The total price of the transaction was US$ 8.5 million paid upon execution of the conveyance deed. This transaction generated a profit before tax of Ps. 16.6 million.

On October 4 and 11, 2012, IRSA signed the transfer deed for the sale of several functional units (stores and parking spaces) of the “Libertador 498 Building”. The transactions price was set at Ps. 29.4 million, amount that has been completely collected. This transaction generated a profit before tax of Ps. 24.1 million

43

On January 8, 2013, IRSA sold several functional units (stores and parking spaces) of the “Costeros Dique IV Building”. The total price of the transaction was Ps. 9.2 million. This transaction generated a profit before tax of Ps. 7.5 million.
On May 8, 2013, IRSA signed the transfer deed for the sale of the 17th floor and two parking units of the Maipú 1300 Building and two parking units of the Libertador 498 Building. The total price of the transaction was Ps. 7.8 million (US$ 1.5 million). Such transaction generated a profit before tax of approximately Ps. 5.7 million.
On May 20, 2013, IRSA signed the transfer deed for the sale of the 6th floor and two parking units of the Maipú 1300 Building and two parking units of the Libertador 498 Building. The transactions price was set at Ps. 7.6 million (US$ 1.45 million), amount that has been completely collected. This transaction generated a profit before tax of Ps. 5.7 million.
On June 28, 2013, IRSA signed the transfer deed for the sale of 4th, 5th and 6th floors and 56 parking units of the Bouchard 551 Building. The total price of the transaction was Ps. 148.7 million, equivalent to US$ 27.6 million. This transaction generated a profit before tax of Ps. 106.2 million.
The properties mentioned above were classified as investment properties until the above mentioned transactions were executed, which represents a gross lease area of approximately 14,442 square meters.
All sales of the year led to a combined profit for the Company of Ps. 178.0 million, disclosed within the line “Gain from disposal of investment properties” in the income statement.
Acquisition of Rigby 183 LLC
On June 30, 2012, the Company held, through its subsidiary IMadison LLC, a 49% interest in the capital stock of Rigby 183 LLC (“Rigby”), a company that owns office buildings for rental at Madison Avenue 183, New York, USA. On November 27, 2012, the Company, through its subsidiary IRSA International LLC, acquired an additional equity interest of 25.5% in Rigby’s capital stock, thus taking control over said company. As a result of the acquisition, the Company expects to increase its footprint in the US real estate market. The goodwill from the acquisition, which amounts to Ps. 45.7 million, is attributable to the synergies expected to be achieved by combining the Company’s and Rigby’s operations.
The acquisition-related costs, which amount to Ps. 2.6 million, were charged under “General and administrative expenses” line in the statements of income.
The fair value of the investment property acquired for Ps. 679.2 million was assessed by a qualified independent appraiser. The fair value of trade and other receivables amounts to Ps. 2.3 million, including trade receivables in the amount of Ps. 0.1 million. As of the acquisition date, the Company estimates that these receivables are recoverable. The fair value of the non-controlling interest in Rigby, an unlisted company, has been determined on a proportional basis to the fair value of net acquired assets.
The Company has recognized gains of Ps. 124.1 million derived from the reassessment of the fair value of the 49% interest held in Rigby before the business combination. In addition, all exchange gains (losses) accumulated in shareholder’s equity from the interest held in Rigby before the business combination (Ps. 12.9 million) were charged to income. These gains were disclosed under "Other operating results, net" line in the income statements.
The incomes Rigby has generated since November 27, 2012 and that have been disclosed in the consolidated income statements amount to Ps. 40.9 million. Rigby has also run a net gain of Ps. 8.1 million during said period. If Rigby had been included in the consolidation since July 1, 2012, the consolidated income statements would have shown pro forma revenues in the amount of Ps. 2,202.9 million and pro-forma net income of Ps. 297.5 million.
Disposal of joint ventures
On June 28, 2013, IRSA sold, assigned and transferred to Euromayor S.A. de Inversiones the 100% of its equity interest in Canteras Natal Crespo S.A., accounting for a 50% interest in that company’s capital stock for an aggregate amount of US$ 4.2 million; out of that amount, US$ 1.4 million was cashed in July 2013, with the balance being collected as follows: US$ 2.4 million on March 31, 2014 and US$ 0.4 million against delivery to IRSA of certain lots in the development to be carried out in Canteras Natal Crespo S.A.’s property. IRSA was granted a security interest on the 100% of Canteras Natal Crespo S.A.’s shares to secure payment of the remaining balance.
Disposal of subsidiaries
During the fiscal year ended June 30, 2013, IRSA sold to Doneldon S.A., the 100% of Sedelor S.A.'s, Alafox S.A.'s and Codalis S.A.'s capital stock, all of them companies incorporated in the Republic of Uruguay, with no business activity. Later, IRSA sold to Cresud the 100% of Doneldon S.A.'s capital stock.
Transactions and authorizations pending
Urban Properties and investments
Paraná plot of land
On June 30, 2009, the Company, through IRSA Commercial Properties, subscribed a “Letter of Intent” by which it stated its intention to acquire from Wal-Mart Argentina S.A. a plot of land of about 10,022 square meters located in Paraná, Province of Entre Ríos, to be used to build, develop and operate a shopping center or mall.
On August 12, 2010, the agreement of purchase was executed. The purchase price stood at US$ 0.5 million to be paid as follows: i) US$ 0.05 million had been settled as a prepayment on July 14, 2009, ii) US$ 0.1 million was settled upon executing such agreement, and iii) US$ 0.35 million will be paid upon executing the title deed. The mentioned payments were recorded as an advance under “Trade and other receivables” line.
On December 29, 2011, possession of the real estate was granted, and a minute was signed in which the parties agreed that the deed transferring ownership would be granted on June 30, 2012, or within sixty (60) consecutive days from the date in which the selling party evidenced with a certified copy before the buying party that the real estate was not subject to any encumbrance, burden, limit or restriction to the ownership, except for the electroduct administrative easement in favor of EDEER S.A..
On June 29, 2012, the parties have agreed to extend the term for the execution of the title conveyance deed, which shall be executed within sixty (60) days from the date the seller provides reliable notification to the buyer that the property is not subject to any levy, encumbrance, restrictions on ownership, except for the right of way already mentioned. As of the consolidated financial statements date, evidence of such notice has not been provided.

44

Acquisition of commercial center goodwill
The Company, through IRSA Commercial Properties, has signed an offering letter for acquiring, building and running a commercial center in a real estate owned by INC S.A. (“INC”), located in the City of San Miguel de Tucumán, Province of Tucumán. The price of this transaction was US$ 1.3 million. Out of this total, US$ 0.05 million were paid. The mentioned payment was recorded as an advance under “Trade and other receivables” line.
Antitrust LawRecent Developments
 
Law N° 25,156, known as "Antitrust Law" as amended, prevents anticompetitive practices
Cresud’s Recent Developments
Credit Line with IFISA.
On July 1º, 2016, we renewed the credit line with IFISA for up to 3,500,000 ADRs (previously 4,053,942) of our subsidiary IRSA, in which we are the lender and requires administrative authorization for transactions that accordingIFISA is the borrower. The term of the transaction was set at 30 days, renewable up to the Antitrust Law would lead to market concentration According to this law, such transactions include mergers, acquisitions and/or transfers eithera maximum of businesses or assets by which the acquirer controls or substantially influences another party. Transactions completed by entities365 calendar days with an annual sales volumeinterest rate of more than Ps. 200.0 million must be submitted6%.
Selling of  "El Invierno" and "La Esperanza" farmlands, city of Rancul, province of La Pampa.
On July 6, 2016, we sold to an unrelated party the Comisión Nacional de Defensa de la Competencia (hereinafter referred to as the "Antitrust Commision")"El Invierno" and "La Esperanza" farmlands. The transaction included 2,615 hectares suitable for approval. Certain exemptions apply. Submissions may be filed either prior toagricultural activities which are located in "Rancul" province of La Pampa. The total amount of the transaction or withinwas set at US$ 6 million (US$ / ha 2,294). US$ 5 million have been paid to date and the remaining balance of US$ 1 million, secured by a week aftermortgage on the property, in 5 equal, consecutive and annual installments ending in August 2021.
Director renouncement
On September 6, 2016, David Alberto Perednik resigned, being its completion. The Antitrust Commision may (i) authorizemandate up to June 30, 2016. Its replacement will be appointed in the transaction, (ii) conditionnext shareholder meeting.
Subscription of the transaction to the accomplishmentPrior Commitment of certain acts, or (iii) reject the authorization.Merger between Cresud and AGRO MANAGERS S.A.
 
In general, acquisitions effectedJuly 2016, Cresud made a shares purchase offer to the other shareholders of Ps. 5.5 million to acquire their total ownership interest, this offer was accepted. Thus, our direct interest increased to 100%.
On September 16, 2016, a pre-merger agreement was executed, by which all assets, rights and obligations of Agromanagers S.A. are transferred to us.
Annual Shareholders’ Meeting
Our annual shareholders’ meeting will be held on October 31, 2016, in order to consider and approve, among others, the following matters: (i) consideration of documents contemplated in section 234, paragraph 1, of the Argentine Companies Law No. 19,550 for the fiscal year ended June 30, 2016; (ii) Consideration of the result of the fiscal year ended June 30, 2016 which resulted in a loss for the amount of Ps.1,401,856,585; (iii) consideration of Board of Directors’ performance; (iv) consideration of Supervisory Committee’s performance; (v) consideration of compensation payable to the Board of Directors for Ps.18,985,218 (total compensation) for the fiscal year ended June 30, 2016; (vi) consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2016; (vii) consideration of the appointment of Regular Directors and Alternate Directors, as applicable; (viii) appointment of Regular and Alternate Members of the Supervisory Committee; (ix) appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers; (x) updating of report on Shared Services Agreement; (xi) treatment of amounts paid as personal assets tax levied on the shareholders; (xii) consideration of the renewal of the delegation to the Board of Directors of the broadest powers to establish the time and currency of issuance, and other terms and conditions of the issuance of notes under the global note program, for up to US$ 300.000.000 currently in force in accordance with approval of the shareholders' meeting dated October 31, 2012, and November 14, 2014 and its extension for an additional amount of US$ 200.000.000 in accordance with the approval of the shareholders' meeting dated October 30, 2015; (xiii) consideration of granting indemnities to Messrs. Directors, Syndics and Managers who work or have worked in the Company in a manner subsidiary to D&O policies; (xiv) consideration of special financial merger statement of AGRO MANAGERS S.A.; special separate financial merger statements of Cresud and consolidated financial merger statements of Cresud with AGRO MANAGERS S.A. as of June 30, 2016 as well as the reports of the supervisory committee and the auditor. Consideration of the preliminary merger by absorption with AGRO MANAGERS S.A. and other related documentation. Authorizations and delegations. Appointment of proxy to grant definitive agreements and other formalities; (xv) consideration of the distribution of treasury shares.
Repurchased of notes
Since the end of fiscal year 2016 until October 7, 2016, we have repurchased Notes (Class XIV, XVI and XVIII) by operations in the local market with unrelated parties for a total amount of Ps.149,821,406, equivalent to the amount of NV 11,022,123.

IRSA’s Recent Developments
Operations Center in Argentina
Dolphin Netherlands shares subscription.
On August 10, 2016, through a subsidiary, IRSA subscribed additional shares of Dolphin Netherlands B.V. for a subscription price of US$ 3.2 million. As of June 30, 2016 IRSA owned 98.6% of Dolphin Netherlands B.V.
Issuance of Series VII and Series VIII Notes.
On September 8, 2016, IRSA issued the Series VII Notes, for Ps. 384,233,262, bearing an adjustable interest rate of BADLAR + 2.99% and the Series VIII Notes, for US$ 184,507,138, bearing interest at a fixed rate of 7% per year. Both Series mature on September 9, 2019. The use of proceeds was mainly to repay debt.
Redemption of Series I Notes.
On September 9, 2016, IRSA announced its intention to redeem all outstanding Series I Notes for a total amount of US$ 74.55 million. The redemption took place on October 11, 2016, and the redemption price was equal to 100% of the aggregate principal amount of the outstanding Notes plus accrued interest, as a result of the redemption, the outstanding amount of the Notes was cancelled in full.
Operations Center in Israel
ChemChina’s offer for Adama Agricultural Solutions Ltd.
On July 17, 2016, IRSA’s indirect subsidiary DIC, agreed to sell its remaining 40% in Adama to ChemChina for cash consideration of US$ 230 million and cancellation of a loan due to a Chinese bank. It is expected that the sale transaction be consummated by the Companyfirst week of November 2016, subject to the fulfillment of certain conditions, including the receipt of Chinese regulatory and antitrust approvals.
Dismissal of liquidation request of IDBD.
On July 18, 2016, the Tel Aviv District Court dismissed the request for liquidation of IDBD and appointment of interim liquidator put forward by Hermetic Trust (1975) Ltd. on behalf of IDBD’s Series 9 bondholders.
Issuance of Notes by IDBD and DIC.
On August 2, 2016 IDBD issued a new Series of Debentures in the Israeli market for an amount of NIS 325 million due November 2019 at an annual interest rate adjustable by CPI plus 4.25%. The notes are withinpledged by shares of Clal Insurance Enterprise Holdings Ltd (“Clal”), subject to the scopeapproval of the Antitrust Law.Commissioner of Capital Markets, Insurance and Savings. IDBD is working to get the authorization to constitute the guarantee through the filing of an application to the Supreme Court asking for such approval. In case IDBD does not get the required approval, funds must be repaid with interest plus a penalty. on September 15, 2016, the High Court of Justice gave a partial judgment and decision, according to which it was decided, to reject the petition  for the most part and to grant an order which instructs the Commissioner to appear and show a reason for her opposition to the request of the company to pledge up to 5% of the shares of Clal Holdings, subject to an outline agreed to at the time by the company. Furthermore, the company maintains the right to accede to a proposal for compromise which was raised in the context of the discussion. A hearing date was set for January 2017.
Furthermore, DIC re-opened its issuance of Notes due 2025 for an additional principal amount of NIS 360 million.
Notes in IDBD and subsidiaries
In July 2016, Shufersal acquired Notes Series B shares with a Nominal Value of NIS 511 million by way of an additional issue of Notes Series F shares at a ratio of 1.175 for each NIS 1 nominal value of the Series B shares outstanding. The Notes Series B shares acquired by Shufersal were cancelled and delisted.
Acqusition of DIC shares from IDBD
On September 23, 2016, we acquired from IDBD 8,888,888 shares of Discount Investment Corporation (“DIC”) (DISI:TASE) for NIS 100 million (approximately US$ 26.7 million), equivalent to the 8.8% of DIC’s shares outstanding.
B. BUSINESS OVERVIEW
General
We are a leading Latin American agricultural company engaged in the production of basic agricultural commodities with a growing presence in the agricultural sector of Brazil, through our investment in Brasilagro, as well as in other Latin American countries. We are currently involved in several farming activities including grains and sugarcane production, cattle raising and milk production. Our business model focuses on the acquisition, development and exploitation of agricultural properties having attractive prospects for agricultural production and/or value appreciation and the selective sale of such properties where appreciation has been realized. In addition, we lease land to third parties and perform agency and agro-industrial services, including a meat packing plant. Our shares are listed on Mercado de Valores de Buenos Aires (“MVBA”) and the NASDAQ.
We are also directly and indirectly engaged in the real estate business through our subsidiary IRSA and its subsidiaries and joint ventures, one of Argentina’s leading real estate companies. IRSA is engaged in the development, acquisition and operation of shopping centers, premium offices, and luxury hotels in Argentina, as well as the sales and development properties. Also, IRSA has international investments, that mainly operate in the United States in relation to the lease of office buildings and hotels in that country, and the investment in IDBD, one of the largest and most diversified investment groups of Israel, which, through its subsidiaries, participates in numerous markets and industry sectors, including real estate, retail, agroindustry, insurance, telecommunications, among others. IRSA’s shares are listed on the MVBA and the NYSE. We own 63.38% of the outstanding common shares of IRSA and a majority of our directors are also directors of IRSA.

During fiscal years ended June 30, 2016, 2015 and 2014, we had consolidated revenues of Ps. 35,384 million, Ps. 5,652 and Ps. 4,604 million, and consolidated net income/(loss) of Ps. 4,166 million, Ps. 1,767 million and Ps. 1,186 million, respectively. During the fiscal years ended June 30, 2015 and June 30, 2016, our total consolidated assets increased 986.7% from Ps. 15,276 million to Ps. 166,001 million, and our consolidated shareholders’ equity decreased 290.3% from Ps. 3,903 million to Ps. 15,232 million.
We operate in two businesses areas, namely, “Agricultural” and “Investment and Development Properties” businesses, as further described below.
In fiscal year ended June 30, 2016, the Company has changed the presentation of the agricultural business segments which are reviewed by the CODM for a better alignment with the current business vision and the metrics used to such end. Our Agricultural business is further comprised of three reportable segments:
The "Agricultural production" segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. The new segment “agricultural production” aggregate the old segments crops, cattle, dairy and sugarcane:
Our “Crops” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Company is focused on the long-term performance of the land and seeks to maximize the use of the land through crop rotation; the use of technology and techniques. In this cases,way, the type and quantity of harvested crops change in each agricultural campaign. Our Crops Segment had assets of Ps. 2,775 million and Ps. 1,913 million as of June 30, 2016 and 2015, respectively, representing 60% and 58% of our agricultural business assets at such dates, respectively. Our Crops segment generated operating income of Ps. 154 million, operating loss of Ps. 277 million and Ps. 140 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 53%, (90%) and 368%, of our consolidated operating income/loss from Agricultural Business for such years, respectively.
Our “Cattle” segment consists of breeding, purchasing and/or fattening of free-range cattle for sale to meat processors and local livestock auction markets. Our Cattle segment had assets of Ps. 815 million and Ps. 606 million as of June 30, 2016 and 2015, respectively, representing 18% and 18% of our agricultural business assets at such dates, respectively. Our Cattle segment generated operating income of Ps. 103 million, Ps. 36 million and Ps. 31 million for fiscal years ended June 30, 2016, 2015 and 2014 respectively, representing 35%, 12% and (82%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Dairy” segment consists of breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers. Our Dairy segment had assets of Ps. 77 million and Ps. 65 million as of June 30, 2016 and 2015, respectively, representing 2% and 2% of our agricultural business assets at such dates, respectively. Our Dairy segment generated operating loss of Ps. 8 million for fiscal year ended June 30, 2016, representing (3%), of our consolidated operating income from Agricultural Business for such years, respectively and operating income of Ps. 4 million and Ps. 5 million for fiscal year ended June 30, 2015 and 2014, representing 1% and (13%), of our consolidated operating income from Agricultural Business for such year.
Our “Sugarcane” segment consists of planting, harvesting and sale of sugarcane. Our Sugarcane segment had assets of Ps. 713 million and Ps. 410 million as of June 30, 2016 and 2015, respectively, representing 13% and 12% of our agricultural business assets at such dates, respectively. Our Sugarcane segment generated operating income of Ps. 63 million for the fiscal year ended June 30, 2016, representing 22% of our consolidated operating income from Agricultural Business for such year and operating loss of Ps. 13 million and Ps. 23 million for fiscal years ended June 30, 2015 and 2014, respectively, representing (4%) and 61%, of our consolidated operating income from Agricultural Business for such years.
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
The "Other segments" segment includes, principally, agricultural services (for example, irrigation); leasing of the Company's farms to third parties; feedlot farming, slaughtering and processing in the meat refrigeration plant; and brokerage activities, among others. The new segment “Other segments” aggregate the old segments Agricultural Rentals and Services, Agro-industrial and Others:
Our “Agricultural Rentals and Services”segment consists of services (for example: irrigation) and leasing of the Company’s farms to third parties. Our Agricultural Rentals and Services Segment had assets of Ps. 22 million and Ps. 118 million as of June 30, 2016 and 2015, respectively, representing 0% and 4% of our agricultural business assets at such dates, respectively. Our Agricultural Rentals and Services segment generated operating income of Ps. 53 million, Ps. 37 million and Ps. 7 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 18%, 12% and (18%) of our consolidated operating income from Agricultural Business for such years.
Our “Agro-industrial” segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant. Our Agro-industrial segment had assets of Ps. 71 million and Ps. 42 million as of June 30, 2016 and 2015, respectively, representing 2% and 1% of our agricultural business assets at such dates, respectively. Our Agro-Industrial segment generated operating income of Ps. 1 million for the fiscal year ended June 30, 2014, representing (3%) of our consolidated operating income from Agricultural Business for such year, and operating loss of Ps. 63 million and Ps. 35 million for the fiscal years ended June 30, 2016 and 2015, respectively, representing (22%) and (11%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 129 million and Ps.114 million as of June 30, 2016 and 2015, respectively, representing 3% and 3% of our agricultural business assets at such dates, respectively. Our Others segment generated operating income of Ps. 2 million, Ps. 3 million and Ps. 3 million for fiscal years ended June 30, 2016, 2015 and 2014, representing 1%, 1% and (8%) of our consolidated operating income for such years, respectively.
Our Agricultural business is further comprised of eight reportable segments:
·  
Our “Agricultural production” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. Our Agricultural production segment had assets of Ps. 4,380 million and Ps. 2,994 million as of June 30, 2016 and 2015, respectively, representing 95% and 91% of our agricultural business assets at such dates, respectively. Our Agricultural production segment generated operating income of Ps. 312 million, operating loss of Ps. 250 million and operating loss Ps. 127 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 107%, (4%) and (3%), of our consolidated operating income/loss from Agricultural Business for such years, respectively.
·  
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
·  
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 222 million and Ps.274 million as of June 30, 2016 and 2015, respectively, representing 5% and 8% of our agricultural business assets at such dates, respectively. Our Others segment generated operating loss of Ps. 8 million, operating income Ps. 5 million and operating income Ps. 11 million for fiscal years ended June 30, 2016, 2015 and 2014, representing (3%), 2% and (29%) of our consolidated operating income from Agricultural Business for such years, respectively.
We have decided to break down reporting of our Urban properties and investment business into an Operation Center in Argentina and an Operation Center in Israel. From the Operation Center in Argentina, the Company, directly requests authorization. In other cases,through IRSA and its subsidiaries, manages the businesses in Argentina and the international investments in the Lipstick Building in New York and the Condor hotel REIT. From the Operation Center in Israel, the Company may requestmanages IDBD.
Operations Center in Argentina
We operate our business in Argentina through six reportable segments, namely “Shopping Centers”, “Offices and Others”, “Sales and Developments”, “Hotels”, “International” and “Financial Operations and Others” as further described below:
·  
Our “Shopping Centers” segment includes the Antitrust Commisionoperating results from our portfolio of shopping centers principally comprised of lease and service revenue from tenants. Our Shopping Centers segment had assets of Ps. 2,365 million and Ps. 2,400 million as of June 30, 2016 and 2015, respectively, representing 47.8% and 37.5% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Shopping Centers segment generated operating income of Ps. 1,637 million, Ps. 1,190 million and Ps. 864 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 60.3%, 47.2% and 69.7%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Offices and Others” segment includes the operating results of our lease and service revenues of office space and other non-retail building properties principally comprised of lease and service revenue from tenants. Our Offices and Others segment had assets of Ps. 941 million and Ps. 1,036 million as of June 30, 2016 and 2015, respectively, representing 19.0% and 16.2% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Offices and Others segment generated operating income of Ps. 219 million, Ps. 99 million and Ps. 160 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 8.1%, 3.9% and 12.9%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Sales and Developments” segment includes the operating results of our acquisition and/or construction of housing and other properties for sale in the ordinary course of business. Our Sales and Developments segment had assets of Ps. 585 million and Ps. 466 million as of June 30, 2016 and 2015, respectively, representing 11.8% and 7.3% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Sales and Developments segment generated operating income of Ps. 864 million, Ps. 1,099 million and Ps. 239 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 31.8%, 43.6% and 19.3%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Hotels” segment includes the operating results of our hotels mainly comprised of room, catering and restaurant revenues. Our Hotels segment had assets of Ps. 174 million and Ps. 182 million as of June 30, 2016 and 2015, respectively, representing 3.5% and 2.8% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Hotels segment generated, operating losses of Ps. 2 million and Ps. 13 million, and operating income of Ps. 10 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), (0.5%) and 0.8%, of our consolidated operating income for the Operations Center in Argentina for such years.
·  
Our “International” segment includes investments that mainly operate in the United States in relation to issuethe lease of office buildings and hotels in that country, and the results arising from investment in IDBD at fair value. We intend to continue evaluating investment opportunities outside Argentina as long as they offer attractive investment and development options. Our International segment generated operating losses of Ps. 2 million and operating income of Ps. 148 million, and operating losses of Ps. 30 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), 5.9% and (2.4%), of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
·  
Our “Financial Operations and Others” segment includes principally the income or loss generated by our associates Banco Hipotecario, BACS and Tarshop, and the residual financial operations of Metroshop carried on through Apsamedia. During fiscal year 2015, we decreased equity interest in Banco Hipotecario from 29.99% to 29.91%, held in the form of Class D shares, which are currently entitled to three votes per share. As of June 30, 2016, our investment in Banco Hipotecario generated income for Ps. 257 million. Tarshop’s operations consist primarily of lending and servicing activities related to the credit card offered to consumers at retail venues. Our Financial Operations and Others segment had assets of Ps. 1,709 million and Ps. 1,411 million as of June 30, 2016 and 2015, respectively, representing 34.6% and 22.0% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Financial Operations and Others segment generated operating losses for Ps. 1 million, Ps. 3 million and Ps. 3 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 0.0%, (0.1%) and (0.2%) of our consolidated operating income for the Operations Center in Argentina for such years.

Operations Center in Israel
We operate our business in Israel through six reportable segments, namely “Real Estate”, “Supermarkets”, “Agrochemicals”, “Telecommunications”, “Insurances” and “Others” as further described below:
·  
Our “Real Estate” segment includes mainly assets and operating income derived from business related to the subsidiary PBC. Through PBC, the Company operates rental properties and residential properties in Israel, United States and other parts of the world and carries out commercial projects in Las Vegas. Our Real Estate segment had net assets of Ps. 10,745 million as of June 30, 2016, representing 76.1% of our operating assets for the Operations Center in Israel at such date. Our Real Estate segment generated operating income of Ps. 617 million for fiscal year ended June 30, 2016, representing 85.7%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Supermarkets” segment includes assets and operating income derived from the business related to the subsidiary Shufersal. Through Shufersal, the Company mainly operates a prior statement about whethersupermarket chain in Israel. Our Supermarkets segment had net assets of Ps. 5,826 million as of June 30, 2016, representing 41.2% of our operating assets for the Operations Center in Israel at such date. Our Supermarkets segment generated operating income of Ps. 424 million for fiscal year ended June 30, 2016, representing 58.9%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Agrochemicals” segment includes income derived from the associate Adama. Adama is a particular transaction should be either notified or submittedcompany specialized in agrochemicals, particularly for approvalthe production of crops.. Our Agrochemicals segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Telecommunications” segment includes assets and operating income derived from the business related to the subsidiary Cellcom. Cellcom is a provider of telecommunication services and its main activities include the provision of mobile phone services, fixed line phone services, data and Internet, among others. Our Telecommunications segment had net assets of Ps. 5,688 million as of June 30, 2016, representing 40.3% of our operating assets for the Operations Center in Israel at such date. Our Telecommunications segment generated operating losses of Ps. 71 million for fiscal year ended June 30, 2016, representing (9.9%), of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Insurance” segment includes the investment in Clal. This company is one of the most important insurance groups in Israel, and is mainly engaged in pension and social security insurance, among others. As indicated in Note 16 of the Financial Statements, 51% of the controlling shares of Clal are held in a trust following the instructions of the Israel Securities Commission in order to comply with the sale of the controlling shares of Clal; as a result, Clal is not fully consolidated on a line-by-line basis but rather in a single line as a financial instrument at fair value, as required by the Company.IFRS under the current circumstances where no control is exercised. Our Insurance segment had assets of Ps. 4,602 million as of June 30, 2016, representing 32.6% of our operating assets for the Operations Center in Israel at such date. Our Insurance segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Others” segment includes the assets and income derived from other diverse business activities, such as technological developments, tourism, oil and gas assets, electronics, and others. Our Others segment had negative net assets of Ps. 12,737 million as of June 30, 2016, representing (90.2%) of our operating assets for the Operations Center in Israel at such date. Our Others segment generated operating losses of Ps. 250 million for fiscal year ended June 30, 2016, representing (34.7%), of our consolidated operating income for the Operations Center in Israel for such year.
Agricultural Business
 
As of June 30, 20152016, we owned 27 farms with approximately 622,217 hectares distributed in Argentina, Brazil, Bolivia and Paraguay. Approximately 96,710 hectares of the land we own are used for crop production, approximately 71,937 hectares are for Cattle production, 85,000 hectares are for sheep production, 2,231 hectares are for milk production and approximately 2,435 hectares are leased to third parties for crop and cattle beef production. The remaining 363,904 hectares of land reserves are primarily natural woodlands. In addition, we have the rights to hold approximately 132,000 hectares of land under concession for a 35-year period that can be extended for another 29 years. Out of this total, we have developed 23,196 hectares for crop production. Also, during fiscal year 2016 ended on June 30, 2016, we leased 41,966 hectares to third parties for crop production and 13,455 hectares for Cattle production
The following table sets forth, at the dates indicated, the amount of land used for each production activity (including owned and leased land, and land under concession):
 
2016(1)
2015(1)(6)
2014(1)(6)
2013(1)(6)
2012(1)(6)
Crops (2)
178,617187,438201,648182,513181,079
Cattle (3)
85,39288,64395,16091,05395,995
Milk/Dairy2,2312,8642,8642,7803,022
Sheep85,00085,00085,00085,00085,000
Land Reserves (4)
473,290467,568467,532461,729459,979
Own farmlands leased to third parties2,43510,02613,11131,59325,538
Total (5)
826,965841,539865,315854,668850,613
(1)
Includes 35.72% of approximately 8,299 hectares owned by Agro-Uranga S.A., an affiliated Argentine company in which we own a non-controlling 35.72% interest.
(2)
Includes wheat, corn, sunflower, soybean, sorghum and others, including double crop production.
(3)
Breeding and fattening.
(4)
We use part of our land reserves to produce charcoal, rods and fence posts.
(5)
It includes Brasilagro and our interest in CRESCA at 50%.
(6)
Includes farms owned by Brasilagro and CRESUD sold in 2014 and 2015.

Strategy
We seek to maximize our return on assets and overall profitability by (i) identifying, acquiring and operating agricultural properties having attractive prospects for increased agricultural production and/or medium or long-term value appreciation and selectively disposing of properties as appreciation is realized, (ii) optimizing the yields and productivity of our agricultural properties through the implementation of state-of-the-art technologies and agricultural techniques and (iii) preserving the value of our significant long-term investment in the urban real estate sector through our subsidiary IRSA.
To such end, we seek to:
Focus on maximizing the value of our agricultural real estate assets
We conduct our agricultural activities with a focus on maximizing the value of our agricultural real estate assets. We rotate our portfolio of properties from time to time by purchasing properties which we believe have a high potential for appreciation and selling them selectively as opportunities arise to realize attractive capital gains. We achieve this by relying on the following cases are pending resolution by the Antitrust Commision:principles:
 
Acquiring under-utilized properties and enhancing their land use: We seek to purchase under-utilized properties at attractive prices and develop them to achieve more productive uses. We seek to do so by (i) 
The Company requestedtransforming non-productive land into cattle feeding land, (ii) transforming cattle feeding land into land suitable for more productive agricultural uses, (iii) enhancing the Antitrust Commissionvalue of agricultural lands by changing their use to issue a statement aboutmore profitable agricultural activities; and (iv) reaching the Company's obligation to either notify or submit for authorization the acquisitionfinal stage of the property formerly ownedreal estate development cycle by Nobleza Piccardo S.A.I.C.Y F.. The Antitrust Commision stated thattransforming rural properties into urban areas as the operation hadboundaries of urban development continue to extend into rural areas. To do so, we generally focus on acquisitions of properties outside of highly developed agricultural regions and/or properties whose value we believe is likely to be notified. The Company appealed this decision. Subsequently,enhanced by proximity to existing or expected infrastructure.
Applying modern technologies to enhance operating yields and property values. We believe that an opportunity exists to improve the Courtproductivity and long-term value of Appeals confirmedinexpensive and/or underdeveloped land by investing in modern technologies such as genetically modified and high yield seeds, direct sowing techniques, and machinery. We optimize crop yield through land rotation, irrigation and the Antitrust Commission’s decision regardinguse of fertilizers and agrochemicals. To enhance our cattle production, we use genetic technology and have a strict animal health plan controlled periodically through traceability systems. In addition, we have introduced state-of-the-art milking technologies in our dairy business.
Anticipating market trends. We seek to anticipate market trends in the obligationagribusiness sector by (i) identifying opportunities generated by economic development at local, regional and worldwide levels, (ii) detecting medium- and long-term increases or decreases in supply and demand caused by changes in the world’s food consumption patterns and (iii) using land for the production of food and energy.
International expansion. We believe that an attractive opportunity exists to notifyacquire and therefore, on February 23, 2012, local form F1 was filed, whichdevelop agricultural properties outside Argentina, and our objective is being processed asto replicate our business model in other countries. Although most of the date hereof.our properties are located in different areas of Argentina, we have begun a process of expansion into other Latin American countries, including Brazil, Bolivia, and Paraguay.
 
Increase and optimize production yields
We seek to increase and improve our production yields through the following initiatives:
Implementation of technology.
(ii)  PurchaseTo improve crop production, we use state-of-the-art technology. We invest in machinery and the implementation of Arcos shares: On December 3, 2009agricultural techniques such as direct sowing. In addition, we use high-potential seeds (GMOs) and fertilizers and we apply advanced land rotation techniques. In addition, we consider installing irrigation equipment in some of our farms.
To increase cattle production we use advanced breeding techniques and technologies related to animal health. Moreover, we optimize the Company requesteduse of pastures and we make investments in infrastructure, including installation of watering troughs and electrical fencing. In addition, we have one of the few vertically integrated cattle processing operations in Argentina through Sociedad Anónima Carnes Pampeanas S.A.
In our milking facility, we have implemented an individual animal identification system, using plastic tags for our cattle and “RFID” tags. We use software from Westfalia Co. which enables us to store individual information about each of our dairy cows.
Increased production.
Our goal is to increase our crop, cattle and milk production in order to achieve economies of scale by:
Increasing our owned land in various regions by taking advantage of attractive land purchase opportunities. In addition, we expand our production areas by developing lands in regions where agricultural and livestock production is not developed to its full potential. We believe in the use of technological tools for improving the productivity of our land reserves and enhancing their long-term value. However, current or future environmental regulations could prevent us from fully developing our lands by demanding us to maintain part of them as natural woodlands not allocated to production.
Diversifying our production and the weather risk by leasing farms, thus expanding our product portfolio and optimizing our geographic focus, in particular in areas that are not appealing in terms of land value appreciation but with attractive productivity levels. We believe that this diversification mix mitigates our exposure to seasonality, commodity price fluctuations, weather conditions and other factors affecting the CNDC issuedagricultural and livestock sector.
Moreover, we believe that continuing to expand our agricultural operations outside of Argentina will help us improve even more our ability to produce new agricultural products, further diversifying our mix of products, and mitigating our exposure to regional weather conditions and country-specific risks.

Focus on preserving long-term value of our investment in our real estate subsidiary IRSA
As a leading company engaged in acquiring, developing and managing real estate, IRSA seeks to (i) generate stable cash flows through the operation of its real estate rental assets (shopping centers, office buildings, hotels), (ii) achieve long-term appreciation of its asset portfolio by taking advantage of development opportunities, (iii) increase the productivity of its land reserves and enhance the margins of its development and sale of properties segment through partnerships with other developers, and (iv) look for opportunities abroad offering capital gain potential.
Operations Center in Argentina
Shopping Center. Our main purpose is to maximize our shareholders’ profitability. By using our know-how in the shopping center industry in Argentina as well as our leading position, we seek to generate a rulingsustainable growth of cash flow and to increase the long-term value of our real estate assets. We attempt to take advantage of the unsatisfied supply in different urban areas of the region, as well as of our customers’ purchase experience. Therefore, we seek to develop new shopping centers in urban areas with attractive prospects for growth, including Buenos Aires’ Metropolitan area, some cities in the provinces of Argentina and possibly, other places abroad. To achieve this strategy, the close business relationship we have had for years with more than 1,000 retail companies and trademarks composing our selected group of tenants is of utmost importance, as it allows us to offer an adequate mix of tenants for each particular case.
Offices and Others. We seek to purchase and develop premium office buildings in strategically-located business districts in the City of Buenos Aires and other strategic locations that we believe offer return and potential for long-term capital gain. We expect to continue our focus on attracting premium corporate tenants to our office buildings. Furthermore, we intend to consider new opportunities on a selective basis to acquire or construct new rental office buildings.
Sales and Developments. We seek to purchase undeveloped properties in densely-populated areas and build apartment complexes offering green space for recreational activities. We also seek to develop residential communities by acquiring undeveloped properties with convenient access to the notification requirement.City of Buenos Aires, developing roads and other basic infrastructure such as electric power and water, and then selling lots for the construction of residential units. The CNDC confirmed thatscarcity of mortgage financing restricted the transaction had to be notified;growth in low class home purchases and, as a result, notice was served in December 2010we mainly focused on the development of residential communities for middle and ashigh-income individuals, who do not need to finance their home purchases. We seek to continue to acquire undeveloped land at locations we consider attractive within and outside Buenos Aires. In each case, our intention is to purchase land with significant development or appreciation potential to resell. We believe that holding a portfolio of desirable undeveloped plots of land enhances our ability to make strategic long-term investments and affords us a valuable pipeline of new development projects for upcoming years.
Hotels. We believe our portfolio of three luxury hotels is positioned to take advantage of the consolidatedfuture growth in tourism and business travel in Argentina. We seek to continue with our strategy to invest in high-quality properties that are operated by leading international hotel companies to capitalize on their operating experience and international reputation. We also seek to continue to invest in improvements for our hotels.
International. In this segment, we seek investments that represent an opportunity of capital appreciation potential in the long term. After the international financial statements date itcrisis in 2008, we took advantage of the price opportunity in the real estate sector in the United States and invested in two office buildings in Manhattan, New York. In 2015, we sold the Madison building and we hold a 49.9% interest in a US company, whose main asset is still pending.the so-called “Lipstick” office building located in the City of New York. In addition, jointly with subsidiaries, we hold 49.0% of the voting securities of Condor Hospitality Trust REIT (NASDAQ: CDOR). We intend to continue evaluating -on a selective basis- investment opportunities outside Argentina as long as they offer attractive investment and development options.
Financial Operations and Other. Through our investment in Banco Hipotecario, the main mortgage-lending bank in Argentina, we believe that we are able to achieve good synergies in the long term with a developed mortgage market.
 
(iii)  Acquisition of shares in Nuevo Puerto Santa Fe (NPSF): On August 23, 2011 the Company informed the CNDC of the direct and indirect acquisition of NPSF (IRSA Commercial Properties directly acquired 33.33% of NPSF and indirectly a 16.66% through its controlled company Torodur SA). On December 14, 2014 the CNDC notified approval of the transaction.
Operations Center in Israel
 
(iv)  Acquisition of shares in Entertainment Holdings SA (EHSA): On December 7, 2012, the Company informed the CNDC of the acquisition of shares in EHSA, which indirectly owns 50% of La Rural S.A. – a company that operates a convention center known as Predio Ferial de Palermo. As of the consolidated financial statements date, the transaction is pending approval by the CNDC.
We hold, through Dolphin, 68.3% of IDBD, which is one of the largest and most diversified investment groups in Israel, which participates, through its subsidiaries, associates and joint ventures, in numerous markets and industry sectors, including real estate, retail, agricultural industry, insurance, telecommunications, among others. We seek to continue to reduce IDBD’s indebtedness level, simplifying its capital structure and nurturing a strategy in each business unit aimed at improving operating margins and the results of our investment.
 
Capital Expenditures
·  
Real Estate. PBC has partnered with IDBD in two projects based in Las Vegas, through IDBG Ltd., including commercial and office building project (Tivoli). The first stage of this project has been fully completed. The second stage of the project is undergoing the building and marketing stages, and will include commercial areas with a surface area of approximately 16,000 square meters and office areas with a surface area of approximately 12,000 square meters. We have already entered into lease agreements with an anchor tenant and other tenants covering approximately 66% of the commercial area included in the second stage of the project and around 8% of the office areas. We also expect to develop an additional project encompassing two residential buildings and, during the year under review, have sold all the remaining residential units of these buildings.
·  
Supermarkets. Shufersal continued developing its business plan, with a focus on building a commercial and operating infrastructure to enable growth in the coming years; strengthening its competitive edge; offering more value to customers; and improving its service. Under its business plan, Shufersal continues expanding and strengthening its brand; boosting the development of its digital platforms, with “Shufersal Online” at the core; fostering new and supplementary operations in the sectors in which it currently operates; and streamlining its real property, including the closure and downsizing of existing branches and the opening of new ones.
·  
Agrochemicals. As a part of Adama’s long-term strategy, in December 2015, Adama entered into a commercial cooperation agreement, according to which Adama will gradually become the sole distributor of formulated agrochemical products in China of several agrochemical companies controlled by China National Chemical Corporation (“ChemChina”). This cooperation is expected to support the strengthening of Adama’s status in the Chinese market, by combining sales of Adama’s products with products of ChemChina’s companies and setting up a significant distribution platform in China, starting at the beginning of 2016. On July 17, 2016, DIC, reported that it had accepted ChemChina’s offer for 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments”.
·  
Telecommunications. Cellcom operates in a highly competitive environment. The main elements of Cellcom’s business strategy are: offering comprehensive solutions to expand landline and mobile communication services, optimization of costs and expenses, including by means of carrying out streamlining measures.
·  
Insurance. The investment managers make use of an advanced research department and an effective trading execution, to ensure a competitive advantage in order to achieve a fair long-term yield for policy holders, maximizing income from investments in accordance with the company’s risk appetite and the structure of liabilities in the portfolios.
·  
Others. Includes the assets and income from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities.

 
Our capital expenditures totaled Ps. 499.5(1) million,  Ps. 435.7(2) millionPrincipal Business Activities
During fiscal year ended June 30, 2016, we conducted our operations on 30 owned farms and Ps. 1,048.0(3) million35 leased farms. Some of the farms we own are engaged in more than one productive activity at the same time.
The following chart shows, for fiscal year 2016, the surface area in operation for each line of business:
The following chart illustrates, for the fiscal year ended on June 30, 2016, the surface area in operation and the hectares held as land reserves, classified into own, under lease or under concession:
Agricultural Business
Land Transformation and Sales
Land Acquisitions
We intend to increase our farmland portfolio by acquiring large extensions of land with high appreciation potential. We also intend to transform the land acquired from non-productive to cattle breeding, from cattle breeding to farming, applying state-of-the-art technology to improve farming yields so as to generate higher land appreciation.
In our view, the sector’s potential lies in developing marginal areas and/or under-utilized areas. Thanks to the current technology, we may achieve similar yields with higher profitability than core areas, resulting in the appreciation of land values.
Over the past 15 years, prices of farmlands intended for agricultural production have increased in the southern hemisphere (mainly South America) but continue to be relatively low compared to the northern hemisphere (U.S. and Europe). Our financial strength relative to other Argentine producers gives us the chance to increase our land holdings at attractive prices, improve our production scale and create potential for capital appreciation.
Several important intermediaries, with whom we usually work, bring farmlands available for sale to our attention. The decision to acquire farmlands is based on the assessment of a large number of factors. In addition to the land’s location, we normally carry out an analysis of soil and water, including the quality of the soil and its suitability for our intended use (crops, cattle, or milk production), classify the various sectors of the lot and the prior use of the farmland; analyze the improvements in the property, any easements, rights of way or other variables in relation to the property title; examine satellite photographs of the property (useful in the survey of soil drainage characteristics during the different rain cycles) and detailed comparative data regarding neighboring farms (generally covering a 50-km area). Based on the foregoing factors, we assess the farmland in terms of the sales price compared against the production potential of the land and capital appreciation potential. We consider that competition for the acquisition of farmlands is, in general, limited to small farmers for the acquisition of smaller lots, and that there is scarce competition for the acquisition of bigger lots.
In addition, we may consider the acquisition of farmlands in marginal zones and their improvement by irrigation in non-productive areas as well as the installation of irrigation devices in order to obtain attractive production yields and create potential for capital appreciation.

The following chart shows certain information concerning our land acquisitions for each of the last 10 fiscal years ended on June 30, 2015, 201430:
Fiscal Year
Number of Farmlands
Amount of Acquisitions
(Ps. million)
2006 (1)
145.9
2007 (2)
17.3
2008 (3)
24.5
2009 (4)
7133.2
2010 (5)
15.0
2011 (6)
361.5
2012--
2013--
2014--
2015--
2016--
   
(1)  
Includes the acquisition of “San Pedro” farmland of 6,022 hectares.
(2)  
Includes the acquisition of “8 de Julio” farmland of 90,000 hectares.
(3)  
Includes the acquisition of the remaining 25% of “La Adela” farmland of 18 hectares and 2013,80% of “La Esperanza” farmland of 980 hectares.
(4)  
Includes the acquisition of "Estancia Carmen", "Puertas de Luján", "Las Londras", "San Cayetano", "San Rafael", and "La Fon Fon" farmlands and 50% of "Jerovia" farmland, of 10,911, 115, 4,566, 883, 2,969, 3,748 and 20,966 hectares, respectively.
(5)  
Includes exercise of the option over 50% of the “Jerovía” farmland of 3,646 hectares.
(6)  
Includes the acquisition of “La Primavera” and “4 Vientos” farmlands of 2,341 hectares and 2,659 hectares, respectively. In addition, it includes the acquisition of 943 hectares of the Mendoza farmland.
Land Sales
We periodically sell properties that have reached a considerable appraisal to reinvest in new farms with higher appreciation potential. We analyze the possibility of selling based on a number of factors, including the expected future yield of the farmland for continued agricultural and livestock exploitation, the availability of other propertyinvestment opportunities and equipment acquired in business combinations. Our capital expenditures consistedcyclical factors that have a bearing on the global values of farmlands.
The following chart shows certain information concerning our land sales for each of the last 10 fiscal years ended on June 30:
Fiscal Year
Number of Farmlands
Gross Proceeds from Sales
(Ps. million)
Profit(1)
(Ps. million )
          2006 (2)
116.19.9
         2007 (3)
329.922.3
         2008 (4)
223.020.0
        2009 (5)
22.01.9
        2010 (6)
118.613.7
2011 (7)
284.554.6
2012 (8)
3118.363.2
2013 (9)
4332.6149.6
 2014 (10)
2148.591.4
     2015(11)(12)
4814.3569.6
                                                   2016---
(1)  
Includes the difference between the gross proceeds from sales (net of all taxes and commissions) and the book value of the assets sold.
(2)  
Includes the sale of “El Gualicho” farmland of 5,727 hectares.
(3)  
Includes the sale of 20,833 hectares of “Tapenagá” farmland and the partial sale of 14,516 hectares of “Los Pozos” farmland and 50 hectares of “El Recreo” farmland.
(4)  
Includes the partial sale of 4,974 hectares of “Los Pozos” farmland and the partial sale of 2,430 hectares of “La Esmeralda” farmland.
(5)  
Includes the partial sale of 1,658 hectares of “Los Pozos” farmland and the partial sale of 1,829 hectares of “El Recreo” farmland.
(6)  
Includes the sale of 12,071 hectares of “Tali Sumaj.”
(7)  
Includes the sale of “La Juanita” farmland, of 4,302 hectares, and the partial sale of 910 hectares of “La Fon Fon.”
(8)  
Includes the sale of 2,447 hectares of “San Pedro” farmland, the partial sale of 1,194 hectares of “La Fon Fon” farmland, and the partial sale of 115 hectares of “Puerta de Lujan” farmland.
(9)  
Includes the sale of 14,359 hectares of “Horizontina” farmland, the partial sale of 394 hectares of “Araucaria” farmland, the partial sale of “Cremaq” farmland of 4,985 hectares, and the partial sale of 5,613 hectares of La “Suiza” farmland.
(10)  
Includes the sale of 883 hectares of “San Cayetano” farmland and the partial sale of 1,164 hectares of “Araucaria” farmland.
(11)  
Includes the sale of 1,058 hectares of “La Adela” farmland, 24,624 hectares of “Chaco Paraguayo” farmland, 1,643 hectares of “Fon Fon” farmland and the remainder sale of 27,745 hectares of “Cremaq” farmland.
(12)  
The sale of “La Adela” to our subsidiary IRSA was a transaction between related parties and generated therefore no results under the IFRS and it was not included in the purchasegain from disposition of real estatefarms for Ps. 569.5 million.
After recording farm sales for Ps. 814 million in 2015, we did not close any transactions during fiscal year 2016. Specifically in Argentina, the farmland sale market was affected during the last years by the controls on capitals that prevailed until December 2015 and the profitability conditions of the business. With the new administration and new government policies for the farming industry we have seen a positive change in this market’s prospects. In this regard, after year-end we sold the “El Invierno” and “La Esperanza” farms, acquisitioncomprising 2,615 hectares used for agriculture and improvementlocated in the district of productive“Rancul”, province of La Pampa, for US$ 6 million (US$ 2,294 per hectare). These farms’ book value was approximately Ps. 13.5 million; therefore, the transaction will result in a gain of Ps. 72 million, which will be recorded in the first quarter of fiscal year 2017.

Farmland Development
We consider that there is great potential in farmland development where, through the use of current technology, we may achieve similar yields with higher profitability than in core areas.
As of June 30, 2016, we owned land reserves in the region extending over more than 365,306 hectares of own farmlands that were purchased at very attractive prices. In addition, we have a concession 107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farms and, therefore, achieve appreciation in the long term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to be used for production purposes.
During fiscal year 2016, we conducted our land development business in Argentina mainly in Los Pozos, where we developed 2,486 hectares in La Paz and Don Mario modules. Moreover, we developed 548 hectares in La Suiza intended for agricultural assets, completion of building a shopping center, construction of real estate and acquisition of land reserves.production.
 
Our capital expendituresdevelopments in Brazil, through our subsidiary Brasilagro, consisted of 4,416 hectares of developed land intended for agriculture.
In connection with our business in Paraguay, we developed, through CRESCA, 1,400 hectares for agricultural production.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year  2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
Revenues----
Costs(9)(9)(8)0.0%
Gross Loss(9)(9)(8)0.0%
(Loss)/Gain from disposition of farmlands(2)57091-
Profit/(Loss) from operations(12)55278-
Segment Profit/(Loss)(12)55278-
Area under Development (hectares)Developed 2014/2015Developed 2015/2016
Argentina                               1,703                               3,034
Brazil                               7,475                               4,416
Paraguay (1)                               2,367                               1,400
Total                             11,545                             8,850
(1) Includes the farms of Cresca S.A. at 100%.
Agricultural Production
Crops and Sugarcane
Our crop production is mainly based on grains, oilseeds and sugarcane. Our main crops include soybean, wheat, corn, and sunflower. Other crops, such as sorghum and peanut, are sown occasionally and represent only a small percentage of total sown land.
Production
The following table shows, for the new fiscal year will depend onyears indicated, our crop production volumes measured in tons:
Production Volume(1)
FY 2016FY2015FY2014FY2013FY2012
Corn229,893             310,874                 155,759           194,870           247,839
Soybean168,916             279,608                 242,349           220,540           196,515
Wheat16,186               15,990                   12,373               4,392             18,625
Sorghum1,127                 1,740                     4,502               6,709               7,791
Sunflower3,053               11,992                     5,803             12,437             14,503
Other6,432                 6,999                     2,476               5,002               6,774
Total Crops (tons)425,607             627,203                 423,262           443,950           492,047
Sugarcane  (tons)1,228,830             928,273                 657,547        1,156,848           576,048
Cattle herd7,714                 7,812                     6,970               7,723               8,936
Milking cows491                    524                        489                  470                  445
Cattle (tons)8,205                 8,336                     7,459               8,193               9,381
Milk (thousand of liters)16,723        17,526            19,320      18,459      16,563
(1)  
Includes CRESCA at 50%. Does not include Agro-Uranga S.A.
Below is the geographical distribution of our agricultural production for the last five seasons (in tons):
2016 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn189,70819,98213,2336,969229,893
Soybean117,74426,25215,4169,505168,916
Wheat15,525-661-16,186
Sorghum56-7732981,127
Sunflower3,053---3,053
Other5,3671,065--6,432
Total Grains and Other331,45347,29930,08316,772425,607
Sugarcane-1,075,183153,648-1,228,830

2015 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         253,929           40,102           10,199             6,644         310,874
Soybean         132,101         111,751           30,471             5,285         279,608
Wheat           15,990                  -                  -                  -           15,990
Sorghum                538                  -                406                796             1,740
Sunflower           11,992                  -                  -                  -           11,992
Other             6,917                  -                  -                  82             6,999
Total Grains and Other         421,467         151,853           41,076           12,807         627,203
Sugarcane                  -         830,204           98,069                  -         928,273
2014 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn           93,388           50,102           11,445                826         155,761
Soybean         108,088         108,107           20,821             5,334         242,350
Wheat           12,373                  -                  -                  -           12,373
Sorghum             1,367                  -             2,487                648             4,502
Sunflower             5,756                  -                  47                  -             5,803
Other             1,926                534                  -                  16             2,476
Total Grains and Other         222,898         158,743           34,800             6,824         423,265
Sugarcane                  -         570,820           86,727                  -         657,547
2013 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         145,949           34,630           14,291                  -         194,870
Soybean           82,476         106,276           31,601                187         220,540
Wheat             3,111                  -             1,281                  -             4,392
Sorghum             3,766                  -             2,638                305             6,709
Sunflower           12,090                  -                347                  -           12,437
Other             2,644             2,358                  -                  -             5,002
Total Grains and Other         250,036         143,264           50,158                492         443,950
Sugarcane                  -      1,014,234         142,614                  -      1,156,848
2012 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         153,889           72,387           21,563                  -         247,839
Soybean           83,221           83,319           29,976                  -         196,516
Wheat           17,637                  -                988                  -           18,625
Sorghum             3,360                  -             4,431                  -             7,791
Sunflower           13,210                  -             1,293                  -           14,503
Other             5,494             1,280                  -                  -             6,774
Total Grains and Other         276,811         156,986           58,251                  -         492,048
Sugarcane                  -         576,030                  18                  -         576,048
Sales
Below is the total volume of grains and sugarcane sold broken down into geographical areas, measured in millions of tons:
Volume of Sales(3)
FY2016FY2015FY2014FY2013FY2012
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
Corn217.337.9255.2269.70.0269.7179.90.0179.9233.337.8271.1 202.321.8 224.1
Soybean182.515.8198.3172.977.2250.1188.933.2222.1153.455.4208.8 228.623.0 251.6
Wheat17.329.346.67.00.17.111.40.011.410.70.010.7   15.25.5   20.7
Sorghum1.00.01.01.60.01.63.80.03.85.80.05.8     8.50.0     8.5
Sunflower10.40.010.45.20.05.29.70.09.710.60.010.6   18.10.0   18.0
Other5.90.05.91.90.01.96.20.36.514.00.114.1   12.00.0   12.0
Total
Grains (tons)
434.483.0517.4458.377.3535.6399.933.5433.4427.893.3521.1484.2503534.5
Sugarcane (tons)1,219.70.01,219.7924.5-924.5675.7-675.71,179.9-1,179.9636.3-636.3
Cattle herd8.30.08.38.90.08.98.80.08.89.60.09.6   15.0-   15.0
Milking cows0.70.00.70.90.00.90.50.00.50.50.00.5        0.5-        0.5
Beef-Cattle (tons)9.00.09.0     9.8-     9.8     9.3           -     9.3      10.1-      10.1   15.5-   15.5
Milk (in millions of liters)15.50.015.5   16.9-   16.9   18.8           -   18.8      17.9-      17.9   16.3-   16.3
(1) Domestic Market.
(2) Foreign Market.
(3) Includes Brasilagro and CRESCA at 50%, Acres del Sud, Ombú, Yatay and Yuchán. Does not include Agro-Uranga.
The following table shows the sown surface area assigned to crop production, classified into owned, under lease, under concession and leased to third parties for the fiscal years indicated below, measured in hectares:
 
2016(1)(2)
2015(1)(2)
2014(1)(2)
2013(1)(2)
2012(1)(2)
Own112,112128,795122,632127,952127,793
Under lease43,30958,16758,03045,62444,508
Under concession23,19621,54720,9868,9378,778
Leased to third parties2,3653,2677,61618,22323,595
Total180,982211,776209,264200,736204,674
(1)  
Sown land may differ from that indicated under “Uses of Land”, since some hectares are sown twice in the same season and therefore are counted twice.
(2)  
Includes CRESCA at 50%. Does not include Agro-Uranga.
Stock2016 Season2015 Season2014 SeasonYoY var 2016/2015YoY var 2015/2014
Corn        21,233        61,157        17,604(65.3%)247.4%
Soybean        69,665        99,972        75,885(30.3%)31.74%
Sunflower             913          8,594          1,825(89.4%)370.9%
Sorghum             369             198             52286.4%(62.1%)
Wheat          4,964          9,377             681(47.1%)1,276.9%
Cotton               -               -               -0.0%0.0%
Sugarcane               -               -               -0.0%0.0%
Other          2,975          4,500        32,608(33.9%)(86.2%)
Total      100,119      183,798      129,125(45.5%)42.3%

We seek to diversify our mix of products and the geographic location of our farmlands to achieve an adequate balance between the two principal risks associated with our activities: weather conditions and the fluctuations in the prices of real estate,commodities. In order to reduce such risks, we own and lease land in several areas of Argentina with different climate conditions that allow us to sow a diversified range of products. Our leased land for agriculturecrops is mostly located in the Pampas region, a favorable area for crop production. The leased farms are previously studied by technicians who analyze future production expectations based on the historic use of the land. The initial duration of lease agreements is typically one or three seasons. Leases of farms for production of crops generally consist of lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. The principal advantage of leasing farms is that leases do not require us to commit large amounts of capital to the acquisition of lands but allow us to increase our scale in the short term and cattlereduce the risk of inclement weather. The disadvantage of this strategy is that the cost of leasing can increase over time, in part, because increased demand for leased land increases the price of leased land.
In order to increase our production yields, we use, besides state-of-the-art technology, labor control methods which imply the supervision of the seeding’s quality (density, fertilization, distribution, and depth), crop monitoring (determination of natural losses and losses caused by harvester) and verification of bagged crop quality. In this way, we work jointly with our suppliers to achieve the best management of inputs, water and soil.
Wheat seeding takes place from June to August, and harvesting takes place from December to January. Corn, soybean and sunflower are sown from September to December and are harvested from February to August. Grains are available to be sold as wellcommodities after the harvest from December to June and we usually store part of our production until prices recover after the drop that normally takes place during the harvesting season. A major part of production, especially soybean, wheat, corn and sorghum, is sold and delivered to buyers pursuant to agreements in which price conditions are fixed by reference to the market price at a specific time in the future that we determine. The rest of the production is either sold at current market prices or delivered to cover any futures contract that we may have entered into.
Agro-Uranga S.A.
We have a 35.72% interest in Agro-Uranga S.A. (“Agro-Uranga”). This company optimizes production processes and attains excellent results, with special emphasis in soil conservation, the application of rational techniques and care of the environment.
At present, with the assistance of its foreign trade team it is seeking to develop new products so as to significantly increase export volumes, encouraged by the world’s growing demand.
Lease of Farmlands
We conduct our business on owned and leased land. Rental payments increase our production costs, as the evolutionamounts paid as rent are accounted for as operating expenses. As a result, production costs per hectare of commodity prices.leased land are higher than for the land owned by us.
 
Fiscal Year EndedOur land leasing policy is designed to supplement our expansion strategy, using our liquidity to make production investments in our principal agricultural activities. On the other hand, our leasing strategy provides us with an added level of flexibility in the share of each of our products in total production, providing for greater diversification.
The initial duration of lease agreements is typically one crop season. Leases of farms for production of crops consist in lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. Leases of farmlands for cattle breeding consist in lease agreements with fixed payments based on a fixed amount of Pesos per hectare or steer kilograms or capitalization agreements with payments in kind or in cash based on the weight gain in kilograms.
During fiscal year 2016, we leased to third parties a total of 35 farmlands, covering 56,003 hectares, including 11,718 hectares in Brazil. Out of the total leased area, 43,309 hectares were assigned to agricultural production, including double crops, and 12,635 hectares to cattle raising. The properties for agricultural production were leased, primarily, for a fixed price prior to harvest and only a small percentage consisted of sharecropping agreements.
The following table shows a breakdown of the number of hectares of leased land used for each of our principal production activities:
 20162015201420132012
Crops(1)
43,30958,16758,03045,62444,508
Cattle12,63513,50118,54912,63512,635
(1)  
Includes Brasilagro.
Due to the rise in the price of land, we adopted a policy of not validating excessive prices and applying strict criteria upon adopting the decision to lease, selecting those lands with values that would ensure appropriate margins.

Results
The following table shows the Company’s results for fiscal year 2016, compared to the two preceding fiscal years:
Crops
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues 1,152      98783716.8%17.9%
Costs (1,813)  (1,819)(1,539)(0.3%)18.1%
Initial recognition and changes in the fair value of biological assets and agricultural products  at the point of harvest 1,071      91886816.6%5.8%
Changes in the net realizable value of agricultural products after harvest208       (34)(17)-100%
Gross profit618      521491088.5%(65.1%)
General and administrative expenses(174)     (159)(147)9.4%8.2%
Selling expenses(216)     (161)(115)34.2%40.0%
Other operating results, net(74)       (9)(27)722.2%(66.6%)
Profit/(Loss) from operations154     (277)(140)--
Share of profit/(loss) of associates and joint ventures26        111(2500.0%)(90.9%)
Segment Profit/(Loss)180     (276)(129)--
Sugarcane
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues29419812448.5%59.7%
Costs(511)(368)(207)38.8%77.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest3181879670.5%94.8%
Gross profit1011713494.1%30.8%
General and administrative expenses(34)(20)(28)70.0%(28.6%)
Selling expenses(8)(8)(8)--
Other operating results, net4(2)---
(Loss)/Profit from operations63(13)(23)--
Segment (Loss)/Profit63(13)(23)--
Cattle
Our cattle production involves the breeding and fattening of our own animals. In some cases, if market conditions are favorable, we also purchase and fatten cattle which we sell to slaughterhouses and supermarkets.  As of June 30, 20152016, our cattle aggregated 69,873 heads, and we had a total surface area of 85,392 hectares of own and leased lands devoted to this business activity.  In addition, we have leased to third parties 70 hectares assigned to these activities.
 
During the fiscal year ended June 30, 2016, our production was 7,714 tons, a 1.2% year-on-year decrease.
The following table sets forth, for the fiscal years indicated below, the cattle production volumes measured in tons:
 
2016(1)
2015(1)
2014(1)
2013(1)
2012(1)
Cattle production7,7147,8126,9707,7238,936
(1)
Production measured in tons of live weight.  Production is the sum of the net increases (or decreases) during a given period in live weight of each head of cattle owned by us.
Our cattle breeding activities are carried out with breeding cows and bulls and our fattening activities apply to steer, heifers and calves. Breeding cows calve approximately once a year and their productive lifespan is from six to seven years. Six months after birth, calves are weaned and transferred to fattening pastures. Acquired cattle are directly submitted to the fattening process. Upon starting this process, cattle have been grazing for approximately one year to one and a half year in order to be fattened for sale. Steer and heifers are sold when they have achieved a weight of 380–430 kg and 280–295 kg, respectively, depending on the breed.
Pregnancy levels, which have been improving over the years, showed satisfactory levels of efficiency notwithstanding the adverse weather conditions. Genetics and herd management are expected to further improve pregnancy levels in the coming years. Reproductive indicators improved thanks to the implementation of technologies, which have included handling techniques and females artificial insemination with cattle genetics especially selected for the stock which is purchased from specialized companies in quality semen elaboration for meat production. We use veterinarian products manufactured by leading national and international laboratories. It is important to emphasize the work of a veterinarian advising committee, who are external to us and visit each establishment monthly to control and agree tasks.
Currently, the cattle raising farms are officially registered as export farmlands pursuant to the identification and traceability rules in force in Argentina. Animals are individually identified, thus allowing for the development of special businesses in this area.
Our cattle stock is organized into breeding and fattening activities. The following table shows, for the fiscal years indicated, the number of head of cattle for each activity:
 201620152014
Breeding stock58,74752,05254,808
Winter grazing stock11,12612,10210,932
Total Stock (heads)69,87364,15465,740
We seek to improve cattle production and quality in order to obtain a higher price through advanced breeding techniques. We cross breed our stock of Indicus, British (Angus and Hereford) and Continental breeds to obtain herds with characteristics better suited to the pastures in which they graze. To enhance the quality of our herds even further, we plan to continue improving our pastures through permanent investment in seeds and fertilizers, an increase in the watering troughs available in pastures, and the acquisition of round bailers to cut and roll grass for storage purposes.
Our emphasis on improving the quality of our herd also includes the use of animal health-related technologies. We comply with national animal health standards that include laboratory analyses and vaccination aimed at controlling and preventing disease in our herd, particularly FMD.
Direct costs of beef production consist primarily of crops for feeding and dietary supplementation purposes, animal health and payroll costs, among others.

Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues1781439024.5%58.9%
Costs(268)(225)(161)19.1%39.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest25416714552.1%15.2%
Changes in the net realizable value of agricultural products after harvest-----
Gross Profit164857492.9%14.9%
General and administrative expenses(40)(26)(27)53.8%(3.7%)
Selling expenses(19)(20)(14)(5.0%)42.9%
Other operating results, net(2)(3)(2)(33.3%)50.0%
Profit/ (Loss) from operations1033631186.1%16.1%
Segment Profit / (Loss)1033631186.1%16.1%
Dairy
As of June 30, 2016, we conducted our milk business in the dairy facility located in “El Tigre” farm in the Province of La Pampa, Argentina. We have a milking capacity of 1,788 cows per day and seek to increase total productivity through the application of new technologies including improved genetic management for milk production, strategic feeding plans, based on cattle specific requirements and the use of individual traceability to know the productivity history of each animal. We also use computer science applied to the milk business to make more efficient the manual labor by surveying the information supplied by the farm.
Within the process of de-commoditization and technological innovation, we implemented an identification and tracking system in compliance with European and SENASA standards. We also obtained Global Gap and HCCP certification. Our goal in this respect is to distinguish our production and obtain higher prices in production sales.
Our milk production is based on a herd of Holando Argentina dairy cows, genetically selected through the use of imported frozen semen of North American Holando bulls. Male calves are sold, at calving, for a given amount per head, whereas female calves are weaned after 24 hours, spend approximately 60 days in raising and approximately 100 days being fed on the basis of grass, grains and supplements. Young heifers then graze for an additional 12 to 15 month period, prior to artificial insemination at the age of 18 to 20 months and they calve nine months later. Heifers are subsequently milked for an average of 300 days. Milking dairy cows are once again inseminated during the 60 to 90 day subsequent period. This process is repeated once a year during six or seven years. The pregnancy rate for our dairy cows is 80-90%.
Our dairy herd is milked mechanically twice a day. The milk obtained is cooled to less than five degrees centigrade to preserve quality and is then stored in a tank for delivery once a day to trucks sent by buyers. Dairy cows are fed mainly with grass, supplemented as needed with grains, hay and silage. We have invested in certain technologies that focus on genetic improvement, animal health and feeding in order to improve our milk production. These investments include imports of top quality frozen semen from genetically improved North American Holstein bulls, agricultural machinery and devices such as feed-mixer trucks, use of dietary supplements and the installation of modern equipment to control milk cooling. We are currently acquiring dietary supplements for our dairy cows and have made investments with the aim of increasing the quantity and quality of forage (pasture, alfalfa and corn silage) in order to reduce feeding costs.
The following table sets forth, for the periods indicated, the average number of our dairy cows and average daily production per cow:
 201620152014
Average dairy cows per day (heads)1,788               2,189               2,439
Milk Production/Dairy Cow/Day (liters)23.81               21.48               19.69
At the closing of fiscal year 2016, we had 5,047 heads of cattle on 2,231 hectares involved in the production of milk; whereas as of June 30, 2015, we investedhad 5,658 heads of cattle on 2,864 hectares.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues657254(9.7%)33.3%
Costs(135)(133)(104)1.5%27.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest747563(1.3%)19.0%
Gross Profit41413(71.4%)7.7%
General and administrative expenses(8)(5)(6)60.0%(16.7%)
Selling expenses(4)(4)(2)--
Other operating results, net-(1)---
Profit / (Loss) from operations(8)45--
Segment Profit / (Loss)(8)45--
Agro-industrial Activities
This segment consists in the slaughtering and processing of beef in meat packing plants.
Through our subsidiary Sociedad Anónima Carnes Pampeanas S.A. (“Carnes Pampeanas”) we own a meat packing plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,600 cattle heads per month.
During the last years, the smaller supply of cattle has adversely affected the value chain by reducing cold-storage plant utilization. This has left several plants struggling to remain operational in view of the poor returns and shortage of raw materials. Our investment in Carnes Pampeanas has not escaped unscathed of this situation.
During fiscal year 2016, this segment recorded a net loss of Ps. 318.063.0 million compared to a net loss of Ps. 35.0 million in the urban propertiesprevious fiscal year. Although the business was favored by the new government policies consisting in raising the exchange rate and investment business, mainly due to (a) improvementslowering withholding taxes on beef exports, the positive impact of these measures was offset by a deterioration in our hotels Sheraton Libertador, Intercontinentalthe input/product ratios, explained by the fact that livestock prices and Llao Llaolabor costs significantly outpaced the rise in beef prices for Ps. 1.2 million, Ps. 9.0 milliondomestic consumption and Ps. 4.5 million, respectively, (b) acquisitionin the international markets, as well as the prices of furniture and fixtures, machinery and equipment, vehicles and other buildings and facilitiesleather, this business’ main by-product.

Results
The following table shows this segment’s results for Ps. 35.0 million, (c) improvements made to our shopping centers for Ps. 60.4 million, (d) development of properties for Ps. 186.5 million, corresponding Ps. 1.5 million to "Distrito Arcos" project and Ps. 185.0 million to Shopping Neuquén project, (e)  supliers advances for investment acquisitions for Ps. 14.0 million, (f) Ps.  5.9 million improvements in our Office buildings and other rental properties and (g) Ps. 1.6 million were relatedfiscal year 2016, compared to the acquisitiontwo preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues96680655419.8%45.4%
Costs(925)(739)(480)25.2%54.0%
Gross profit416774(38.8%)(9.5%)
General and administrative expenses(38)(25) (17)52.0%47.1%
Selling expenses(67)(77) (55)(13.0%)40.0%
Other operating results, net1- (1)-100.0%
(Loss)/Profit from operations(63)(35)180.0%3,600%
Segment (Loss)/Profit(63)(35)180.0%3,600%
Leases andAgricultural Services
We lease own farms to third parties for agriculture, cattle breeding and seed production, mainly in two types of plotsfarms. On the one hand, we lease our farms under irrigation in San Luis (Santa Bárbara and La Gramilla) to seed producers. These farms are ideal for obtaining steady production levels, given the quality of lands.their soil and the weather conditions of the area, along with the even humidity provided by irrigation.
On the other hand, we lease farms recently put into production after agricultural development. In this way we manage to reduce our production risk, ensuring fixed rental income until the new farms reach stable productivity levels.
 
In addition, in this segment we include the irrigation service we provide to our main investmentsown farms leased to third parties.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues78612927.9%110.3%
Costs(20)(21)(17)4.8%23.5%
Gross Profit58401245.0%233.4%
General and administrative expenses(4)(2)(4)100%(100.0%)
Selling expenses(1)(1)(1)--
Other operating results, net-----
Profit from operations5337743.2%428.6%
Segment Profit5337743.2%428.6%
Other
This segment includes part of our business through Futuros y Opciones (FyO), as grain trading is reflected in the agricultureGrains segment.
Futuros y Opciones.Com S.A. (FyO)
Futuros y Opciones.com’s main business during theis grain trading (grain brokerage, storage, futures and options, consulting and logistics services) and sale and distribution of own inputs and third-party products.
During this fiscal year 2015 were Ps. 181.5 million, mainly due (a) acquisitionFyO sold its website to Agrofy S.A., a company in which Cresud holds an equity interest.
As concerns the Grains business, revenues grew thanks to the increase in traded volumes as compared to the previous fiscal year, the effect of the devaluation and developmentstrong growth in trading revenues. The inputs business started to recover, and invoicing increased 6% as compared to the previous fiscal year.
During this fiscal year, financial income increased as compared to the previous year as a result of owner occupied farmlandthe investments made in mutual investment funds, LEBACS and government securities.
FyO continues to invest in systems for Ps. 153.3 million (including Ps. 93.3 millionthe inputs and grains businesses.
Concerning the goals for next year, the Grains business is expected to keep growing at the same pace as in the past years, aspiring to lead the grain trading business and to consolidate storage operations. As concerns inputs, FyO’s goals include consolidating its suite of subsidiary Brasilagro), (b)  Ps. 8.4 millionproducts, increasing sales and improving margins. Other objectives include becoming a leading company in investment properties, (c) Ps. 5.7 million in machinerythe knowledge of the grains markets, offering all businesses and equipment, (d) Ps. 4.7 million in vehicles, (e) Ps. 8.7 million in other buildingservices related to grain trading, and facilities and (f) Ps. 0.7 million in furniture and fixtures.being digital innovators.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues17912812539.8%2.4%
Costs(140)(105)(101)33.3%3.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest-----
Gross Profit39232469.6%(4.2%)
General and administrative expenses(15)(8)(11)87.5%(27.3%)
Selling expenses(23)(13)(11)76.9%18.2%
Other operating results, net111--
Profit from operations23333.3%-
Share of Profit/(loss) of associates and joint ventures(3)----
Segment Profit(1)33--




1 IncludesNote that the acquisition of investment properties,shareholders’ agreement was originally signed between Dolphin and ETH MBA Extra Holdings. On April 2014, Dolphin and CAA Extra Holding received the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 484.3 million accordingrights to the Statement of cash flows, non-cash transactions for Ps. 2.3 million as described in Note 21- Cash flow information and capitalized borrowing costs for Ps. 13.0 as described in Note 10 – Investment properties,become holders of the Consolidated Financial Statements as of June 30, 2015.shares.

2 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 434.92,040 million according to the Statement of cash flows, and non-cash transactions for Ps. 0.8418 million as described in Note 21-20 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2014.2016.

3 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 366.3486 million according to the Statement of cash flows, and non-cash transactions for Ps. 2 million as described in Note 21 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2015.

4 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 435 million according to the Statement of cash flows, non-cash transactions for Ps. 2.51 million as described in Note 2221 - Cash flow information and acquisition of subsidiaries for Ps. 679.2 million as described in Note 11 – Investment Properties, of the Consolidated Financial Statements as of June 30, 2013.
2014.

 
4555

 
 
Fiscal Year Ended
Farmland Portfolio
As of June 30, 20142016, we owned, together with our subsidiaries, 27 farms, with a total surface area of 622,217 hectares.
 
The following table sets forth our farm portfolio as of June 30, 2016:
Use of Farmlands Owned and under Concession as of June 30, 2016
 LocalityProvinceDate ofSurface AreaMain BusinessCattleSheepDairyAgricultureCattle
   Acquisition(has) (has)(has)(has)(has)(head)
El RecreoRecreoCatamarcaMay 9512,395Natural woodlands     
Los PozosJV GonzálezSaltaMay ’95239,639Cattle/ Agriculture/ Natural woodlands44,010  13,93844,914
San Nicolás (1)
RosarioSanta FeMay ‘971,431Agriculture   1,409 
Las Playas (1)
IdiazabalCórdobaMay ‘971,534Agriculture/ Dairy   1,534 
La Gramilla/ Santa BárbaraMerloSan LuisNov ‘977,072Agriculture Under irrigation   4,294 
La SuizaVilla AngelaChacoJun ‘9836,380Agriculture/ Cattle26,700  3,41415,300
La EsmeraldaCeresSanta FeJun ‘989,370Agriculture/ Cattle   7,885 
El TigreTrenelLa PampaApr ‘038,360Agriculture/ Dairy  2,2315,2395,047
El Invierno(4)
RanculLa PampaJun ‘051,946Agriculture   1,839 
San PedroConcepción de UruguayEntre RiosSep ‘056,022Agriculture   4,083 
8 De Julio/ Estancia CarmenPuerto DeseadoSanta CruzMay ‘07/ Sep ‘08100,911Sheep 85,000   
Cactus ArgentinaVilla MercedesSan LuisDec ‘97171Natural woodlands171    
Las VertientesLas VertientesCordoba-4Silo     
La Esperanza(4)
RanculLa PampaMar ‘08980Agriculture   402 
Las LondrasSanta CruzBoliviaNov ‘084,566Agriculture   3,736 
San RafaelSanta CruzBoliviaNov ‘082,969Agriculture   2,269 
La PrimaveraSanta CruzBoliviaJun ‘112,340Agriculture   636 
Cuatro VientosSanta CruzBoliviaJun ‘112,658Agriculture   1,844 
Jeroviá/Marangatú/Udra (2)
Mariscal EstigarribiaParaguayFeb ‘0958,754Agriculture/ Natural woodlands1,126  5,870 
Finca MendozaLujan de CuyoMendozaMar ‘11389Natural woodlands     
Establecimiento MendozaFinca LavalleMendozaNov’039Natural woodlands     
JatobaJaborandi/BABrazilOct ‘0631,606Agriculture   12,510 
Alto TaquariAlto Taquari/MTBrazilAug ‘075,395Agriculture   3,190 
AraucariaMineiros/GOBrazilMar ‘078,124Agriculture   4,020 
ChaparralCorrentina/BABrazilNov ‘0737,182Agriculture   14,398 
Nova BurutiJanuária/MGBrazilDec ‘0724,211Forestry     
PreferenciaBarreiras/BABrazilSep ‘0817,799Cattle   6,566 
Subtotal Own Farms   622,217 72,00785,0002,23199,07665,261
Agropecuaria Anta SA(3)
Las LajitasSalta 132,000 820  23,5472,460
Subtotal Farms under Concession   132,000 820  23,5472,460
Total   754,217 72,82785,0002,231122,62367,721
           
(1)      Hectares in proportion to our 35.72% interest in Agro-Uranga S.A.
(2)
Hectares in proportion to our 50.0% interest in CRESCA through Brasilagro.
(3)    Hectares in concession. They include 2,000 hectares operated by third parties.
(4)    On July 2016, we sold these farmlands.
56
Additional information about our Farmlands
Argentina
El Recreo
“El Recreo” farm, located 970 kilometers northwest of Buenos Aires, in the Province of Catamarca, was acquired in May 1995. It has semi-arid climate and annual rainfall not in excess of 400 mm. This farm is maintained as a productive reserve.
Los Pozos
The “Los Pozos” farm, located 1,600 kilometers northwest of Buenos Aires, in the Province of Salta, was acquired in May 1995. This property is located in a semi-arid area with average annual rainfall of 500 mm. The area is naturally suited to cattle raising and forestry activities (poles and fence posts), and it has agricultural potential for summer crops such as sorghum and corn, among others. For the fiscal year ended June 30, 2016, we used 13,938 hectares in agricultural production. As of June 30, 2016, there were 41,914 heads of cattle in this farm.
San Nicolás
“San Nicolás” is a 4,005 hectares farm owned by Agro-Uranga S.A., and is located in the Province of Santa Fe, approximately 45 kilometers from the Port of Rosario. As of June 30, 2016, 5,918 hectares were planted for agricultural production, including double crops. The farm has two plants of silos with a storage capacity of 14,950 tons.
Las Playas
The “Las Playas” farm has a surface area of 4,294 hectares and is owned by Agro-Uranga S.A. It is located in the Province of Córdoba, and it is used for agricultural purposes. As of June 30, 2016, the farm had a sown surface area, including double crops, of 7,079 hectares for grain production.
La Gramilla and Santa Bárbara
These farms have a surface area of 7,072 hectares in Valle de Conlara, in the Province of San Luis. Unlike other areas in the Province of San Luis, this valley has a high quality underground aquifer which makes these farms well suited for agricultural production after investments were made in the development of lands, wells and irrigation equipment. In the course of the 2015/2016 farm season, a total of 4,294 hectares were sown, 513 hectares of which were sown under contractual arrangements with seed producers. We leased, in turn, 1,259 hectares to third parties. The remaining hectares are kept as land reserves.
La Suiza
 The “La Suiza” farm has a surface area of 36,380 hectares and is located in Villa Ángela in the Province of Chaco. It is used for raising cattle. As of June 30, 2016, “La Suiza” had a stock of approximately 15,300 heads of cattle. During the 2015/16 season, we used 3,414 hectares for agricultural production and 200 hectares for timber production.
La Esmeralda
The “La Esmeralda” farm has a surface area of 9,370 hectares and is located in Ceres in the Province of Santa Fe. This farm was acquired in June 1998. During the 2015/16 farm season, we used 7,885 hectares for production of corn, soybean, wheat, sunflower and sorghum.
El Tigre
The “El Tigre” farm was acquired on April 30, 2003 and has a surface area of 8,360 hectares. This farm has a high-tech dairy facility where we develop our milk production business in compliance with the highest quality standards. It is located in Trenel in the Province of La Pampa. As of June 30, 2016, 5,239 hectares were assigned to crop production, including double crops, and 2,231 hectares were assigned to milk production. This farm produced 16.2 million liters of milk in the fiscal year ended June 30, 2016, with an average of 1,838 cows being milked and an average daily production of 24.16 liters per cow.
El Invierno
The “El Invierno” farm was acquired on June 24, 2005 and has a surface area of 1,946 hectares.  It is located in Rancul in the Province of La Pampa, 621 kilometers to the west of Buenos Aires. During the fiscal year ended June 30, 20142016, we investedused the land exclusively for crop production and planted 1,839 hectares. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 318.490.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
San Pedro
 The “San Pedro” farm was purchased on September 1, 2005. It has a surface area of 6,022 hectares and is located in Concepción del Uruguay, Province of Entre Ríos, which is 305 kilometers north of Buenos Aires. In the course of the 2015/2016 farm season, 4,083 hectares were used for agricultural production, including double crops.
8 de Julio and Estancia Carmen
The “8 de Julio” farm was acquired on May 15, 2007 and has a surface area of 90,000 hectares. It is located in the department of Deseado in the Province of Santa Cruz. Due to its large surface area, this farm offers excellent potential for sheep production. In addition, we believe the land has potential for future tourism and recreational activities, as the southeast border of the farm stretches over 20 kilometers of coast. "Estancia Carmen" was acquired on September 5, 2008 and has a surface area of 10,911 hectares. It is located in the Province of Santa Cruz, next to our "8 de Julio" farm.

Cactus
The feedlot has a surface area of 171 hectares. It is located in Villa Mercedes, Province of San Luis. Given its degree of urban development and closeness to the city, we decided to discontinue fattening activities in this facility.
Las Vertientes
The “Las Vertientes” storage facility has a surface area of 4 hectares and 10,000 tons capacity, and is located in Las Vertientes, Río Cuarto, in the Province of Córdoba.
La Esperanza
In 2008 we acquired “La Esperanza” farm located in the Province of La Pampa with a surface area of 980 hectares. The transaction was agreed for a price of US$ 1.3 million that has been paid in full. During the year ended June 30, 2015, we used this farm solely for crop production. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 90.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
Finca Mendoza
On March 2, 2011, the Company purchased, jointly with Zander Express S.A., a rural property composed of thirteen plots of land located in the District of Perdriel, Luján de Cuyo Department, in the Province of Mendoza. As a result of this acquisition, CRESUD has become owner of a 40% undivided estate in all and each of the properties, while Zander Express S.A. holds the remaining 60%. The total agreed price for this transaction was US$ 4.0 million; therefore, the amount of US$ 1.6 million was payable by CRESUD.
Bolivia
Las Londras
On January 22, 2009, the bill of purchase for "Las Londras" farm was cast into public deed; it has a surface area of 4,566 hectares, and is located in the Province of Guarayos, Republic of Bolivia. During the 2015/2016 farm season it was used for crop production.
San Rafael
On November 19, 2008, the bill of purchase for "San Rafael" farm was cast into public deed. This farm is located in the Province of Guarayos, Republic of Bolivia, and has a surface area of 2,969 hectares, which were used for crop production during the 2015/2016 farm season.
Cuatro Vientos
On June 3, 2011, we executed the purchase agreement for the “Cuatro Vientos” farm, with a surface area of approximately 2,658 hectares, allocated to sugarcane production. Its purchase price was US$ 8.4 million.
La Primavera
On June 7, 2011 we acquired “La Primavera” farm, with a surface area of approximately 2,340 hectares. During the 2015/2016 season, this farm was used for crop production.
Brazil (through our subsidiary Brasilagro)
Jatobá
Jatobá is a farm in the northeastern region of Brazil, with a total surface area of 31,606 hectares, 12,510 of which are intended for agriculture. Jatobá was acquired in March 2007 for BRL 33 million. We consider that this farm is in a very advantageous location for the movement of crops, as it is close to the Candeias Port, in the State of Bahia.
Araucária
Araucária is a farm located in the municipal district of Mineiros, in the State of Goiás, and it has a total surface area of 8,124 hectares, 4,020 of which are used for agriculture. Araucaria was acquired in 2007 for BRL 70.4 million. Before we purchased it, Araucária had been used for grain planting. The farm was transformed, and at present it is planted with sugarcane.
Alto Taquarí
Alto Taquarí is located in the municipal district of Alto Taquarí, State of Mato Grosso, and it has a total surface area of 5,395 hectares, 3,190 of which are used for agriculture. The farm was acquired in August 2007 for BRL 33.2 million. Before we purchased it, the farm had been used for agriculture and Cattle raising. Following its transformation, it is being used for sugarcane production.
Chaparral
Chaparral is a 37,182hectare farm, with 14,398 hectares used for agriculture. It is located in the municipal district of Correntina, State of Bahia. The farm was acquired in November 2007 for BRL 47.9 million.
Nova Buriti
Located in the municipal district of Januária, State of Minas Gerais, Nova Buriti has a surface area of 24,211 hectares. Nova Buriti was acquired in December 2007 for BRL 21.6 million. It is located in the southeastern region of Brazil and it is close to the large iron industries. At present, it is undergoing proceedings for obtaining the environmental licenses required for starting operations.

Preferencia
Preferencia is located in the municipal district of Barreiras, in the State of Bahia. It has a total surface area of 17,799 hectares, 6,566 of which are used for cattle activities. It was acquired for R$ 9.6 million in September 2008. The farm is being transformed into a pasturing area and will be later developed for agricultural purposes.
Paraguay (through our subsidiary Brasilagro)
Jeroviá / Marangatú /Udra
Cresud, through Brasilagro, who is in turn shareholder of CRESCA, holds a 50% undivided interest in the urban properties“Jeroviá”, “Marangatú” and investment business, mainly due“UDRA” farms and related undeveloped plots of land, all of them located in Mariscal José Félix Estigarribia, Department of Boquerón, Paraguayan Chaco, Republic of Paraguay, totaling 117,508 hectares.
Silos
As of June 30, 2016, we had a storage capacity of approximately 25,620 tons (including 35.723% of the storage capacity of over 14,950 tons available at Agro-Uranga S.A.).
The following table shows, for the fiscal years presented, our storage facilities:
 
As of year ended June 30,
 
2016(2)
2015(2)
2014(2)
2013(2)
2012(2)
Las Vertientes (1)
10,00010,00010,00010,00010,000
San Nicolás (1)
5,3415,3415,3415,3415,341
Brasilagro10,27910,27990,20090,20090,200
Total25,62025,620105,541105,541105,541
(1)Owned by us through Agro-Uranga (which represents 35.723% of the total capacity).
(2)Includes Brasilagro.
Land Management
In contrast to (a) improvementstraditional Argentine farms, run by families, we centralize policy making in an Executive Committee that meets on a weekly basis in Buenos Aires. Individual farm management is delegated to farm managers who are responsible for farm operations. The Executive Committee lays down commercial and production rules based on sales, market expectations and risk allocation.
We rotate the use of our hotels Sheraton Libertador, Intercontinentalpasture lands between agricultural production and Llao Llao for Ps. 5.6 million, Ps. 2.1 millioncattle feeding and Ps. 2.3 million, respectively, (b) acquisitionthe frequency depends on the location and characteristics of furniture and fixtures, machinery and equipment, and other buildings and facilities for Ps. 9.5 million, (c) improvements madethe farmland. The use of preservation techniques (including exploitation by no till sowing) frequently allows us to our shopping centers for Ps. 61.1 million, (d) development of properties for Ps. 179.3 million, corresponding Ps. 99.9 million to "Arcos" project and Ps. 79.4 million to Shopping Neuquén project, (e)  supliers advances for investment acquisitions for Ps. 29.6 million, (f) Ps.  24.0 million improvements in our Office buildings and other rental properties and (g) Ps. 0.5 million were relatedimprove farm performance.
Subsequent to the acquisition of plotsthe properties, we make investments in technology in order to improve productivity and increase the value of lands.the property. It may be the case that upon acquisition, a given extension of the property is under-utilized or the infrastructure may be in need of improvement. We have invested in traditional fencing and in electrical fencing, watering troughs for cattle herds, irrigation equipment and machinery, among other things.
Principal Markets
Crops
Our crop production is mostly sold in the domestic market. The prices of our grains are based on the market prices quoted in Argentine grains exchanges such as the Buenos Aires Grains Exchange (Bolsa de Cereales de Buenos Aires) and the cereal exchanges in each country, that take as reference the prices in international grains markets. The largest part of this production is sold to exporters who offer and ship this production to the international market. Prices are quoted in relation to the month of delivery and the port in which the product is to be delivered. Different conditions in price, such as terms of storage and shipment, are negotiated between the end buyer and ourselves.
Cattle
Our beef cattle production is sold in the local market. The main buyers are slaughterhouses and supermarkets.
Prices in the beef cattle market in Argentina are basically fixed by local supply and demand. The Liniers Market (on the outskirts of the City of Buenos Aires) provides a standard in price formation for the rest of the domestic market. In this market live animals are sold by auction on a daily basis. At Liniers Market, prices are negotiated by kilogram of live weight and are mainly determined by local supply and demand. Prices tend to be lower than in industrialized countries. Some supermarkets and meat packers establish their prices by kilogram of processed meat; in these cases, the final price is influenced by processing yields.
Dairy
During fiscal year 2016 we sold our entire milk production to the largest Argentine dairy company, Mastellone S.A., which in turn manufactures a range of mass consumption dairy products sold in Argentina and abroad. The price of the milk we sell is mainly based on the percentage of fat and protein that it contains and the temperature at which it is cooled. The price we obtain from our milk also rises or drops based on the content of bacteria and somatic cells.

Customers
For the fiscal year 2016 our sales from the agribusiness segment (excluding sales of farms) were made to approximately 850 customers. Sales to our ten largest customers represented approximately 70% to 75% of our net sales. Of these customers, our biggest three customers were Bunge Argentina S. A., Cargill S.A.C.I. and Vicentin S.A.I.C. We have signed non-binding letters of intent with some of our largest customers that allow us to estimate the volume of the demand for certain products and to plan production accordingly. We generally enter into short-term agreements with a term of less than a year.
Marketing Channels and Sales Methods
Crops
We normally work with grains brokers and other intermediaries to trade in the exchanges. We sell part of our production in advance through futures contracts and buy and sell options to hedge against a drop in prices. Approximately 87% of the futures and options contracts are closed through the Buenos Aires Grains Exchange and 13% in the Chicago Board of Trade for hedging purposes.
Our storage capabilities allow us to condition and store grains with no third-party involvement and thus to capitalize the fluctuations in the price of commodities. Our largest storage facilities in Argentina, with capacity for 10,000 tons, are located in “Las Vertientes”, close to Río Cuarto, Province of Córdoba. In addition, we store grains in silo bags.
Cattle
We have several marketing channels. We sell directly to local meat processors and supermarkets, as well as in markets and auctions. Our customers include Arre Beef S.A., Frigorífico Bermejo, Quickfood S.A., Frigorífico Forres Beltrán S.A., Madelán S.A., Colombo y Colombo S.A., Iván O’Farrell S.R.L. and Colombo y Magliano S.A., for prices based on the price at Liniers Market.
We usually are responsible for the costs of the freight to the market and, in general, we pay commissions on our transactions.
Inputs
The current direct cost of our production of grains varies in relation to each crop and normally includes the following costs: tillage, seeds, agrochemicals and fertilizers. We buy in bulk and store seeds, agrochemicals and fertilizers to benefit from discounts offered during off-season sales.
Competition
The agricultural and livestock sector is highly competitive, with a huge number of producers. We are one of the leading producers in Argentina and the region. However, if we compare the percentage of our production to the country’s total figures, our production would appear as extremely low, since the agricultural market is highly atomized. Our leading position improves our bargaining power with suppliers and customers. In general, we obtain discounts in the region in the acquisition of raw materials and an excess price in our sales.
Historically, there have been few companies competing for the acquisition and leases of farmlands for the purpose of benefiting from land appreciation and optimization of yields in the different commercial activities. However, we anticipate the possibility that new companies, some of them international, may become active players in the acquisition of farmlands and the leases of sown land, which would add players to the market in coming years.
Seasonality
As is the case with any company in the agro-industrial sector, our business activities are inherently seasonal. Harvest and sales of corn and soybean in general take place from March to September. Sunflower is harvested from December to May. Wheat is harvested from October to January. Peanut is harvested from April to July. With respect to our international market, in Bolivia climate conditions allow a double season of soybean, corn and sorghum production and, accordingly, these crops are harvested in March and October, while wheat and sunflower are harvested between August and September. In Brasil, our crops are harvested from March to May and our sugarcane is harvested from April to November. Other segments of our activities, such as our sales of cattle and milk and our forestry activities tend to be more of a successive character than of a seasonal character. However, the production of beef and milk is generally higher during the second quarter, when pasture conditions are more favorable. In consequence, there may be significant variations in results from one quarter to the other.
Regulation and Governmental Supervision of our Agricultural Business
Farming and Animal Husbandry Agreements
Agreements relating to farming and animal husbandry activities are regulated by Argentine law, the Argentine Civil and Commercial Code and local customs.
According to Law No. 13,246, as amended by Law No. 22,298, all lease agreements related to rural properties and land are required to have a minimum duration of 3 years. Upon death of the tenant farmer, the agreement may continue with his successors. Upon misuse of the land by the tenant farmer or default on payment of the rent, the land owner may initiate an eviction proceeding.
Law No. 13,246, amended by Law No. 22,298, also regulates agreements for crop sharing pursuant to which one of the parties furnishes the other with farmland animals or land with the purpose to share benefits between tenant farmer and land owner. These agreements are required to have a minimum term of duration of 3 years. The tenant farmer must perform the obligations under the agreement himself and may not, assign it under any circumstances. Upon death, incapacity of the tenant farmer or other impossibility, the agreement may be terminated.

Quality control of Crops and Cattle
The quality of the crops and the health measures applied on the cattle are regulated and controlled by the Servicio Nacional de Sanidad y Calidad Agroalimentaria (“SENASA”), which is an entity within the Ministry of Economy and Public Finance that over sees the farming and animal sanitary activities.
Argentine law establishes that the brands should be registered with each provincial registry and that there cannot be brands alike within the same province.
Sale and Transportation of Cattle
Even though the sale of cattle is not specifically regulated, general contract provisions are applicable. Further, every province has its own rural code regulating the sale of cattle.
Argentine law establishes that the transportation of cattle is lawful only when it is done with the respective certificate that specifies the relevant information about the cattle. The required information for the certificate is established by the different provincial regulations, the inter-provinces treaties and the regulations issued by the SENASA.
Export Restriction of Beef
 
In addition, the Secretary of Agriculture, Livestock, Fishing and Food Products, within the orbit of the Ministry of Economy and Public Finance, oversees the farming and animal sanitary activities.
The Secretary of Agriculture, Livestock, Fishing and Food Products is in charge of distributing the annual regular quota of top quality chilled beef without bones, the “Cuota Hilton.” The destination of the Cuota Hilton is the European Union.
The Secretary of Agriculture, Livestock, Fishing and Food Products granted to our main investmentssubsidiary Sociedad Anónima Carnes Pampeanas up to 1,400 tons to export beef under the Cuota Hilton for the July 2015-June 2016 period.
Environment
The development of our agribusiness activities depends on a number of federal, provincial and municipal laws and regulations related to environmental protection.
We may be subject to criminal and administrative penalties, including taking action to reverse the adverse impact of our activities on the environment and to reimburse third parties for damages resulting from contraventions of environmental laws and regulations. Under the Argentine Criminal Code, persons (including directors, officers and managers of corporations) who commit crimes against public health, such as poisoning or dangerously altering water, food or medicine used for public consumption and selling products that are dangerous to health, without the necessary warnings, may be subject to fines, imprisonment or both. Some courts have enforced these provisions in the Argentine Criminal Code to sanction the discharge of substances which are hazardous to human health. At the administrative level, the penalties vary from warnings and fines to the full or partial suspension of the activities, which may include the revocation or annulment of tax benefits, cancellation or interruption of credit lines granted by state banks and a prohibition against entering into contracts with public entities.
The Forestry Legislation of Argentina prohibits the devastation of forests and forested lands, as well as the irrational use of forest products. Landowners, tenants and holders of natural forests require an authorization from the Forestry Competent Authority for the cultivation of forest land. The legislation also promotes the formation and conservation of natural forests in properties used for agriculture business duringand farming purposes.
As of June 30, 2016, we owned land reserves extending over 365.306 hectares, which are located in under-utilized areas where agricultural production is not yet fully developed. We also have 107,984 hectares under concession as reserves for future developments. We believe that technological tools are available to improve the fiscal year 2014productivity of such land and enhance its long-term value. However, existing or future environmental regulations may prevent us from developing our land reserves, requiring us to maintain a portion of such land as unproductive land reserves.
In accordance with legislative requirements, we have applied for approval to develop certain parts of our land reserves and were Ps. 117.3 million, mainly due (a) acquisitionauthorized to develop them partially and to maintain other areas as land reserves. We cannot assure you that current or future development applications will be approved, and if so, to what extent we will be allowed to develop our land reserves. We intend to use genetically modified organisms in our agricultural activities. In Argentina, the development of owner occupied farmland for Ps. 96.9 million (including Ps. 58.2 million of subsidiary Brasilagro), (b)  Ps. 7.0 million in investment properties, (c) Ps. 6.1 million in machinerygenetically modified organisms is subject to special laws and equipment, (d) Ps. 3.2 million in vehicles, (e) Ps. 3.0 million in other buildingregulations and facilities and (f) Ps. 1.1 million in furniture and fixturesspecial permits.
 
Fiscal Year Ended June 30, 2013
DuringOn November 28, 2007, Argentine Congress passed a law known as the fiscal year ended June 30, 2013, we invested Ps. 920.9 million, mainly dueForest Law which sets minimum standards for the conservation of native forests and incorporates minimum provincial expenditures to (a) improvements in our hotels Sheraton Libertador, Intercontinentalpromote the protection, restoration, conservation and Llao Llaosustainable use of native forests. The Forest Law prevents landowners, including owners of native forests, from deforesting or converting forested areas into non-forested land for Ps. 0.9 million, Ps. 2.6 millionother commercial uses without prior permission from each local government that gives the permit and Ps.0.4 million, respectively, (b) acquisitionrequires the preparation, assessment and approval of furniturean environmental impact report. The Forest Law also provides that each province should adopt its own legislation and fixtures, machineryregional regulation map within a term of one year. Until such provincial implementation is carried into effect, no new areas may be deforested. In addition, the Forest Law also establishes a national policy for sustainable use of native forests and equipment,includes the recognition of native communities and other buildingsaims to provide preferential use rights to indigenous communities living and facilities for Ps. 11.6 million, (c)  improvements made to our shopping centers for Ps. 56.9 million, (d)  developmentfarming near the forest. In case a project affects such communities, the relevant provincial authority may not issue permits without formal public hearings and written consent of properties for Ps. 144.2 million, corresponding Ps. 117.9 million to “Arcos” project and Ps. 26.3 million to Shopping Neuquén project (e) improvements in our Office buildings and other rental properties for Ps. 7.6 million, (f) Ps. 679.2 million were related  to the purchased an additional 25.5% equity interest in Rigby 183 LLC ’s capital stock, (g) Ps.15.8 million are related to suppliers advances and (h) Ps. 1.8 million were related to the acquisition of plots of lands.communities.
 
In addition, our main investmentsthe Rules issued by the CNV provide that publicly traded companies whose corporate purpose includes environmentally hazardous activities should report to their shareholders, investors and the general public their compliance with the applicable environmental laws and risks inherent to such activities, so as to be able to reasonably assess such hazards.

Our activities are subject to a number of national, provincial and municipal environmental regulations. Section 41 of the Argentine Constitution, as amended in 1994, provides that all Argentine inhabitants have the right to a healthy and balanced environment fit for human development and have the duty to preserve it. Environmental damage shall bring about primarily the obligation to redress it as provided by applicable law. The authorities shall protect this right, the rational use of natural resources, the preservation of the natural and cultural heritage and of biodiversity, and shall also provide for environmental information and education. The National Government shall establish minimum standards for environmental protection and Provincial and Municipal Governments shall determine specific standards and issue the applicable regulations.
On November 6, 2009, the Argentine Congress passed Law No. 25,675. This law regulates the minimum standards for the achievement of a sustainable environment and the preservation and protection of biodiversity and sets environmental policy goals. Moreover, Law No. 25,675 establishes the activities that will be subject to an environmental impact assessment procedure and certain requirements applicable thereto. In addition, the Law sets forth the duties and obligations that will be triggered by any damage to the environment and imposes the obligation to restore it to its former condition or, if that is not technically feasible, to pay a compensation in lieu thereof. The Law also fosters environmental education and provides for certain minimum obligations to be fulfilled by natural and artificial persons.
The new Argentine Civil and Commercial Code has introduced as a novel feature the acknowledgement of collective rights, including the right to a healthy and balanced environment. Accordingly, the Argentine Civil and Commercial Code expressly sets forth that the law does not protect an abusive exercise of individual rights if such exercise could have an adverse impact on the environment and the rights with a collective impact in general.
Other Regulations
Consumer Relationship. Consumer or End User Protection. The Argentine Constitution expressly establishes in Article 42 that consumers and users of goods and services have a right to protection of health, safety and economic interests in a consumer relationship. Consumer Protection Law No. 24,240, as amended, regulates several issues concerning the protection of consumers and end users in a consumer relationship, in the agricultural business during fiscal year 2013 were Ps. 127.1 million, mainly due (a) acquisitionarrangement and developmentexecution of owner occupied farmland for Ps. 109.4 million ((including Ps. 61.5 million of our subsidiary Brasilagro), (b) Ps. 10.4 million in machinery, (c) Ps. 2.6 million in trading properties, (d) Ps. 1.6 million in vehicles, (e) Ps. 2.4 million in other building and facilities and (f) Ps. 0.7 million in furniture and fixtures.contracts.
 
The Consumer Protection Law, and the applicable sections of the Argentine Civil and Commercial Code are intended to regulate the constitutional right conferred under the Constitution on the weakest party of the consumer relationship and prevent potential abuses deriving from the stronger bargaining position of vendors of goods and services in a mass-market economy where standard form contracts are widespread.
As a result, the Consumer Protection Law and the Argentine Civil and Commercial Code deem void and unenforceable certain contractual provisions included in consumer contracts entered into with consumers or end users, including those which:
·  
deprive obligations of their nature or limit liability for damages;
·  
imply a waiver or restriction of consumer rights and an extension of seller rights; and
·  
impose the shifting of the burden of proof against consumers.
In addition, the Consumer Protection Law imposes penalties ranging from warnings to the forfeiture of concession rights, privileges, tax regimes or special credits to which the sanctioned party was entitled, including closing down of establishments for a term of up to 30 days.
The Consumer Protection Law and the Argentine Civil and Commercial Code define consumers or end users as the individuals or legal entities that acquire or use goods or services free of charge or for a price for their own final use or benefit or that of their family or social group. In addition, both laws provide that those who though not being parties to a consumer relationship as a result thereof acquire or use goods or services, for consideration or for non-consideration, for their own final use or that of their family or social group are entitled to such protection rights in a manner comparable to those engaged in a consumer relationship.
In addition, the Consumer Protection Law defines the suppliers of goods and services as the individuals or legal entities, either public or private, that in a professional way, even occasionally, produce, import, distribute or commercialize goods or supply services to consumers or users.
The Argentine Civil and Commercial Code defines a consumer agreement as such agreement that is entered into between a consumer or end user and an individual or legal entity that acts professionally or occasionally or a private or public company that manufactures goods or provides services, for the purpose of acquisition, use or enjoyment of goods or services by consumers or users for private, family or social use.
It is important to point out that the protection under the laws afforded to consumers and end users encompasses the entire consumer relationship process (from the offering of the product or service) and it is not only based on a contract, including the consequences thereof.
In addition, the Consumer Protection Law establishes a joint and several liability system under which for any damages caused to consumers, if resulting from a defect or risk inherent in the thing or the provision of a service, the producer, manufacturer, importer, distributor, supplier, seller and anyone who has placed its trademark on the thing or service shall be liable.
The Consumer Protection Law excludes the services supplied by professionals that require a college degree and registration in officially recognized professional organizations or by a governmental authority. However, this law regulates the advertisements that promote the services of such professionals.
The Consumer Protection Law determines that the information contained in the offer addressed to undetermined prospective consumers, binds the offeror during the period in which the offer takes place and until its public revocation. Further, it determines that specifications included in advertisements, announcements, prospectuses, circulars or other media bind the offeror and are considered part of the contract entered into by the consumer.

Pursuant to Resolution No. 104/05 issued by the Secretariat of Technical Coordination reporting to the Argentine Ministry of Economy, the Consumer Protection Law adopted Resolution No. 21/2004 issued by the Mercorsur's Common Market Group which requires that those who engage in commerce over the Internet (E-Business) shall disclose in a precise and clear manner the characteristics of the products and/or services offered and the sale terms. Failure to comply with the terms of the offer is deemed an unjustified denial to sell and gives rise to sanctions.
On September 17, 2014, the Consumer Protection Law was modified by the enactment of Law Nº 26,993, which is called “System for Conflict Resolution in Consumer Relationships” as it provides for the creation of new administrative and judicial procedures for this field of Law. It has created a two-instance administrative system: the Preliminary Conciliation Service for Consumer Relationships (Servicio de Conciliación Previa en las Relaciones de Consumo, COPREC) and the Consumer Relationship Audit, and a number of courts assigned to resolution of conflicts between consumers and producers of goods and services (Fuero Judicial Nacional de Consumo). In order to file a claim, the amount so claimed should not exceed a fixed amount equivalent to 55 adjustable minimum living wages, which are determined by the Ministry of Labor, Employment and Social Security. The claim is required to be filed with the administrative agency. If an agreement is not reached between the parties, the claimant may file the claim in court. The administrative system known as Preliminary Conciliation Service for Consumer Relationships (COPREC) is currently in full force and effect. However, the court system (fuero judicial nacional de consumo) is not in force yet, therefore, any court claims should be currently filed with the existing applicable courts. A considerable volume of claims filed against us are expected to be settled pursuant to the system referred to above, without disregarding the full force and effect of different instances for administrative claims existing in the provincial sphere and the City of Buenos Aires, which remain in full force and effect, where potential claims related to this matter could also be filed.
Recent Developments
 
Cresud’s Recent DevelopmentDevelopments
 
Issuance of Notes
Credit Line with IFISA.
 
On August 12, 2015,July 1º, 2016, we issued Notesrenewed the credit line with IFISA for up to 3,500,000 ADRs (previously 4,053,942) of our subsidiary IRSA, in which we are the lender and IFISA is the borrower. The term of the transaction was set at 30 days, renewable up to a maximum of 365 calendar days with an aggregate principal amount in two series:annual interest rate of 6%.
 
·  Series 21 Notes, for a principal amount of Ps. 192.2 million, with a maturity of 18 months after the issuance date, which will accrue interest at mixed rate. Fixed rate of 27.5% during the first nine months and floating rate (Badlar plus 375 basis points), after that. Interest will be payable quarterly in arrears. The issuance price was 100.0% of the nominal value.
Selling of  "El Invierno" and "La Esperanza" farmlands, city of Rancul, province of La Pampa.
 
·  Series 22 Notes, for a principal amount of US$ 22.7 million, with an issuance price of 97.65% of the nominal value resulting US$ 22.2 million, and falling due 48 months after the issuance date, will accrue interest at fixed annual rate of 4%. Interest will be payable quarterly in arrears whereas principal will be amortized in two payments in month 44 and 48.
Annual Shareholders MeetingOn July 6, 2016, we sold to an unrelated party the "El Invierno" and "La Esperanza" farmlands. The transaction included 2,615 hectares suitable for agricultural activities which are located in "Rancul" province of La Pampa. The total amount of the transaction was set at US$ 6 million (US$ / ha 2,294). US$ 5 million have been paid to date and the remaining balance of US$ 1 million, secured by a mortgage on the property, in 5 equal, consecutive and annual installments ending in August 2021.
 
On October 30, 2015, was held the Ordinary and Extraordinary Shareholders’ Meeting in which was approved the following items:Director renouncement
 
On September 6, 2016, David Alberto Perednik resigned, being its mandate up to June 30, 2016. Its replacement will be appointed in the next shareholder meeting.
•  Consideration of documents contemplated in section 234, paragraph 1, of the Argentine Companies Law No. 19,550 for the fiscal year ended June 30, 2015.
•  Reinstatement of the “Legal Reserve” account. Treatment of allocation of the “Additional Paid-In Capital” account. Consideration of Reclassification of Reserves.
•  Consideration of Board of Directors’ performance.
Subscription of the Prior Commitment of Merger between Cresud and AGRO MANAGERS S.A.
•  Consideration of Supervisory Committee’s performance.
•  Consideration of compensation payable to the Board of Directors for $14,310,941 (total compensation) for the fiscal year ended June 30, 2015. Delegation on the Board of Directors of powers to approve the Audit Committee’s budget.
•  Consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2015.
•   Determination of the number and election of Regular Directors and Alternate Directors, as applicable.
•  Appointment of Regular and Alternate Members of the Supervisory Committee.
•  Appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers.
•  Updating of report on Shared Services Agreement.
•  Treatment of amounts paid as personal assets tax levied on the shareholders.
•  Consideration of increase of the amount of the Global Note Program for a maximum outstanding amount of up to US$ 300,000,000 (three hundred million dollars) (or its equivalent in other currencies) the creation of which was approved by the shareholders’ meeting dated October 31, 2012 (the “Program”) by an additional amount of up to US$ 200,000,000 (two hundred million Dollars) (or its equivalent in other currencies).
•  Consideration of: (i) delegation to the Board of Directors of the broadest powers to implement the increase and/or reduction in the Program amount; (ii) renewal of the Board of Directors’ powers to (a) approve, enter into, deliver and/or execute any agreement, contract, document, instrument and/or security related to the Program and/or the issuance of the various series and/or tranches of notes thereunder; (b) apply for and process before the Argentine Securities Commission the authorization for the public offering of such notes; (c) if applicable, apply for and process before any authorized securities exchange or market of Argentina and/or abroad the authorization for listing and trading of such notes; and (d) carry out any acts, dealings, filings and/or proceedings related to the Program and/or the increase in its amount and/or the issuance of the various series and/or tranches of notes thereunder; and (iii) authorization for the Board of Directors to subdelegate the powers and authorizations referred to in items (i) and (ii) above to one or more of its members.
 
In addition itJuly 2016, Cresud made a shares purchase offer to the other shareholders of Ps. 5.5 million to acquire their total ownership interest, this offer was approvedaccepted. Thus, our direct interest increased to adjourn the Ordinary100%.
On September 16, 2016, a pre-merger agreement was executed, by which all assets, rights and Extraordinaryobligations of Agromanagers S.A. are transferred to us.
Annual Shareholders’ Meeting to November 26, 2015,
Our annual shareholders’ meeting will be held on October 31, 2016, in order to consider and approve, among others, the following items:
•  Consideration of net income for the fiscal year ended June 30, 2015. Consideration of payment of a cash dividend for up to $88,100 thousand.
•  Consideration of allocation of treasury shares. Delegation of powers.
Salematters: (i) consideration of IRSA´s shares
Asdocuments contemplated in section 234, paragraph 1, of the dateArgentine Companies Law No. 19,550 for the fiscal year ended June 30, 2016; (ii) Consideration of issuancethe result of these annual report, we sold, through various market transactions, 410,181 ADR´s of IRSA, representing 10 common shares of IRSAthe fiscal year ended June 30, 2016 which resulted in a loss for the amount of Ps.1,401,856,585; (iii) consideration of Board of Directors’ performance; (iv) consideration of Supervisory Committee’s performance; (v) consideration of compensation payable to the Board of Directors for Ps.18,985,218 (total compensation) for the fiscal year ended June 30, 2016; (vi) consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2016; (vii) consideration of the appointment of Regular Directors and Alternate Directors, as applicable; (viii) appointment of Regular and Alternate Members of the Supervisory Committee; (ix) appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers; (x) updating of report on Shared Services Agreement; (xi) treatment of amounts paid as personal assets tax levied on the shareholders; (xii) consideration of the renewal of the delegation to the Board of Directors of the broadest powers to establish the time and currency of issuance, and other terms and conditions of the issuance of notes under the global note program, for up to US$ 7.1 million. Thus, our investment300.000.000 currently in IRSA would decreaseforce in accordance with approval of the shareholders' meeting dated October 31, 2012, and November 14, 2014 and its extension for an additional amount of US$ 200.000.000 in accordance with the approval of the shareholders' meeting dated October 30, 2015; (xiii) consideration of granting indemnities to Messrs. Directors, Syndics and Managers who work or have worked in the Company in a manner subsidiary to D&O policies; (xiv) consideration of special financial merger statement of AGRO MANAGERS S.A.; special separate financial merger statements of Cresud and consolidated financial merger statements of Cresud with AGRO MANAGERS S.A. as of June 30, 2016 as well as the reports of the supervisory committee and the auditor. Consideration of the preliminary merger by 1.1%.absorption with AGRO MANAGERS S.A. and other related documentation. Authorizations and delegations. Appointment of proxy to grant definitive agreements and other formalities; (xv) consideration of the distribution of treasury shares.
 
Repurchased of notes
Since the end of fiscal year 2016 until October 7, 2016, we have repurchased Notes (Class XIV, XVI and XVIII) by operations in the local market with unrelated parties for a total amount of Ps.149,821,406, equivalent to the amount of NV 11,022,123.

46

 
IRSA’s Recent Developments
 
Operations Center in Argentina
Dolphin Netherlands shares subscription.
On August 10, 2016, through a subsidiary, IRSA subscribed additional shares of Dolphin Netherlands B.V. for a subscription price of US$ 3.2 million. As of June 30, 2016 IRSA owned 98.6% of Dolphin Netherlands B.V.
Issuance of Series VII and Series VIII Notes.
On September 8, 2016, IRSA issued the Series VII Notes, for Ps. 384,233,262, bearing an adjustable interest rate of BADLAR + 2.99% and the Series VIII Notes, for US$ 184,507,138, bearing interest at a fixed rate of 7% per year. Both Series mature on September 9, 2019. The use of proceeds was mainly to repay debt.
Redemption of Series I Notes.
On September 9, 2016, IRSA announced its intention to redeem all outstanding Series I Notes for a total amount of US$ 74.55 million. The redemption took place on October 11, 2016, and the redemption price was equal to 100% of the aggregate principal amount of the outstanding Notes plus accrued interest, as a result of the redemption, the outstanding amount of the Notes was cancelled in full.
Operations Center in Israel
ChemChina’s offer for Adama Agricultural Solutions Ltd.
Annual Shareholders MeetingOn July 17, 2016, IRSA’s .indirect subsidiary DIC, agreed to sell its remaining 40% in Adama to ChemChina for cash consideration of US$ 230 million and cancellation of a loan due to a Chinese bank. It is expected that the sale transaction be consummated by the first week of November 2016, subject to the fulfillment of certain conditions, including the receipt of Chinese regulatory and antitrust approvals.
 
On October 30, 2015, was held the Ordinary and Extraordinary Shareholders’ MeetingDismissal of IRSA in which was approved the following items:
•  Consideration of documents contemplated in Section 234, paragraph 1, of the Argentine Companies Law No. 19,550 for the fiscal year ended June 30, 2015.
•   Consideration of Board of Directors’ performance.
•   Consideration of Supervisory Committee’s performance.
Consideration of compensation payable to the Board of Directors for $18,596,284 (total compensation) for the fiscal year ended June 30, 2015. Delegation on the Board of Directors of powers to approve the Audit Committee’s budget.
•  Consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2015. 
•  Determination of the number and election of Regular Directors and Alternate Directors, as applicable. 
•  Appointment of Regular and Alternate Members of the Supervisory Committee. 
•  Appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers. 
•  Updating of report on Shared Services Agreement.
•   Treatment of amounts paid as personal assets tax levied on the shareholders.
•   Consideration of renewal of delegation on the Board of Directors of the powers to determine the time and currency of issue and further terms and conditions of the notes to be issued under the Global Note Program for up to US$ 300,000,000 currently outstanding, in accordance with the resolutions adopted at the Shareholders’ Meeting dated October 31, 2011.
In addition it was approved to adjourn the Ordinary and Extraordinary Shareholders’ Meetingliquidation request of IRSA to November 26, 2015, in order to consider and approve the following items:
•   Treatment and allocation of net income for the fiscal year ended June 30, 2015. Consideration of payment of a cash dividend for up to $72,000 thousand.
•  Consideration of Special Merger Financial Statements of Unicity SA; Special Merger Financial Statements of Solares de Santa María SA; Special Spin-Off Financial Statements of E-Commerce Latina SA; Special Spin-off-Merger Financial Statements of E-Commerce Latina SA; Special Merger Individual Financial Statements of IRSA Inversiones y Representaciones Sociedad Anónima (IRSA) and Consolidated Financial Statements of IRSA for Merger with Solares de Santa María SA and Unicity SA and Spin-Off-Merger with E-Commerce Latina SA prepared as of June 30, 2015, as well as Supervisory Committee’s and Auditor’s Reports. Consideration of preliminary merger agreement with Solares de Santa María SA and Unicity SA and preliminary spin-off-merger agreement with E-Commerce Latina SA and further documents. Authorizations and delegations of powers. Appointment of representative to execute final agreement and carry out additional proceedings.
Investment in IDBD
On July 6, 2015, the arbitrator granted an injunction requested by Extra, therefore Dolphin appointed only three directors for the next meeting and may appoint such number of directors until the arbitrator issues a final decision about who is the purchaser under the BMBY process.IDBD.
 
On July 9 and 16, 2015, Dolphin submitted certain clarifications to18, 2016, the Proposal Sent toTel Aviv District Court dismissed the request for liquidation of IDBD and DIC dated June 29, 2015.appointment of interim liquidator put forward by Hermetic Trust (1975) Ltd. on behalf of IDBD’s Series 9 bondholders.
 
On July 9, 2015, the main clarifications were as follows:
·  The termination or expiration of the Proposal toIssuance of Notes by IDBD and DIC would not repeal the commitments undertaken by Dolphin under the proposal submitted by Dolphin to IDBD on May 6, 2015 always provided that such commitments continued in full force and effect subject to the proposed terms, or Dolphin’s remaining commitment to inject NIS8.5 million in IDBD pursuant to its irrevocable proposal dated December 29, 2014.
·  
A further condition would be added to the Proposal to IDBD and DIC whereby if Dolphin’s interest in the rights public offering were lower than NIS8.5 million, Dolphin would remain obliged vis-à-vis IDBD to inject the remaining amount arising from subtracting NIS8.5 million and the amount effectively injected at this instance by Dolphin.
·  IDBD would replace its commitment to exercise DIC’s Series 1 warrants for NIS92.5 million with the commitment to exercise the Series 1 warrants for at least the amount that results from subtracting (a) the Capital Contribution Amount; less (b) NIS100 million, always provided that such amount does not exceed NIS92.5 million.
On July 13, 2015, Dolphin extended the maturity of the Proposal to IDBD and DIC until July 16, 2015. In addition, on July 16, 2015, Dolphin submitted additional clarifications to the Proposal to IDBD and DIC dated June 29, 2015 and July 9, 2015, which provided as follows:
·  Dolphin agrees that the new shares to be acquired by Dolphin or any entity controlled by Eduardo Sergio Elsztain under the public offering of shares to be made by IDBD during October 2015 would not grant to it the right to participate in the Tender Offer always provided that such new shares are still held by Dolphin or an entity controlled by Eduardo Sergio Elsztain. Notwithstanding, nothing will prevent Dolphin and/or the entity controlled by Eduardo Sergio Elsztain that holds such new shares to be acquired under the public offering to be made in October 2015 by IDBD from freely disposing of them.
On July 16, 2015, IDBD’s Board of Directors approved a capital increase by means of a public offering pursuant to the terms proposed by Dolphin in the Proposal to IDBD and DIC, and to exercise DIC’s warrants, all based on Dolphin’s irrevocable commitment to participate in the referred capital increase. IDBD plans to carry out the public offering between October 1 and November 15, 2015, subject to the company’s corporate approvals, other statutory consents required and the fact that the exercise of DIC’s warrants can be made pursuant to the terms and conditions set forth in Dolphin’s proposal.
On July 16, 2015, DIC’s Board of Directors accepted the Proposal to IDBD and DIC and instructed its management to take such steps as necessary in order to make a rights offering pursuant to Dolphin’s proposal. On August 28, 2015, DIC published a shelf offering report for the issuance of rights to its shareholders. On September 6, 2015, DIC completed the rights offering process, issuing four series of warrants to its shareholders, which are exercisable into DIC shares. As of the date hereof, IDBD has not completed the capital injection in DIC.
 
On August 16, 2015,2, 2016 IDBD issued a new Series of Debentures in the Arrangement Trustees submitted a petition to the Tel-Aviv Jaffo CourtIsraeli market for it to determine that: (a) IFISA would bean amount of NIS 325 million due November 2019 at an annual interest rate adjustable by CPI plus 4.25%. The notes are pledged by shares of Clal Insurance Enterprise Holdings Ltd (“Clal”), subject to the commitments in the Arrangement jointly and severally with Dolphin; (b) the shares held by IFISA or any other company controlled by Eduardo Sergio Elsztain (including Dolphin) would not be eligible to take part in the Tender Offer; and (c) the shares held by any company controlled by anyapproval of the controlling shareholdersCommissioner of IDBD, including any corporations controlled by Eduardo Sergio Elsztain (including Dolphin)Capital Markets, Insurance and transferred to other entities would not be eligible to take part in the Tender Offer. On August 31, 2015, the competent court asked the Arrangement Trustees to make a supplementary filing to the one dated August 16, 2015, identifying the parties to whom such request was addressed, which filing was made on the above mentioned date. On September 7, 2015 the court dismissed the Arrangement Trustees' filing for failure to submit the supplementary filing requested by the competent court on August 31, 2015.
On August 17, 2015, the Arrangement Trustees submitted to IDBD, its Board of Directors, Dolphin and Extra (among others) an alternative scheme to the one proposed by Dolphin on May 27, 2015 as part of Dolphin’s and Extra’s obligations under the Tender Offer (the “Trustees' Proposal”) which was filed with the competent court. The Trustees’ Proposal provided as follows:
·  Replacement of the obligation to carry out Tender Offers for a total of NIS512 million with the obligation by Dolphin and Extra (and/or their related parties) to inject NIS512 million in IDBD against the issuance of bonds. The NIS512 million would be injected in two tranches of NIS256 million each (the “First Tranche” and the “Second Tranche”, respectively).
i)  The First Tranche would be completed by December 31, 2015, and against its injection IDBD would issue in favor of such investors other than Dolphin, Extra and/or any of their related parties (the “Minority Investors”) bonds for a principal amount of NIS256 million, by reopening Series 9 (“Series 9”), or by issuing a new series of bonds under terms and conditions replicating those of Series 9 (“IDBD’s New Bonds”).
ii)  The Second Tranche would be completed by January 31, 2016 and against its injection the Minority Investors would receive IDBD’s New Bonds for a principal amount of NIS256 million.
iii)  Following the exercise of the First Tranche and Second Tranche, Minority Investors would deliver 64 million shares to the obligors under the Tender Offer.
iv)  In addition, on January 31, 2016, Dolphin and Extra (or any of their related parties) would purchase the remaining shares held by the Minority Investors for a total of NIS90 million, payable on that same date.
·  If the sale of Clal is consummated, IDBD will carry out a partial bond repurchase offering at par value among all series of bonds.
·  The Trustees’ Proposal would be carried out before IDBD launches a new issuance of shares or rights or, alternatively, each new share or right issued would not be part of the proposal as submitted.
·  The Trustees’ Proposal is not approved by the Minority Investors; and such approval would be sought after the proposal is accepted by IDBD, Dolphin and Extra.
On August 30, 2015, IDBD sent a request on Dolphin and Extra for them to express their position on the Trustees’ Proposal, without setting a specific date for their response.
On September 3, 2015 Dolphin rejected the Trustees' Proposal and, therefore, it is invalid as of the date of issuance of these Financial Statements.
On September 9, 2015, The Arrangement Trustees filed to the Tel Aviv District Court an amended application for instructions (the “Application of the Arrangement Trustees”), to which Dolphin, IFISA, Extra and others were added as parties, requesting Court to instruct that IFISA is obliged to all the Investors' obligations under the Arrangement; that the IDBD shares held by any entity controlled by Eduardo Sergio Elsztain are not entitled to participate in the tender offers and that IDBD shares held or were held by Eduardo Sergio Elsztain and Mr. Ben Moshe and/or by any other entity controlled by them, and were transferred or will be transferred to others, are also not entitled to participate in the tender offers.
On September 24, 2015, the arbitrator granted the arbitration award related to the BMBY process, pursuant to which Dolphin and IFISA were designated as buyers in the BMBY process, and consequently Extra was designated as the seller; in the aforementioned framework Extra has to sell all the shares held in IDBD (92,665,925 shares) at a price of NIS1.64 per share.
47

On September 24, 2015, the Arrangement Trustees submitted to the Court an application for a temporary injunction prohibiting Dolphin, IFISA, Extra and other vehicle and/or their representatives to carry out any action or transactions regarding the Company's shares, until the Court's decision in the Application of the Arrangement Trustees, as described above.
Furthermore, on October 11, 2015, the BMBY process concluded and IFISA purchased all the shares of IDBD (92,665,925 shares) held by Extra, for a total consideration of approximately NIS152 million (equivalent to US$39.7 million as of the date of the transaction). For more information, please see “Item 4—Recent Developments”.
On October 1, 2015, Dolphin and IFISA submitted to the Court their response to the Application of the Arrangement Trustees’. Dolphin asked the court to dismiss the Arrangement Trustees petition, and their position included the following arguments: (a) IFISA is not obliged to comply with Dolphin's obligations according to the Arrangement; (b) IFISA and any other corporation controlled by Eduardo Sergio Elsztain are eligible to participate as offerees in the Tender Offers according to the Arrangement and (c) The Arrangement Trustees' requirement regarding the eligibility of shares to participate in the tender offers should to be dismissed. Also, Dolphin undertook that upon the closing of the BMBY, 106.6 million shares held by it will not participate in the Tender Offers, as long as these shares are held by entities controlled by Eduardo S. Elsztain
On October 7, 2015, the Arrangement Trustees submitted to the Court their response to Dolphin and IFISA concerning the Application of the Arrangement Trustees’.
Furthermore, on October 11, 2015, the BMBY process concluded and IFISA purchased all the shares of IDBD (92,665,925 shares) held by Extra, for a total consideration of approximately NIS152 million (equivalent to US$39.7 million as of the date of the transaction). Upon the closing of the transaction, all Extra’s directors in IDBD presented their irrevocable resignation to IDBD’s Board of Directors and the Shareholders Agreement automatically terminated in accordance with its terms. Furthermore, on the same date, Dolphin pledged additional shares as security of the performance of the Tender Offers, rising the number to 64,067,710 pledged shares.
. On October 19, 2015, Dolphin and IFISA submitted their response to Court regarding the Application of the Arrangement Trustees in which, among other things, Dolphin clarified that as the offeror in the Tender Offers, it does not intent and will not participate as an offeree in the Tender Offers. Notwithstanding, according to Dolphin’s position, it has the right to offer to any other shareholder of IDBD, including entities controlled by Eduardo Sergio Elsztain, to purchase shares within the Tender Offers and also to sell shares to third parties (including those controlled by Eduardo Sergio Elsztain), and the shares being sold are able to participate as offerees in the Tender Offers, without derogating from Dolphin’s undertakings according to which 106,600,000 shares held by it will not participate in the Tender Offers, as long as they are held by entities controlled by Eduardo Sergio Elsztain).
On October 20, 2015, the Court decided to grant declaratory remedies requested in the Application of the Arrangement Trustees, according to which:
·  The shares held by Dolphin and any other company controlled by Eduardo Sergio Elsztain are not entitled to participate as offerees in the Tender Offers.
·  The shares held or that were held by Dolphin and/or by companies controlled by Eduardo Sergio and which were transferred or will be transferred by them to other parties, will not be entitled to participate in the Tender Offers.
·  These remedies will not apply to shares which were acquired from the minority shareholders within the framework of the trade in the stock exchange and which came into the possession of IFISA.
The Court rejected the request of the Arrangement Trustees to determine that IFISA is obliged to undertake all the commitments under the terms of the Arrangement, but stated that Dolphin violated its commitment to make IFISA to commit under the undertakings in accordance with the terms of the Arrangement. Dolphin and IFISA reported to IDBD that they intend to appeal the Court decision.
On October 26, 2015, and following the October 20, 2015 court decision and the declaratory remedies submitted, Dolphin and IFISA sent a letter to IDBD ("Dolphin and IFISA's Letter") that, according to their position, and as detailed in the letter: (a) The reservation prescribed by the court vis-à-vis the shares which were acquired from the minority shareholders in trading on the stock exchange and which came into the possession of IFISA, applies to the 127,441,396 shares of IDBD held by IFISA and 131,600 shares of IDBD held by Dolphin, which should be entitled to participate as an offeree in the Tender Offers; and (b) with respect of the 51,760,322 additional shares of IDBD presently held by Dolphin, originating in acquisitions from minority shareholders in IDBD, it may be interpreted from the judgement that, those shares cannot participate as an offeree in the Tender Offers, so long as they are held by Dolphin, however Dolphin is not prevented from selling these shares to any third parties, and that in such a case, that third party shall have the right to participate in the Tender Offers for those shares.
On October 29, 2015, the Arrangement Trustees filed an urgent application for a contempt of court order against Dolphin and IFISA (the "Application for Contempt") and to enforce them to follow the court's instructions of October 20, 2015, alleging that Dolphin and IFISA's letter , published by IDBD on October 27, 2015, which informed of the quantity of shares purchased from the minority shareholders within the framework of the trade in the stock exchange is contrary to the court's decision and thus Dolphin and IFISA are acting in contempt of court.
On October 29, 2015, Dolphin and IFISA filed an appeal to the Supreme Court, with respect to the court decision of October 20, 2015, also requesting to hold an urgent hearing on the appeal. The hearing on the appeal was scheduled for December 16, 2015.
On November 2, 2015, Dolphin and IFISA submitted their response to the Application for Contempt, requesting court to dismiss the application as the Contempt of Court Ordinance does not apply to declaratory remedies and as Dolphin and IFISA did not violate any court order.
On November 4, 2015, the Arrangement Trustees filed a rejoinder to Dolphin´s and IFISA's response to the Application for Contempt, requesting the Court to clarify that the Reservation (as defined below) determined in the Court's decision dated October 20, 2015 shall apply exclusively in the case the following conditions apply:: (1) that the shares were acquired in the market from the public; (2) the acquisition was made within the framework of trading on the TASE; and (3): that the shares are currently held by IFISA; accordingly, the Court was requested to clarify that the Dolphin´s and IFISA's position as filed in the letter dated October 26, 2015 is not and cannot be the correct interpretation of the Judgment.
On November 4, 2015, Dolphin and IFISA filed their response to the rejoinder of the Arrangement Trustees, requesting the Court to dismiss the Arrangement Trustees' request to clarify the judgement.
On November 5, 2015, the Court decided to deny the Application for Contempt filed by Arrangement Trustees. However, the Court stated in an obiter-dictum that Dolphin and IFISA's interpretation of the Reservation in the Decision dated October 20, 2015, within Dolphin and IFISA's letter, stand in contradiction insofar as with regard to the scope of the Reservation.
On November 5, 2015, the Arrangement Trustees sent a letter to Dolphin and IFISA, demanding them, in light of the Court's decision of the same day, to amend Dolphin and IFISA's letter and to inform the Securities Authority and IDBD that all the tender offers will be addressed to the minority shareholders of IDBD and that Dolphin and/or IFISA and any corporation under the control of Mr. Elsztain, will not be offerees in the tender offers and that every share which will be transferred by them to third party, if transferred, will also not be entitled to be an offeree in the tender offer.
On November 5, 2015, the Arrangement Trustees sent a letter to IDBD, demanding it, in light of the Court's decision of the same day, to amend Dolphin and IFISA's letter and to inform the public and the Securities Authority immediately that Dolphin and IFISA's Letter as published bySavings. IDBD is inconsistent withworking to get the court's decision and that allauthorization to constitute the shares held by Dolphin and IFISA or any corporation withinguarantee through the Elsztain Group or which shall be purchased from those corporations, shall not carry a right to participate in the tender offers as an offeree.
On November 10, 2015, following the requestfiling of the ISA to IDBD, IDBD approached Dolphin and IFISA in order to obtain their position with regard to the amount of shares held by corporations controlled by Mr. Eduardo Sergio Elsztain and which are entitled to participate in the Tender Offers according to the Reservation in the Court's decision dated October 20, 2015 (the "First Decision"; the "Reservation") and following the Court's decision dated November 5, 2015 (the "Second Decision"). In response to this request, Dolphin and IFISA notified IDBD that their position, as expressed in Dolphin and IFISA's letter, remains unchanged.
On November 10, 2015, Dolphin and IFISA filed an application to the Supreme Court asking for such approval. In case IDBD does not get the required approval, funds must be repaid with interest plus a penalty. on September 15, 2016, the High Court of Justice gave a partial judgment and decision, according to schedulewhich it was decided, to reject the hearing onpetition  for the appeal,most part and to grant an order which was scheduledinstructs the Commissioner to appear and show a reason for December 16, 2016, to an earlier date, dueher opposition to the fact that Dolphin has to publish a Tender Offer by December 31, 2015, in order to have a high level of certainty regarding the legal situation as soon as possible.
On November 12, 2015, IDBD reported that, at its request Dolphin extended the validity of its commitment with regard to the public offering so that it will be performed no later than November 17, 2015 (instead of the original date of November 15, 2015), which was further extended until December 1, 2015. In addition, IDBD was notified by Dolphin, that discussions are being held between Dolphin and the Arrangement Trustees for a potential amendmentcompany to the Arrangement with respectpledge up to the Tender Offers, pursuant to which the undertakings to execute the Tender Offers will be transformed to an injection of funds into IDBD and bonds to be issued by IDBD instead of a potential public offering as mentioned above. IDBD further reported that the Arrangement Trustees sent a letter stating that the amendments to the Arrangement regarding the Tender Offers are not acceptable for the bondholders, and that the bondholders may convoke a bondholders´ meeting to discuss such issues if IDBD´s Board of Directors do not disapprove such proposal.
Company is assessing its defense strategy, as well as the impact of the closing of the BMBY process with IFISA as the purchaser5% of the shares of IDBD heldClal Holdings, subject to an outline agreed to at the time by Extrathe company. Furthermore, the company maintains the right to accede to a proposal for compromise which was raised in the context of the discussion. A hearing date was set for January 2017.
 
On November 11, the lock-up under the TASE regulations expired, and therefore there are no shares restricted under this provisions asFurthermore, DIC re-opened its issuance of the dateNotes due 2025 for an additional principal amount of hereof.

48

Class Action ClaimNIS 360 million.
 
In June 2015, an application for the court to approve the commencement of a class action (the “Class Action”) was filed by four individuals who argue that they were among the creditors of IDBH and that as a result of IDBH’s approved Arrangement they received sharesNotes in IDBD and that therefore they were entitled to participate in the Rights Offerings made in 2014 and 2015.The Class action was filed before the applicable courts of Israel against IDBD, Dolphin, Eduardo Sergio Elsztain, Extra and Mordechai Ben Moshe (in their capacities both as controlling shareholders of IDBD and as board members of IDBD) and against the members of IDBD’s Board of Directors and alternate directors who were in office between 2014 and 2015. The amount of the claim is NIS1,048 million (equivalent to US$277.6 million as of June 30, 2015).
As concerns the legal action, pursuant to the applicable laws the proceedings are divided into two stages: (i) the preliminary stage, in which the plaintiff pleads the court to allow the complaint to be admitted as a class action, in which the plaintiff shall prove by producing reasonable evidence that it satisfies the minimum requirements for the class action to qualify as such pursuant to the applicable laws; and (ii) if such requirements are met and the case is admitted as a class action, the substantive proceedings will start.
At present, the Class Action is at the preliminary stage.
Pursuant to the applicable laws the defendants have a 90-day term to file their defense (such term does not include the period from July 21 to September 5, 2015, when the Israeli courts are on recess and an eight days recess during the Jewish holiday of Sukot).
Based on the Israeli legal counsel, it is more likely than not that the Class Action will be dismissed against Dolphin.subsidiaries
 
In the applicationJuly 2016, Shufersal acquired Notes Series B shares with a Nominal Value of NIS 511 million by way of an additional issue of Notes Series F shares at a ratio of 1.175 for Class Action, the plaintiffs argued, among other things, that IDBD’s controlling shareholders and its Board of Directors acted in concert to frustrate the sale of Clal’s shares to JT Capital Fund (“JT”) and privileged their own interests, causing them material damages as under the termseach NIS 1 nominal value of the Arrangement they would have been entitled to receive a larger payment had the above mentioned sale been consummated.
In addition, they sustain that the Rights Offerings made in 2014Series B shares outstanding. The Notes Series B shares acquired by Shufersal were cancelled and 2015 discriminated against the minority shareholders and were carried out without obtaining the required consents (given the personal interest of the controlling shareholders), resulting in the dilution of plaintiffs’ rights’ economic value.
Loan agreements with Inversiones Financieras del Sur S.A.
On July 28, 2015, IRSA's subsidiary Dolphin granted a loan to IFISA, a company indirectly controlled by Eduardo Sergio Elsztain for an aggregate amount of US$7.2 million, which will mature on July 2016 and will accrue interests at a rate of f Libor 1M + 3%.delisted.
 
 In addition, on October 9, 2015, through IRSA's subsidiary REIG V L.P. (“Reig V”) IRSA granted another loan for an aggregate amount
Acqusition of US$40 million to IFISA, which will mature on October 2016 and will accrue interests at a rate of f Libor 1M + 3%.
Repurchase of Notes Series V
On August 25, 2015, IRSA repurchased a nominal amount of Ps. 113,762,000 of our Series V Notes for an aggregate amount of Ps.120.5 million, which were cancelled at maturity.
Sale of units in the Intercontinental Plaza BuildingDIC shares from IDBD
 
On September 10, 2015, IRSA Commercial Properties closed23, 2016, we acquired from IDBD 8,888,888 shares of Discount Investment Corporation (“DIC”) (DISI:TASE) for NIS 100 million (approximately US$ 26.7 million), equivalent to the sale to an unrelated third party8.8% of 5,963 square meters that represent seven floors of office space, 56 parking units and three storage units in the Intercontinental Plaza Building located in the neighborhood of Montserrat in the City of Buenos Aires. After such sale, 7,159 square feet remain in IRSA Commercial Properties‘portfolio. The purchase price was Ps.324.5 million, which has been fully paid.DIC’s shares outstanding.
 
Issuance of Series I Notes
 
On September 18, 2015 IRSA Commercial Properties issued Series I Notes under its Global Note Program in an aggregate principal amount of Ps.407,260,000 (equivalent to US$43,441,066.67). Series I Notes have a maturity of 18 months from its issue date, and will bear a mixed interest rate of 26.5% per year during the first three months, and Private Badlar Rate (Tasa Badlar Privada) plus 400 bps per year during the remaining period, payable on a quarterly basis.B. BUSINESS OVERVIEW
Sale of units in the Maipú 1300 Building
On November 6, 2015, IRSA closed the sale to an unrelated third party of 864 square meters that represent two floors of office space, and 4 parking units. After such sale, 2,134 square feet remain in IRSA's portfolio. The purchase price was U$S 3 million, which has been fully paid.
 
General
 
We are a leading Latin American agricultural company engaged in the production of basic agricultural commodities with a growing presence in the agricultural sector of Brazil, through our investment in Brasilagro, as well as in other Latin American countries. We are currently involved in several farming activities including grains and sugarcane production, beef cattle raising and milk production. Our business model focuses on the acquisition, development and exploitation of agricultural properties having attractive prospects for agricultural production and/or value appreciation and the selective sale of such properties where appreciation has been realized. In addition, we lease landsland to third parties and perform agency and agro-industrial services, including a meat packing plant. Our shares are listed on Mercado de Valores de Buenos Aires (“MVBA”) and the NASDAQ.
 
We are also directly and indirectly engaged in the Argentine real estate business through our subsidiary IRSA and its subsidiaries and joint ventures, one of Argentina’s leading real estate companies. IRSA is engaged in the development, acquisition and operation of shopping centers, premium offices, and luxury hotels in Argentina, as well as the sales and development properties. Also, IRSA has international investments, that mainly operate in the United States in relation to the lease of residential properties.office buildings and hotels in that country, and the investment in IDBD, one of the largest and most diversified investment groups of Israel, which, through its subsidiaries, participates in numerous markets and industry sectors, including real estate, retail, agroindustry, insurance, telecommunications, among others. IRSA’s shares are listed on the MVBA and the NYSE. We own 64.30%63.38% of the outstanding common shares of IRSA and a majority of our directors are also directors of IRSA.
 

During the fiscal years ended June 30, 2013,2016, 2015 and 2014, and 2015, we had consolidated revenues of Ps. 3,528.535,384 million, Ps. 4,604.05,652 and Ps. 5,651.84,604 million, and consolidated net income/(loss) of Ps. 154.34,166 million, Ps. (1,408.4)1,767 million and Ps. 176.21,186 million, respectively. During the fiscal years ended June 30, 20142015 and June 30, 2015,2016, our total consolidated assets decreased 3.2%increased 986.7% from Ps. 15,783.715,276 million to Ps. 15,275.4166,001 million, and our consolidated shareholders’ equity decreased 12.0%290.3% from Ps. 4,434.83,903 million to Ps. 3,902.015,232 million.
 
We operate in two businesses areas, namely, “Agricultural” and “Investment and Development Properties” businesses, as further described below.
In fiscal year ended June 30, 2016, the Company has changed the presentation of the agricultural business segments which are reviewed by the CODM for a better alignment with the current business vision and the metrics used to such end. Our Agricultural business is further comprised of three reportable segments:
The "Agricultural production" segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. The new segment “agricultural production” aggregate the old segments crops, cattle, dairy and sugarcane:
Our “Crops” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Company is focused on the long-term performance of the land and seeks to maximize the use of the land through crop rotation; the use of technology and techniques. In this way, the type and quantity of harvested crops change in each agricultural campaign. Our Crops Segment had assets of Ps. 2,775 million and Ps. 1,913 million as of June 30, 2016 and 2015, respectively, representing 60% and 58% of our agricultural business assets at such dates, respectively. Our Crops segment generated operating income of Ps. 154 million, operating loss of Ps. 277 million and Ps. 140 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 53%, (90%) and 368%, of our consolidated operating income/loss from Agricultural Business for such years, respectively.
Our “Cattle” segment consists of breeding, purchasing and/or fattening of free-range cattle for sale to meat processors and local livestock auction markets. Our Cattle segment had assets of Ps. 815 million and Ps. 606 million as of June 30, 2016 and 2015, respectively, representing 18% and 18% of our agricultural business assets at such dates, respectively. Our Cattle segment generated operating income of Ps. 103 million, Ps. 36 million and Ps. 31 million for fiscal years ended June 30, 2016, 2015 and 2014 respectively, representing 35%, 12% and (82%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Dairy” segment consists of breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers. Our Dairy segment had assets of Ps. 77 million and Ps. 65 million as of June 30, 2016 and 2015, respectively, representing 2% and 2% of our agricultural business assets at such dates, respectively. Our Dairy segment generated operating loss of Ps. 8 million for fiscal year ended June 30, 2016, representing (3%), of our consolidated operating income from Agricultural Business for such years, respectively and operating income of Ps. 4 million and Ps. 5 million for fiscal year ended June 30, 2015 and 2014, representing 1% and (13%), of our consolidated operating income from Agricultural Business for such year.
Our “Sugarcane” segment consists of planting, harvesting and sale of sugarcane. Our Sugarcane segment had assets of Ps. 713 million and Ps. 410 million as of June 30, 2016 and 2015, respectively, representing 13% and 12% of our agricultural business assets at such dates, respectively. Our Sugarcane segment generated operating income of Ps. 63 million for the fiscal year ended June 30, 2016, representing 22% of our consolidated operating income from Agricultural Business for such year and operating loss of Ps. 13 million and Ps. 23 million for fiscal years ended June 30, 2015 and 2014, respectively, representing (4%) and 61%, of our consolidated operating income from Agricultural Business for such years.
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
The "Other segments" segment includes, principally, agricultural services (for example, irrigation); leasing of the Company's farms to third parties; feedlot farming, slaughtering and processing in the meat refrigeration plant; and brokerage activities, among others. The new segment “Other segments” aggregate the old segments Agricultural Rentals and Services, Agro-industrial and Others:
Our “Agricultural Rentals and Services”segment consists of services (for example: irrigation) and leasing of the Company’s farms to third parties. Our Agricultural Rentals and Services Segment had assets of Ps. 22 million and Ps. 118 million as of June 30, 2016 and 2015, respectively, representing 0% and 4% of our agricultural business assets at such dates, respectively. Our Agricultural Rentals and Services segment generated operating income of Ps. 53 million, Ps. 37 million and Ps. 7 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 18%, 12% and (18%) of our consolidated operating income from Agricultural Business for such years.
Our “Agro-industrial” segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant. Our Agro-industrial segment had assets of Ps. 71 million and Ps. 42 million as of June 30, 2016 and 2015, respectively, representing 2% and 1% of our agricultural business assets at such dates, respectively. Our Agro-Industrial segment generated operating income of Ps. 1 million for the fiscal year ended June 30, 2014, representing (3%) of our consolidated operating income from Agricultural Business for such year, and operating loss of Ps. 63 million and Ps. 35 million for the fiscal years ended June 30, 2016 and 2015, respectively, representing (22%) and (11%), of our consolidated operating income from Agricultural Business for such years, respectively.
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 129 million and Ps.114 million as of June 30, 2016 and 2015, respectively, representing 3% and 3% of our agricultural business assets at such dates, respectively. Our Others segment generated operating income of Ps. 2 million, Ps. 3 million and Ps. 3 million for fiscal years ended June 30, 2016, 2015 and 2014, representing 1%, 1% and (8%) of our consolidated operating income for such years, respectively.
 
Our Agricultural business is further comprised of eight reportable segments:
 

·  
49

Our “Agricultural production” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane. Our Agricultural production segment had assets of Ps. 4,380 million and Ps. 2,994 million as of June 30, 2016 and 2015, respectively, representing 95% and 91% of our agricultural business assets at such dates, respectively. Our Agricultural production segment generated operating income of Ps. 312 million, operating loss of Ps. 250 million and operating loss Ps. 127 million for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 107%, (4%) and (3%), of our consolidated operating income/loss from Agricultural Business for such years, respectively.
 
·  Our “Crops” segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Company is focused on the long-term performance of the land and seeks to maximize the use of the land through crop rotation; the use of technology and techniques. In this way, the type and quantity of harvested crops change in each agricultural campaign. Our Crops Segment had assets of Ps. 1,822.3 million and Ps. 2,199.2 million as of June 30, 2015 and 2014, respectively, representing 56% and 61% of our agricultural business assets at such dates, respectively. Our Crops segment generated operating loss of Ps. 252.9 million, Ps. 147.5 million and Ps. 110.1 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing (82%), 395% and (313%), of our consolidated operating income/loss from Agricultural Business for such years, respectively.
·  
Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 13 million and Ps. 13 million as of June 30, 2016 and 2015, respectively, representing 0% and 0% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating loss of Ps. 12 million for fiscal year ended June 30, 2016, representing (4%) of our consolidated operating income from Agricultural Business for such year, respectively, and operating income of Ps. 552 million and Ps. 78 million for fiscal years ended June 30, 2015 and 2014, representing 180% and (205%), of our consolidated operating income from Agricultural Business for such years, respectively.
 
·  Our “Cattle” segment consists of breeding, purchasing and/or fattening of free-range cattle for sale to meat processors and local livestock auction markets. Our Cattle segment had assets of Ps. 621.0 million and Ps. 499.5 million as of June 30, 2015 and 2014, respectively, representing 19% and 14% of our agricultural business assets at such dates, respectively. Our Cattle segment generated operating income of Ps. 36.7 million and Ps. 32.1 million for the fiscal years ended June 30, 2015 and 2014 respectively, representing 12% and (86%), of our consolidated operating income from Agricultural Business for such years, respectively and operating loss of Ps. 13.8 million for the fiscal year ended June 30, 2013, representing (39%), of our consolidated operating income from Agricultural Business for such year.
·  
Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure. This segment includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 222 million and Ps.274 million as of June 30, 2016 and 2015, respectively, representing 5% and 8% of our agricultural business assets at such dates, respectively. Our Others segment generated operating loss of Ps. 8 million, operating income Ps. 5 million and operating income Ps. 11 million for fiscal years ended June 30, 2016, 2015 and 2014, representing (3%), 2% and (29%) of our consolidated operating income from Agricultural Business for such years, respectively.
 
·  Our “Dairy” segment consists of breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers. Our Dairy segment had assets of Ps. 63.5 million and Ps. 57.4 million as of June 30, 2015 and  2014, respectively, representing 2.0% and 2.0% of our agricultural business assets at such dates, respectively. Our Dairy segment generated operating income of Ps. 4.2 million and Ps. 4.0 million for the fiscal years ended June 30, 2015 and 2014, respectively, representing 1%  and (11%), of our consolidated operating income from Agricultural Business for such years, respectively and operating loss of Ps. 1.0 million for the fiscal year ended June 30, 2013, representing (3%), of our consolidated operating income from Agricultural Business for such year.
We have decided to break down reporting of our Urban properties and investment business into an Operation Center in Argentina and an Operation Center in Israel. From the Operation Center in Argentina, the Company, through IRSA and its subsidiaries, manages the businesses in Argentina and the international investments in the Lipstick Building in New York and the Condor hotel REIT. From the Operation Center in Israel, the Company manages IDBD.
 
·  Our “Sugarcane” segment consists of planting, harvesting and sale of sugarcane. Our Sugarcane segment had assets of Ps. 411.3 million and Ps. 571.5 million as of June 30, 2015 and 2014, respectively, representing 13% and 16% of our agricultural business assets at such dates, respectively. Our Sugarcane segment generated operating loss of Ps. 12.1 million and Ps. 19.7 million for the fiscal years ended June 30, 2015 and 2014, respectively, representing (4%) and 53%, of our consolidated operating income from Agricultural Business for such years, respectively and operating income of Ps. 27.2 for the fiscal year ended June 30, 2013, representing 77%, of our consolidated operating income from Agricultural Business for such year.
Operations Center in Argentina
 
·  Our “Agricultural Rentals and Services” segment consists of services (for example: irrigation) and leasing of the Company’s farms to third parties. Our Agricultural Rentals and Services Segment had assets of Ps. 105.9 million and Ps. 61.2 million as of June 30, 2015 and 2014, respectively, representing 3% and 2% of our agricultural business assets at such dates, respectively. Our Agricultural Rentals and Services segment generated operating income of Ps. 14.8 million, Ps. 8.1 million and Ps. 11.5 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing 5%, (22%) and 33%, of our consolidated operating income from Agricultural Business for such years, respectively.
We operate our business in Argentina through six reportable segments, namely “Shopping Centers”, “Offices and Others”, “Sales and Developments”, “Hotels”, “International” and “Financial Operations and Others” as further described below:
 
·  Our “Land Transformation and Sales” segment comprises gains from the disposal and development of farmlands activities. Our Land Transformation and Sales segment had assets of Ps. 53.5 million and Ps. 51.5 million as of June 30, 2015 and 2014, respectively, representing  2% and 1% of our agricultural business assets at such dates, respectively. Our Land Transformation and Sales segment generated operating income of Ps. 551.4 million, Ps. 78.0 million and Ps. 132.6 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing 179%, (209%) and 377%, of our consolidated operating income from Agricultural Business for such years, respectively.
·  
Our “Shopping Centers” segment includes the operating results from our portfolio of shopping centers principally comprised of lease and service revenue from tenants. Our Shopping Centers segment had assets of Ps. 2,365 million and Ps. 2,400 million as of June 30, 2016 and 2015, respectively, representing 47.8% and 37.5% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Shopping Centers segment generated operating income of Ps. 1,637 million, Ps. 1,190 million and Ps. 864 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 60.3%, 47.2% and 69.7%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
 
·  Our “Agro-industrial” segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant. Our Agro-industrial segment had assets of Ps. 41.5 million and Ps. 44.9 million as of June 30, 2015 and 2014, respectively, representing 1% and 1% of our agricultural business assets at such dates, respectively. Our Agro-Industrial segment generated operating income of Ps. 1.9 million for the fiscal year ended June 30, 2014, representing (5%) of our consolidated operating income from Agricultural Business for such year, and operating loss of Ps. 36.0 million and Ps. 29.6 million for the fiscal years ended June 30, 2015 and 2013, respectively, representing (12%) and (84%), of our consolidated operating income from Agricultural Business for such years, respectively.
·  
Our “Offices and Others” segment includes the operating results of our lease and service revenues of office space and other non-retail building properties principally comprised of lease and service revenue from tenants. Our Offices and Others segment had assets of Ps. 941 million and Ps. 1,036 million as of June 30, 2016 and 2015, respectively, representing 19.0% and 16.2% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Offices and Others segment generated operating income of Ps. 219 million, Ps. 99 million and Ps. 160 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 8.1%, 3.9% and 12.9%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
 
·  Our “Others” segment consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure includes the brokerage and sale of inputs activities. Our Others segment had assets of Ps. 161.1 million and Ps.115.2 million as of June 30, 2015 and 2014, respectively, representing 5% and 3% of our agricultural business assets at such dates, respectively. Our Others segment generated operating income of Ps. 2.2 million,  Ps. 5.7 million and Ps. 18.4 million for the fiscal years ended June 30, 2015, 2014 and 2013, representing 1%, (15%) and 52% of our consolidated operating income for such years, respectively.
·  
Our “Sales and Developments” segment includes the operating results of our acquisition and/or construction of housing and other properties for sale in the ordinary course of business. Our Sales and Developments segment had assets of Ps. 585 million and Ps. 466 million as of June 30, 2016 and 2015, respectively, representing 11.8% and 7.3% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Sales and Developments segment generated operating income of Ps. 864 million, Ps. 1,099 million and Ps. 239 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 31.8%, 43.6% and 19.3%, of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
 
·  
Our Investment and Development Properties is further“Hotels” segment includes the operating results of our hotels mainly comprised of six reportable segments:room, catering and restaurant revenues. Our Hotels segment had assets of Ps. 174 million and Ps. 182 million as of June 30, 2016 and 2015, respectively, representing 3.5% and 2.8% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Hotels segment generated, operating losses of Ps. 2 million and Ps. 13 million, and operating income of Ps. 10 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), (0.5%) and 0.8%, of our consolidated operating income for the Operations Center in Argentina for such years.
 
·  Our “Shopping Center Properties” segment includes results from the commercial exploitation and development of shopping centers. Such results originate mainly from the lease and the delivery of services related to the lease of commercial facilities and other spaces in the Company’s shopping centers. Our Shopping Center Properties segment had assets of Ps. 2,400.1 million and Ps. 2,316.2 million as of June 30, 2015 and 2014, respectively, representing 34% and 31% of our investment and development properties business assets at such dates, respectively. Our Shopping Center Properties segment generated operating income of Ps. 1,189.3 million, Ps.864.7 million and Ps. 686.0 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing 47%, 70% and 63%, of our consolidated operating income for such years, respectively.
·  
Our “International” segment includes investments that mainly operate in the United States in relation to the lease of office buildings and hotels in that country, and the results arising from investment in IDBD at fair value. We intend to continue evaluating investment opportunities outside Argentina as long as they offer attractive investment and development options. Our International segment generated operating losses of Ps. 2 million and operating income of Ps. 148 million, and operating losses of Ps. 30 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing (0.1%), 5.9% and (2.4%), of our consolidated operating income for the Operations Center in Argentina for such years, respectively.
 
·  Our “Offices” segment includes the operating results of the Company’s lease of office space and other rental properties and service revenues related to this activity. Our Offices segment had assets of Ps. 1,035.7 million and Ps. 905.8 million as of June 30, 2015 and 2014, respectively, representing 15% and 12% of our investment and development properties business assets at such dates, respectively. Our Offices segment generated operating income of Ps. 98.6 million, Ps. 160.0 million and Ps. 123.6 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing 4%, 13% and 11%, of our consolidated operating income for such years, respectively.
·  
Our “Financial Operations and Others” segment includes principally the income or loss generated by our associates Banco Hipotecario, BACS and Tarshop, and the residual financial operations of Metroshop carried on through Apsamedia. During fiscal year 2015, we decreased equity interest in Banco Hipotecario from 29.99% to 29.91%, held in the form of Class D shares, which are currently entitled to three votes per share. As of June 30, 2016, our investment in Banco Hipotecario generated income for Ps. 257 million. Tarshop’s operations consist primarily of lending and servicing activities related to the credit card offered to consumers at retail venues. Our Financial Operations and Others segment had assets of Ps. 1,709 million and Ps. 1,411 million as of June 30, 2016 and 2015, respectively, representing 34.6% and 22.0% of our investment and development properties business assets for the Operations Center in Argentina at such dates, respectively. Our Financial Operations and Others segment generated operating losses for Ps. 1 million, Ps. 3 million and Ps. 3 million, for fiscal years ended June 30, 2016, 2015 and 2014, respectively, representing 0.0%, (0.1%) and (0.2%) of our consolidated operating income for the Operations Center in Argentina for such years.
 
·  Our “Sales and Developments” segment includes the operating results of the sales of undeveloped parcels of land and/or trading properties, as the results related with its development and maintenance. Also included in this segment are the results of the sales of real property intended for rent, sales of hotels and other properties included in the International segment. Our Sales and Developments segment had assets of Ps. 465.7 million and Ps. 697.3 million as of June 30, 2015 and 2014, respectively, representing  7%  and 9% of our investment and development properties business assets at such dates, respectively. Our Sales and Developments segment generated operating income of Ps. 1,098.7 million, Ps. 238.5 million and Ps. 170.4 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively, representing 44%, 19% and 16%, of our consolidated operating income for such years, respectively.

 
·  Our “Hotels” segment includes the operating results of the Company’s hotels principally comprised of room, catering and restaurant revenues. Our Hotels segment had assets of Ps. 182.3 million and Ps. 203.9 million as of June 30, 2015 and 2014, respectively, representing 3% and 3% of our investment and development properties business assets at such dates, respectively. Our Hotels segment generated operating income of Ps. 10.2 million for the fiscal years ended June 30, 2014, representing 1% of our consolidated operating income for such year and operating loss of Ps. 12.8 million and Ps. 22.4 million for the fiscal years ended June 30, 2015 and 2013, respectively, representing (1%) and (2%), of our consolidated operating income for such years, respectively.
Operations Center in Israel
 
·  
Our “International” segment includes the return on investments in subsidiaries and/or associates that mainly operate in the United States in relation to the lease of office buildings and hotels in that country and the return on investment in IDBD at fair value. Our International segment had assets of Ps. 911.2 million and Ps. 1,988.0 million as of June 30, 2015 and 2014, respectively, representing 14% and 27% of our investment and development properties business assets at such dates, respectively. Our International segment generated operating income of  Ps. 147.9 million and Ps. 129.3 million for the fiscal years ended June 30, 2015 and 2013, representing 6% and 12%, respectively and operating loss of Ps. 30.0 million for the fiscal years ended June 30, 2014, representing (2%), of our consolidated operating income for such year.
We operate our business in Israel through six reportable segments, namely “Real Estate”, “Supermarkets”, “Agrochemicals”, “Telecommunications”, “Insurances” and “Others” as further described below:
 
·  Our “Financial Operations and Others” segment includes the financial activities carried out by the Company's associates, Banco Hipotecario S.A. and Tarshop S.A. and consumer finance residual financial operations of APSAMedia S.A. (currently merged with IRSA Commercial Properties). The e-commerce activities conducted through the associate Avenida Inc. are also included until the first quarter of the current fiscal year. This investment began to be considered a financial asset from the second quarter of this fiscal year. Our Financial Operations and Others segment had assets of Ps. 1,411.3 million and Ps. 1,261.2 million as of June 30, 2015 and 2014, respectively, representing 20% and 17% of our investment and development properties business assets at such dates, respectively. Our Financial Operations and Others segment generated operating loss of Ps. 3.3 million, Ps. 3.2 million and Ps. 5.5 million for the fiscal years ended June 30, 2015, 2014 and 2013, representing 0%, 0% and 12% of our consolidated operating income for such years, respectively.
·  
Our “Real Estate” segment includes mainly assets and operating income derived from business related to the subsidiary PBC. Through PBC, the Company operates rental properties and residential properties in Israel, United States and other parts of the world and carries out commercial projects in Las Vegas. Our Real Estate segment had net assets of Ps. 10,745 million as of June 30, 2016, representing 76.1% of our operating assets for the Operations Center in Israel at such date. Our Real Estate segment generated operating income of Ps. 617 million for fiscal year ended June 30, 2016, representing 85.7%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Supermarkets” segment includes assets and operating income derived from the business related to the subsidiary Shufersal. Through Shufersal, the Company mainly operates a supermarket chain in Israel. Our Supermarkets segment had net assets of Ps. 5,826 million as of June 30, 2016, representing 41.2% of our operating assets for the Operations Center in Israel at such date. Our Supermarkets segment generated operating income of Ps. 424 million for fiscal year ended June 30, 2016, representing 58.9%, of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Agrochemicals” segment includes income derived from the associate Adama. Adama is a company specialized in agrochemicals, particularly for the production of crops.. Our Agrochemicals segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Telecommunications” segment includes assets and operating income derived from the business related to the subsidiary Cellcom. Cellcom is a provider of telecommunication services and its main activities include the provision of mobile phone services, fixed line phone services, data and Internet, among others. Our Telecommunications segment had net assets of Ps. 5,688 million as of June 30, 2016, representing 40.3% of our operating assets for the Operations Center in Israel at such date. Our Telecommunications segment generated operating losses of Ps. 71 million for fiscal year ended June 30, 2016, representing (9.9%), of our consolidated operating income for the Operations Center in Israel for such year.
·  
Our “Insurance” segment includes the investment in Clal. This company is one of the most important insurance groups in Israel, and is mainly engaged in pension and social security insurance, among others. As indicated in Note 16 of the Financial Statements, 51% of the controlling shares of Clal are held in a trust following the instructions of the Israel Securities Commission in order to comply with the sale of the controlling shares of Clal; as a result, Clal is not fully consolidated on a line-by-line basis but rather in a single line as a financial instrument at fair value, as required by the IFRS under the current circumstances where no control is exercised. Our Insurance segment had assets of Ps. 4,602 million as of June 30, 2016, representing 32.6% of our operating assets for the Operations Center in Israel at such date. Our Insurance segment generated operating income of Ps. 0 million for fiscal year ended June 30, 2016, for the Operations Center in Israel.
·  
Our “Others” segment includes the assets and income derived from other diverse business activities, such as technological developments, tourism, oil and gas assets, electronics, and others. Our Others segment had negative net assets of Ps. 12,737 million as of June 30, 2016, representing (90.2%) of our operating assets for the Operations Center in Israel at such date. Our Others segment generated operating losses of Ps. 250 million for fiscal year ended June 30, 2016, representing (34.7%), of our consolidated operating income for the Operations Center in Israel for such year.
 
Agricultural Business
 
As of June 30, 2015,2016, we owned 3127 farms with approximately 622,220622,217 hectares distributed in Argentina, Brazil, Bolivia and Paraguay. Approximately 95,15096,710 hectares of the land we own are used for crop production, approximately 74,27371,937 hectares are for beef cattleCattle production, 85,000 hectares are for sheep production, 2,8642,231 hectares are for milk production and approximately 8,0262,435 hectares are leased to third parties for crop and cattle beef production. The remaining 356,907363,904 hectares of land reserves are primarily natural woodlands. In addition, we have the rights to hold approximately 132,000 hectares of land under concession for a 35-year period that can be extended for another 29 years. Out of this total, we have developed 22,98623,196 hectares for crop production. Also, during fiscal year 20152016 ended on June 30, 2015,2016, we leased 56,13741,966 hectares fromto third parties for crop production and 13,50113,455 hectares for beef cattle production.Cattle production
 
The following table sets forth, at the dates indicated, the amount of land used for each production activity (including owned and leased land, and land under concession):
 
 
2015(1)(6)
  
2014(1)(6)
  
2013(1)(6)
  
2012(1)(5)(6)
 
2016(1)
2015(1)(6)
2014(1)(6)
2013(1)(6)
2012(1)(6)
Crops (2)
  187,438   201,648   182,513   181,079 178,617187,438201,648182,513181,079
Cattle (3)
  88,643   95,160   91,053   95,995 85,39288,64395,16091,05395,995
Milk/Dairy  2,864   2,864   2,780   3,022 2,2312,8642,7803,022
Sheep  85,000   85,000   85,000   85,000 85,00085,000
Land Reserves (4)
  467,568   467,532   461,729   459,979 473,290467,568467,532461,729459,979
Own farmlands leased to third parties  10,026   13,111   31,593   25,538 2,43510,02613,11131,59325,538
Total (5)
  841,539   865,315   854,668   850,613 826,965841,539865,315854,668850,613
 
(1)
Includes 35.72% of approximately 8,299 hectares owned by Agro-Uranga S.A., an affiliated Argentine company in which we own a non-controlling 35.72% interest.
(2)
Includes wheat, corn, sunflower, soybean, sorghum and others.others, including double crop production.
(3)
Breeding and fattening.
(4)
We use part of our land reserves to produce charcoal, rods and fence posts.
(5)
It includes Brasilagro and our interest in CRESCA at 50%.
(6)
Includes farms owned by Brasilagro and CRESUD sold in 2014 and 2015.
(7) Includes double crops

 
Strategy
 
We seek to maximize our return on assets and overall profitability by (i) identifying, acquiring and operating agricultural properties having attractive prospects for increased agricultural production and/or medium or long-term value appreciation and selectively disposing of properties as appreciation is realized, (ii) optimizing the yields and productivity of our agricultural properties through the implementation of state-of-the-art technologies and agricultural techniques and (iii) preserving the value of our significant long-term investment in the urban real estate sector through our subsidiary IRSA.
 
To such end, we seek to:
Focus on maximizing the value of our agricultural real estate assets
 
We conduct our agricultural activities with a focus on maximizing the value of our agricultural real estate assets. We rotate our portfolio of properties from time to time by purchasing properties which we believe have a high potential for appreciation and selling them selectively as opportunities arise to realize attractive capital gains. We achieve this by relying on the following principles:
 

50


Acquiring under-utilized properties and enhancing their land use: We seek to purchase under-utilized properties at attractive prices and develop them to achieve more productive uses. We seek to do so by (i) transforming non-productive land into cattle feeding land, (ii) transforming cattle feeding land into land suitable for more productive agricultural uses, (iii) enhancing the value of agricultural lands by changing their use to more profitable agricultural activities; and (iv) reaching the final stage of the real estate development cycle by transforming rural properties into urban areas as the boundaries of urban development continue to extend into rural areas. To do so, we generally focus on acquisitions of properties outside of highly developed agricultural regions and/or properties whose value we believe is likely to be enhanced by proximity to existing or expected infrastructure.
Applying modern technologies to enhance operating yields and property values. values. We believe that an opportunity exists to improve the productivity and long-term value of inexpensive and/or underdeveloped land by investing in modern technologies such as genetically modified and high yield seeds, direct sowing techniques, and machinery. We optimize crop yield through land rotation, irrigation and the use of fertilizers and agrochemicals. To enhance our cattle production, we use genetic technology and have a strict animal health plan controlled periodically through traceability systems. In addition, we have introduced state-of-the-art milking technologies in our dairy business.
Anticipating market trends. We seek to anticipate market trends in the agribusiness sector by (i) identifying opportunities generated by economic development at local, regional and worldwide levels, (ii) detecting medium- and long-term increases or decreases in supply and demand caused by changes in the world’s food consumption patterns and (iii) using land for the production of food and energy.
International expansion.We believe that an attractive opportunity exists to acquire and develop agricultural properties outside Argentina, and our objective is to replicate our business model in other countries. Although most of our properties are located in different areas of Argentina, we have begun a process of expansion into other Latin American countries, including Brazil, Bolivia, and Paraguay.
 
Increase and optimize production yields
 
We seek to increase and improve our production yields through the following initiatives:
 
Implementation of technology.technology.
 
To improve crop production, we use state-of-the-art technology. We invest in machinery and the implementation of agricultural techniques such as direct sowing. In addition, we use high-potential seeds (GMOs) and fertilizers and we apply advanced land rotation techniques. In addition, we consider installing irrigation equipment in some of our farms.
To increase beef cattle production we use advanced breeding techniques and technologies related to animal health. Moreover, we optimize the use of pastures and we make investments in infrastructure, including installation of watering troughs and electrical fencing. In addition, we have one of the few vertically integrated beef cattle processing operations in Argentina through Sociedad Anónima Carnes Pampeanas S.A.
In our milking facility, we have implemented an individual animal identification system, using plastic tags for our beef cattle and “RFID” tags. We use software from Westfalia Co. which enables us to store individual information about each of our dairy cows.
Increased production.production.
 
Our goal is to increase our crop, cattle and milk production in order to achieve economies of scale by:
 
Increasing our owned land in various regions by taking advantage of attractive land purchase opportunities. In addition, we expand our production areas by developing lands in regions where agricultural and livestock production is not developed to its full potential. We believe in the use of technological tools for improving the productivity of our land reserves and enhancing their long-term value. However, current or future environmental regulations could prevent us from fully developing our lands by demanding us to maintain part of them as natural woodlands not allocated to production.
Diversifying our production and the weather risk by leasing farms, thus expanding our product portfolio and optimizing our geographic focus, in particular in areas that are not appealing in terms of land value appreciation but with attractive productivity levels. We believe that this diversification mix mitigates our exposure to seasonality, commodity price fluctuations, weather conditions and other factors affecting the agricultural and livestock sector.
Moreover, we believe that continuing to expand our agricultural operations outside of Argentina will help us improve even more our ability to produce new agricultural products, further diversifying our mix of products, and mitigating our exposure to regional weather conditions and country-specific risks.

 
Focus on preserving long-term value of our investment in our real estate subsidiary IRSA
 
We seek to maintain the long-term value of our significant investmentAs a leading company engaged in the urbanacquiring, developing and managing real estate, sectorIRSA seeks to (i) generate stable cash flows through IRSA.  We believe that IRSA is an ideal vehicle through which to participate in the urbanoperation of its real estate market due to its substantial and diversified portfolio of residential and commercial properties, the strengthrental assets (shopping centers, office buildings, hotels), (ii) achieve long-term appreciation of its managementasset portfolio by taking advantage of development opportunities, (iii) increase the productivity of its land reserves and what we believe areenhance the margins of its attractive prospectsdevelopment and sale of properties segment through partnerships with other developers, and (iv) look for future growth and profitability.opportunities abroad offering capital gain potential.
 

Operations Center in Argentina
 
51



Shopping Center Properties.Center. Our main purpose is to maximize our shareholders’ profitability. By using our know-how in the shopping center industry in Argentina as well as our leading position, we seek to generate a sustainable growth of cash flow and to increase the long-term value of our real estate assets. We attempt to take advantage of the unsatisfied supply in different urban areas of the region, as well as of our customers’ purchase experience. Therefore, we seek to develop new shopping centers in urban areas with attractive prospects for growth, including Buenos Aires’ Metropolitan area, some cities in the provinces of Argentina and possibly, other places abroad. To achieve this strategy, the close business relationship we have had for years with more than 10001,000 retail companies and trademarks composing our selected group of tenants is of utmost importance, as it allows us to offer an adequate mix of tenants for each particular case.
Offices. Since the Argentine economic crisis in 2001Offices and 2002, there have been limited investments in high-quality office buildings in Buenos Aires and, as a result, we believe there is currently substantial demand for top-notch office spaces.Others. We seek to purchase and develop premium office buildings in the corestrategically-located business districts in the City of Buenos Aires and other strategic locations that we believe offer attractive returnsreturn and potential for long-term capital gain. We expect to continue our focus on attracting premium corporate tenants to our office buildings. Furthermore, we intend to selectively consider new opportunities on a selective basis to acquire or construct new rental office buildings.
Hotels. We believe our portfolio of three luxury hotels is positioned to take advantage of the future growth in tourism and business travel in Argentina. We seek to continue with our strategy to invest in high-quality properties that are operated by leading international hotel companies to capitalize on their operating experience and international reputation. We also seek to continue to invest in improvements for our hotels.
Sales and Developments. We seek to purchase undeveloped properties in densely-populated areas and build apartment complexes offering green space for recreational activities. We also seek to develop residential communities by acquiring undeveloped properties with convenient access to the City of Buenos Aires, developing roads and other basic infrastructure such as electric power and water, and then selling lots for the construction of residential units. After the Argentine economic crisis in 2001 and 2002, theThe scarcity of mortgage financing restricted the growth in middlelow class home purchases and, as a result, we mainly focused on the development of residential communities for middle and high-income individuals, who do not need to finance their home purchases. We seek to continue to acquire undeveloped land at locations we consider attractive within and outside Buenos Aires. In each case, our intention is to purchase land with significant development or appreciation potential to resell. We believe that holding a portfolio of desirable undeveloped plots of land enhances our ability to make strategic long-term investments and affords us a valuable pipeline of new development projects for upcoming years.
Hotels. We believe our portfolio of three luxury hotels is positioned to take advantage of the future growth in tourism and business travel in Argentina. We seek to continue with our strategy to invest in high-quality properties that are operated by leading international hotel companies to capitalize on their operating experience and international reputation. We also seek to continue to invest in improvements for our hotels.
International. In this segment, we seek investments that represent an opportunity of capital appreciation potential in the long term. After the international financial crisis in 2008, we took advantage of the price opportunity in the real estate sector in the United States and invested in two office buildings in Manhattan, New York. During this yearIn 2015, we sold 74.5% of the officeMadison building located at Madison Avenue, City of New York, for a total amount of US$ 185 million, and we have retainedhold a 49.9% equity interest in a US company, whose main asset is the so-called “Lipstick” office building located in the City of New York. In addition, jointly with subsidiaries, we hold 34.0%49.0% of the voting powersecurities of the REIT Condor Hospitality Trust REIT (NASDAQ:CDOR) and we hold, through Dolphin Fund, a 49.0% stake in the Israeli company IDBD, one of the largest and most diversified investment groups of Israel, which, through its subsidiaries, participates in numerous markets and industry sectors, including real estate, retail, agroindustry, insurance, telecommunications, etc.. We intend to continue evaluating -on a selective basis- investment opportunities outside Argentina as long as they offer attractive investment and development opportunities.options.
 
Financial Operations and Other.We maintain Through our investment in Banco Hipotecario, the leading mortgagemain mortgage-lending bank in Argentina, as we believe that we will beare able to reach positiveachieve good synergies in the long term hand in hand with the development of thea developed mortgage market.
Operations Center in Israel
We hold, through Dolphin, 68.3% of IDBD, which is one of the largest and most diversified investment groups in Israel, which participates, through its subsidiaries, associates and joint ventures, in numerous markets and industry sectors, including real estate, retail, agricultural industry, insurance, telecommunications, among others. We seek to continue to reduce IDBD’s indebtedness level, simplifying its capital structure and nurturing a strategy in each business unit aimed at improving operating margins and the results of our investment.
·  
Real Estate. PBC has partnered with IDBD in two projects based in Las Vegas, through IDBG Ltd., including commercial and office building project (Tivoli). The first stage of this project has been fully completed. The second stage of the project is undergoing the building and marketing stages, and will include commercial areas with a surface area of approximately 16,000 square meters and office areas with a surface area of approximately 12,000 square meters. We have already entered into lease agreements with an anchor tenant and other tenants covering approximately 66% of the commercial area included in the second stage of the project and around 8% of the office areas. We also expect to develop an additional project encompassing two residential buildings and, during the year under review, have sold all the remaining residential units of these buildings.
·  
Supermarkets. Shufersal continued developing its business plan, with a focus on building a commercial and operating infrastructure to enable growth in the coming years; strengthening its competitive edge; offering more value to customers; and improving its service. Under its business plan, Shufersal continues expanding and strengthening its brand; boosting the development of its digital platforms, with “Shufersal Online” at the core; fostering new and supplementary operations in the sectors in which it currently operates; and streamlining its real property, including the closure and downsizing of existing branches and the opening of new ones.
·  
Agrochemicals. As a part of Adama’s long-term strategy, in December 2015, Adama entered into a commercial cooperation agreement, according to which Adama will gradually become the sole distributor of formulated agrochemical products in China of several agrochemical companies controlled by China National Chemical Corporation (“ChemChina”). This cooperation is expected to support the strengthening of Adama’s status in the Chinese market, by combining sales of Adama’s products with products of ChemChina’s companies and setting up a significant distribution platform in China, starting at the beginning of 2016. On July 17, 2016, DIC, reported that it had accepted ChemChina’s offer for 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments”.
·  
Telecommunications. Cellcom operates in a highly competitive environment. The main elements of Cellcom’s business strategy are: offering comprehensive solutions to expand landline and mobile communication services, optimization of costs and expenses, including by means of carrying out streamlining measures.
·  
Insurance. The investment managers make use of an advanced research department and an effective trading execution, to ensure a competitive advantage in order to achieve a fair long-term yield for policy holders, maximizing income from investments in accordance with the company’s risk appetite and the structure of liabilities in the portfolios.
·  
Others. Includes the assets and income from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities.

 
Our Principal Business Activities
 
During the fiscal year ended June 30, 2015,2016, we conducted our operations on 3130 owned farms 1 farm under concession and 5335 leased farms. Some of the farms we own are engaged in more than one productive activity at the same time.
 
Volume
(in tons)
 
Fiscal Year 2015
Production
  
Fiscal Year 2015
Sales
  
Stock
as of June 30, 2015
  
Stock
as of June 30, 2014
  
Stock
as of June 30, 2013
 
Wheat  15,990   7,083   8,666   737   -- 
Corn  310,874   269,701   61,927   17,799   34,667 
Sunflower  11,992   5,181   8,594   1,825   5,855 
Soybean  279,608   250,125   102,464   84,351   45,928 
Sugarcane  928,273   924,478   --   --   -- 
Dairy (1)
  17,526   16,924   --   --   -- 
Cattle  7,812   8,871   70,660(2)  72,865(2)  64,167(2)
 
(1)In thousands of liters.
(2)Heads


52

 
The following chart shows, for fiscal year 2015,2016, the surface area in operation for each line of business:
 
The following chart illustrates, for the fiscal year ended on June 30, 2015,2016, the surface area in operation and the hectares held as land reserves, classified into own, under lease or under concession:
 
 
 
 
Agricultural Business
Land Transformation and Sales
Land Acquisitions
We intend to increase our farmland portfolio by acquiring large extensions of land with high appreciation potential. We also intend to transform the land acquired from non-productive to cattle breeding, from cattle breeding to farming, applying state-of-the-art technology to improve farming yields so as to generate higher land appreciation.
In our view, the sector’s potential lies in developing marginal areas and/or under-utilized areas. Thanks to the current technology, we may achieve similar yields with higher profitability than core areas, resulting in the appreciation of land values.
Over the past 15 years, prices of farmlands intended for agricultural production have increased in the southern hemisphere (mainly South America) but continue to be relatively low compared to the northern hemisphere (U.S. and Europe). Our financial strength relative to other Argentine producers gives us the chance to increase our land holdings at attractive prices, improve our production scale and create potential for capital appreciation.
Several important intermediaries, with whom we usually work, bring farmlands available for sale to our attention. The decision to acquire farmlands is based on the assessment of a large number of factors. In addition to the land’s location, we normally carry out an analysis of soil and water, including the quality of the soil and its suitability for our intended use (crops, cattle, or milk production), classify the various sectors of the lot and the prior use of the farmland; analyze the improvements in the property, any easements, rights of way or other variables in relation to the property title; examine satellite photographs of the property (useful in the survey of soil drainage characteristics during the different rain cycles) and detailed comparative data regarding neighboring farms (generally covering a 50-km area). Based on the foregoing factors, we assess the farmland in terms of the sales price compared against the production potential of the land and capital appreciation potential. We consider that competition for the acquisition of farmlands is, in general, limited to small farmers for the acquisition of smaller lots, and that there is scarce competition for the acquisition of bigger lots.
In addition, we may consider the acquisition of farmlands in marginal zones and their improvement by irrigation in non-productive areas as well as the installation of irrigation devices in order to obtain attractive production yields and create potential for capital appreciation.

The following chart shows certain information concerning our land acquisitions for each of the last 10 fiscal years ended on June 30:
Fiscal Year
Number of Farmlands
Amount of Acquisitions
(Ps. million)
2006 (1)
145.9
2007 (2)
17.3
2008 (3)
24.5
2009 (4)
7133.2
2010 (5)
15.0
2011 (6)
361.5
2012--
2013--
2014--
2015--
2016--
   
(1)  
Includes the acquisition of “San Pedro” farmland of 6,022 hectares.
(2)  
Includes the acquisition of “8 de Julio” farmland of 90,000 hectares.
(3)  
Includes the acquisition of the remaining 25% of “La Adela” farmland of 18 hectares and 80% of “La Esperanza” farmland of 980 hectares.
(4)  
Includes the acquisition of "Estancia Carmen", "Puertas de Luján", "Las Londras", "San Cayetano", "San Rafael", and "La Fon Fon" farmlands and 50% of "Jerovia" farmland, of 10,911, 115, 4,566, 883, 2,969, 3,748 and 20,966 hectares, respectively.
(5)  
Includes exercise of the option over 50% of the “Jerovía” farmland of 3,646 hectares.
(6)  
Includes the acquisition of “La Primavera” and “4 Vientos” farmlands of 2,341 hectares and 2,659 hectares, respectively. In addition, it includes the acquisition of 943 hectares of the Mendoza farmland.
Land Sales
We periodically sell properties that have reached a considerable appraisal to reinvest in new farms with higher appreciation potential. We analyze the possibility of selling based on a number of factors, including the expected future yield of the farmland for continued agricultural and livestock exploitation, the availability of other investment opportunities and cyclical factors that have a bearing on the global values of farmlands.
The following chart shows certain information concerning our land sales for each of the last 10 fiscal years ended on June 30:
Fiscal Year
Number of Farmlands
Gross Proceeds from Sales
(Ps. million)
Profit(1)
(Ps. million )
          2006 (2)
116.19.9
         2007 (3)
329.922.3
         2008 (4)
223.020.0
        2009 (5)
22.01.9
        2010 (6)
118.613.7
2011 (7)
284.554.6
2012 (8)
3118.363.2
2013 (9)
4332.6149.6
 2014 (10)
2148.591.4
     2015(11)(12)
4814.3569.6
                                                   2016---
(1)  
Includes the difference between the gross proceeds from sales (net of all taxes and commissions) and the book value of the assets sold.
(2)  
Includes the sale of “El Gualicho” farmland of 5,727 hectares.
(3)  
Includes the sale of 20,833 hectares of “Tapenagá” farmland and the partial sale of 14,516 hectares of “Los Pozos” farmland and 50 hectares of “El Recreo” farmland.
(4)  
Includes the partial sale of 4,974 hectares of “Los Pozos” farmland and the partial sale of 2,430 hectares of “La Esmeralda” farmland.
(5)  
Includes the partial sale of 1,658 hectares of “Los Pozos” farmland and the partial sale of 1,829 hectares of “El Recreo” farmland.
(6)  
Includes the sale of 12,071 hectares of “Tali Sumaj.”
(7)  
Includes the sale of “La Juanita” farmland, of 4,302 hectares, and the partial sale of 910 hectares of “La Fon Fon.”
(8)  
Includes the sale of 2,447 hectares of “San Pedro” farmland, the partial sale of 1,194 hectares of “La Fon Fon” farmland, and the partial sale of 115 hectares of “Puerta de Lujan” farmland.
(9)  
Includes the sale of 14,359 hectares of “Horizontina” farmland, the partial sale of 394 hectares of “Araucaria” farmland, the partial sale of “Cremaq” farmland of 4,985 hectares, and the partial sale of 5,613 hectares of La “Suiza” farmland.
(10)  
Includes the sale of 883 hectares of “San Cayetano” farmland and the partial sale of 1,164 hectares of “Araucaria” farmland.
(11)  
Includes the sale of 1,058 hectares of “La Adela” farmland, 24,624 hectares of “Chaco Paraguayo” farmland, 1,643 hectares of “Fon Fon” farmland and the remainder sale of 27,745 hectares of “Cremaq” farmland.
(12)  
The sale of “La Adela” to our subsidiary IRSA was a transaction between related parties and generated therefore no results under the IFRS and it was not included in the gain from disposition of farms for Ps. 569.5 million.
After recording farm sales for Ps. 814 million in 2015, we did not close any transactions during fiscal year 2016. Specifically in Argentina, the farmland sale market was affected during the last years by the controls on capitals that prevailed until December 2015 and the profitability conditions of the business. With the new administration and new government policies for the farming industry we have seen a positive change in this market’s prospects. In this regard, after year-end we sold the “El Invierno” and “La Esperanza” farms, comprising 2,615 hectares used for agriculture and located in the district of “Rancul”, province of La Pampa, for US$ 6 million (US$ 2,294 per hectare). These farms’ book value was approximately Ps. 13.5 million; therefore, the transaction will result in a gain of Ps. 72 million, which will be recorded in the first quarter of fiscal year 2017.

Farmland Development
We consider that there is great potential in farmland development where, through the use of current technology, we may achieve similar yields with higher profitability than in core areas.
As of June 30, 2016, we owned land reserves in the region extending over more than 365,306 hectares of own farmlands that were purchased at very attractive prices. In addition, we have a concession 107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farms and, therefore, achieve appreciation in the long term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to be used for production purposes.
During fiscal year 2016, we conducted our land development business in Argentina mainly in Los Pozos, where we developed 2,486 hectares in La Paz and Don Mario modules. Moreover, we developed 548 hectares in La Suiza intended for agricultural production.
Our developments in Brazil, through our subsidiary Brasilagro, consisted of 4,416 hectares of developed land intended for agriculture.
In connection with our business in Paraguay, we developed, through CRESCA, 1,400 hectares for agricultural production.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year  2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
Revenues----
Costs(9)(9)(8)0.0%
Gross Loss(9)(9)(8)0.0%
(Loss)/Gain from disposition of farmlands(2)57091-
Profit/(Loss) from operations(12)55278-
Segment Profit/(Loss)(12)55278-
Area under Development (hectares)Developed 2014/2015Developed 2015/2016
Argentina                               1,703                               3,034
Brazil                               7,475                               4,416
Paraguay (1)                               2,367                               1,400
Total                             11,545                             8,850
(1) Includes the farms of Cresca S.A. at 100%.
Agricultural Production
Crops and Sugarcane
 
Our crop production is mainly based on grains, and oilseeds and sugarcane. Our main crops include soybean, wheat, corn, and sunflower. Other crops, such as sorghum and peanut, are sown occasionally and represent only a small percentage of total sown land.
 
Production
 
The following table shows, for the fiscal years indicated, our crop production volumes measured in tons:
 
Production Volume(1)
 FY2015  FY2014  FY2013  FY2012 FY 2016FY2015FY2014FY2013FY2012
Corn  310,874   155,759   194,870   247,839 229,893             310,874                 155,759           194,870           247,839
Soybean  279,608   242,349   220,540   196,515 168,916             279,608                 242,349           220,540           196,515
Wheat  15,990   12,373   4,392   18,625 16,186               15,990                   12,373               4,392             18,625
Sorghum  1,740   4,502   6,709   7,791 1,127                 1,740                     4,502               6,709               7,791
Sunflower  11,992   5,803   12,437   14,503 3,053               11,992                     5,803             12,437             14,503
Other  6,999   2,476   5,002   6,774 6,432                 6,999                     2,476               5,002               6,774
Total Crops (tons)  627,203   423,262   443,950   492,047 425,607             627,203                 423,262           443,950           492,047
Sugarcane (tons)  928,273   657,547   1,156,848   576,048 1,228,830             928,273                 657,547        1,156,848           576,048
Cattle herd  7,812   6,970   7,723   8,936 7,714                 7,812                     6,970               7,723               8,936
Milking cows  524   489   470   445 491                    524                        489                  470                  445
Cattle (tons)  8,336   7,459   8,193   9,381 8,205                 8,336                     7,459               8,193               9,381
Milk (liters)  17,525,818   19,320,317   18,459,472   16,562,904 
Milk (thousand of liters)16,723        17,526            19,320      18,459      16,563
 
(1)  
Includes CRESCA at 50%. Does not include Agro-Uranga S.A.

Includes CRESCA at 50%. Does not include Agro-Uranga S.A.
53

 
Below is the geographical distribution of our agricultural production for the last fourfive seasons (in tons):
 
2015 Season Argentina  Brazil  Bolivia  Paraguay  Total 
Corn  253,929   40,102   10,199   6,644   310,874 
Soybean  132,101   111,751   30,471   5,285   279,608 
Wheat  15,990   -   -   -   15,990 
Sorghum  538   -   406   796   1,740 
Sunflower  11,992   -   -   -   11,992 
Other  6,917   -   -   82   6,999 
Total Grains and Other  421,467   151,853   41,076   12,807   627,203 
Sugarcane  -   830,204   98,069   -   928,273 
2016 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn189,70819,98213,2336,969229,893
Soybean117,74426,25215,4169,505168,916
Wheat15,525-661-16,186
Sorghum56-7732981,127
Sunflower3,053---3,053
Other5,3671,065--6,432
Total Grains and Other331,45347,29930,08316,772425,607
Sugarcane-1,075,183153,648-1,228,830

 
2015 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         253,929           40,102           10,199             6,644         310,874
Soybean         132,101         111,751           30,471             5,285         279,608
Wheat           15,990                  -                  -                  -           15,990
Sorghum                538                  -                406                796             1,740
Sunflower           11,992                  -                  -                  -           11,992
Other             6,917                  -                  -                  82             6,999
Total Grains and Other         421,467         151,853           41,076           12,807         627,203
Sugarcane                  -         830,204           98,069                  -         928,273
2014 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn           93,388           50,102           11,445                826         155,761
Soybean         108,088         108,107           20,821             5,334         242,350
Wheat           12,373                  -                  -                  -           12,373
Sorghum             1,367                  -             2,487                648             4,502
Sunflower             5,756                  -                  47                  -             5,803
Other             1,926                534                  -                  16             2,476
Total Grains and Other         222,898         158,743           34,800             6,824         423,265
Sugarcane                  -         570,820           86,727                  -         657,547

 
2013 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         145,949           34,630           14,291                  -         194,870
Soybean           82,476         106,276           31,601                187         220,540
Wheat             3,111                  -             1,281                  -             4,392
Sorghum             3,766                  -             2,638                305             6,709
Sunflower           12,090                  -                347                  -           12,437
Other             2,644             2,358                  -                  -             5,002
Total Grains and Other         250,036         143,264           50,158                492         443,950
Sugarcane                  -      1,014,234         142,614                  -      1,156,848

 
2012 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         153,889           72,387           21,563                  -         247,839
Soybean           83,221           83,319           29,976                  -         196,516
Wheat           17,637                  -                988                  -           18,625
Sorghum             3,360                  -             4,431                  -             7,791
Sunflower           13,210                  -             1,293                  -           14,503
Other             5,494             1,280                  -                  -             6,774
Total Grains and Other         276,811         156,986           58,251                  -         492,048
Sugarcane                  -         576,030                  18                  -         576,048


54



Sales
 
Below is the total volume of grains and sugarcane sold broken down into geographical areas, measured in millions of tons:
 
 FY2015  FY2014  FY2013  FY2012 
Volume of Sales(3)
FY2016FY2015FY2014FY2013FY2012
 
D.M.(1)
  
F.M.(2)
  Total  
D.M.(1)
  
F.M.(2)
  Total  
D.M.(1)
  
F.M.(2)
  Total  
D.M.(1)
  
F.M.(2)
  Total 
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
Corn  269,701   -   269,701   179,893   -   179,893   233,369   37,775   271,144   202,345   21,769   224,114 217.337.9255.2269.70.0269.7179.90.0179.9233.337.8271.1 202.321.8 224.1
Soybean  172,938   77,187   250,125   188,818   33,233   222,051   153,446   55,368   208,814   228,639   23,000   251,639 182.515.8198.3172.977.2250.1188.933.2222.1153.455.4208.8 228.623.0 251.6
Wheat  6,969   114   7,083   11,359   -   11,359   10,735   -   10,735   15,246   5,500   20,746 17.329.346.67.00.17.111.40.011.410.70.010.7   15.25.5   20.7
Sorghum  1,569   -   1,569   3,843   -   3,843   5,807   -   5,807   8,497   -   8,497 1.00.01.01.60.01.63.80.03.85.80.05.8     8.50.0     8.5
Sunflower  5,181   -   5,181   9,745   -   9,745   10,551   -   10,551   18,095   -   18,095 10.40.010.45.20.05.29.70.09.710.60.010.6   18.10.0   18.0
Other  1,872   -   1,872   6,248   261   6,509   13,925   127   14,052   11,519   -   11,519 5.90.05.91.90.01.96.20.36.514.00.114.1   12.00.0   12.0
Total
Grains (tons)
  458,230   77,301   535,531   399,906   33,494   433,400   427,833   93,270   521,103   484,341   50,269   534,610 434.483.0517.4458.377.3535.6399.933.5433.4427.893.3521.1484.2503534.5
Sugarcane (tons)  924,478   -   924,478   675,670   -   675,670   1,179,877   -   1,179,877   636,335   -   636,335 1,219.70.01,219.7924.5-924.5675.7-675.71,179.9-1,179.9636.3-636.3
Cattle herd  8,871   -   8,871   8,842   -   8,842   9,627   -   9,627   15,014   -   15,014 8.30.08.38.90.08.98.80.08.89.60.09.6   15.0-   15.0
Milking cows  903   -   903   465   -   465   496   -   496   451   -   451 0.70.00.70.90.00.90.50.00.50.50.00.5        0.5-        0.5
Beef-Cattle (tons)  9,774   -   9,774   9,307   -   9,307   10,123   -   10,123   15,465   -   15,465 9.00.09.0     9.8-     9.8     9.3           -     9.3      10.1-      10.1   15.5-   15.5
Milk (in thousands of liters)  16,924   -   16,924   18,787   -   18,787   17,870   -   17,870   16,267   -   16,267 
Milk (in millions of liters)15.50.015.5   16.9-   16.9   18.8           -   18.8      17.9-      17.9   16.3-   16.3
 
(1) Domestic Market.
(2) Foreign Market.
(3) Includes Brasilagro and CRESCA at 50%., Acres del Sud, Ombú, Yatay and Yuchán. Does not include Agro-Uranga.
 
The following table shows the sown surface area assigned to crop production, classified into owned, under lease, under concession and leased to third parties for the fiscal years indicated below, measured in hectares:
 
 
2015(1)(2)
  
2014(1)(2)
  
2013(1)(2)
  
2012(1)(2)
 
2016(1)(2)
2015(1)(2)
2014(1)(2)
2013(1)(2)
2012(1)(2)
Own  128,795   122,632   127,952   127,793 112,112128,795122,632127,952127,793
Under lease  58,167   58,030   45,624   44,508 43,30958,16758,03045,62444,508
Under concession  21,547   20,986   8,937   8,778 23,19621,54720,9868,9378,778
Leased to third parties  3,267   7,616   18,223   23,595 2,3653,2677,61618,22323,595
Total  211,776   209,264   200,736   204,674 180,982211,776209,264200,736204,674
(1)  
Sown land may differ from that indicated under “Uses of Land”, since some hectares are sown twice in the same season and therefore are counted twice.
(2)  
Includes CRESCA at 50%. Does not include Agro-Uranga.
 
(1)  Sown land may differ from that indicated under “Uses of Land”, since some hectares are sown twice in the same season and therefore are counted twice.
Stock2016 Season2015 Season2014 SeasonYoY var 2016/2015YoY var 2015/2014
Corn        21,233        61,157        17,604(65.3%)247.4%
Soybean        69,665        99,972        75,885(30.3%)31.74%
Sunflower             913          8,594          1,825(89.4%)370.9%
Sorghum             369             198             52286.4%(62.1%)
Wheat          4,964          9,377             681(47.1%)1,276.9%
Cotton               -               -               -0.0%0.0%
Sugarcane               -               -               -0.0%0.0%
Other          2,975          4,500        32,608(33.9%)(86.2%)
Total      100,119      183,798      129,125(45.5%)42.3%
(2)  Includes CRESCA at 50%. Does not include Agro-Uranga.


 Stock 2015 Season  2014 Season  2013 Season  Variation 
Corn  61,927   17,799   34,667   247.9%
Soybean  102,464   84,351   45,928   21.5%
Sunflower  8,594   1,825   5,855   370.9%
Sorghum  198   530   3,577   (62.6%)
Wheat  8,666   737       1,075.8%
Cotton          239   0.0%
Sugarcane              0.0%
Other  4,925   32,782       (85.0%)
Total  186,774   138,024   90,266   35.3%
 
We seek to diversify our mix of products and the geographic location of our farmlands to achieve an adequate balance between the two principal risks associated with our activities: weather conditions and the fluctuations in the prices of commodities. In order to reduce such risks, we own and lease land in several areas of Argentina with different climate conditions that allow us to sow a diversified range of products. Our leased land for crops is mostly located in the Pampas region, a favorable area for crop production. The leased farms are previously studied by technicians who analyze future production expectations based on the historic use of the land. The initial duration of lease agreements is typically one or three seasons. Leases of farms for production of crops generally consist of lease agreements with payments based on a fixed amount of Pesos per hectare or crop sharingsharecropping agreements (“sharecropping”) with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. The principal advantage of leasing farms is that leases do not require us to commit large amounts of capital to the acquisition of lands but allow us to increase our scale in the short term and reduce the risk of inclement weather. The disadvantage of this strategy is that the cost of leasing can increase over time, in part, because increased demand for leased land increases the price of leased land.
 
In order to increase our production yields, we use, in addition tobesides state-of-the-art technology, labor control methods which imply the supervision of the seeding’s quality (density, fertilization, distribution, and depth), crop monitoring (determination of natural losses and losses caused by harvester) and verification of bagged crop quality. In this way, we work jointly with our suppliers to achieve the best management of inputs, water and soil.
 
Wheat seeding takes place from June to August, and harvesting takes place from December to January. Corn, soybean and sunflower are sown from September to December and are harvested from February to August. Grains are available to be sold as commodities after the harvest from December to June and we usually store part of our production until prices recover after the drop that normally takes place during the harvesting season. A major part of production, especially soybean, wheat, and sunflower seeds, corn and sorghum, is sold and delivered to buyers pursuant to agreements in which price conditions are fixed by reference to the market price at a specific time in the future that we determine. The rest of the production is either sold at current market prices or delivered to cover any futures contract that we may have entered into.
 

55

 
Agro-Uranga S.A.
 
We have a 35.72% interest in Agro-Uranga S.A. (“Agro-Uranga”). This company optimizes production processes and attains excellent results, with special emphasis in soil conservation, the application of rational techniques and care of the environment.
 
Agro-Uranga S.A. has two farms: Las Playas and San Nicolás, with a combined area of 8,299 hectares, located in the core region of the Pampas prairies.
26% of the planted hectares in Agro-Uranga is devoted to the production of its special products division, including popcorn, peas and inshell sunflower, whereas the remaining 76% derives from commodities, such as soybean, corn and wheat.
At present, with the assistance of its foreign trade team it is seeking to develop new products so as to significantly increase export volumes, encouraged by the world’s growing demand.
 
Lease of FarmlandsFarmland Development
 
We conductconsider that there is great potential in farmland development where, through the use of current technology, we may achieve similar yields with higher profitability than in core areas.
As of June 30, 2016, we owned land reserves in the region extending over more than 365,306 hectares of own farmlands that were purchased at very attractive prices. In addition, we have a concession 107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farms and, therefore, achieve appreciation in the long term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to be used for production purposes.
During fiscal year 2016, we conducted our land development business on ownedin Argentina mainly in Los Pozos, where we developed 2,486 hectares in La Paz and leased land. Rental payments increase our production costs, as the amounts paid as rent are accountedDon Mario modules. Moreover, we developed 548 hectares in La Suiza intended for as operating expenses. As a result, production costs per hectare of leased land are higher than for the land owned by us.agricultural production.
 
Our developments in Brazil, through our subsidiary Brasilagro, consisted of 4,416 hectares of developed land leasing policyintended for agriculture.
In connection with our business in Paraguay, we developed, through CRESCA, 1,400 hectares for agricultural production.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year  2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
Revenues----
Costs(9)(9)(8)0.0%
Gross Loss(9)(9)(8)0.0%
(Loss)/Gain from disposition of farmlands(2)57091-
Profit/(Loss) from operations(12)55278-
Segment Profit/(Loss)(12)55278-
Area under Development (hectares)Developed 2014/2015Developed 2015/2016
Argentina                               1,703                               3,034
Brazil                               7,475                               4,416
Paraguay (1)                               2,367                               1,400
Total                             11,545                             8,850
(1) Includes the farms of Cresca S.A. at 100%.
Agricultural Production
Crops and Sugarcane
Our crop production is designedmainly based on grains, oilseeds and sugarcane. Our main crops include soybean, wheat, corn, and sunflower. Other crops, such as sorghum and peanut, are sown occasionally and represent only a small percentage of total sown land.
Production
The following table shows, for the fiscal years indicated, our crop production volumes measured in tons:
Production Volume(1)
FY 2016FY2015FY2014FY2013FY2012
Corn229,893             310,874                 155,759           194,870           247,839
Soybean168,916             279,608                 242,349           220,540           196,515
Wheat16,186               15,990                   12,373               4,392             18,625
Sorghum1,127                 1,740                     4,502               6,709               7,791
Sunflower3,053               11,992                     5,803             12,437             14,503
Other6,432                 6,999                     2,476               5,002               6,774
Total Crops (tons)425,607             627,203                 423,262           443,950           492,047
Sugarcane  (tons)1,228,830             928,273                 657,547        1,156,848           576,048
Cattle herd7,714                 7,812                     6,970               7,723               8,936
Milking cows491                    524                        489                  470                  445
Cattle (tons)8,205                 8,336                     7,459               8,193               9,381
Milk (thousand of liters)16,723        17,526            19,320      18,459      16,563
(1)  
Includes CRESCA at 50%. Does not include Agro-Uranga S.A.
Below is the geographical distribution of our agricultural production for the last five seasons (in tons):
2016 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn189,70819,98213,2336,969229,893
Soybean117,74426,25215,4169,505168,916
Wheat15,525-661-16,186
Sorghum56-7732981,127
Sunflower3,053---3,053
Other5,3671,065--6,432
Total Grains and Other331,45347,29930,08316,772425,607
Sugarcane-1,075,183153,648-1,228,830

2015 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         253,929           40,102           10,199             6,644         310,874
Soybean         132,101         111,751           30,471             5,285         279,608
Wheat           15,990                  -                  -                  -           15,990
Sorghum                538                  -                406                796             1,740
Sunflower           11,992                  -                  -                  -           11,992
Other             6,917                  -                  -                  82             6,999
Total Grains and Other         421,467         151,853           41,076           12,807         627,203
Sugarcane                  -         830,204           98,069                  -         928,273
2014 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn           93,388           50,102           11,445                826         155,761
Soybean         108,088         108,107           20,821             5,334         242,350
Wheat           12,373                  -                  -                  -           12,373
Sorghum             1,367                  -             2,487                648             4,502
Sunflower             5,756                  -                  47                  -             5,803
Other             1,926                534                  -                  16             2,476
Total Grains and Other         222,898         158,743           34,800             6,824         423,265
Sugarcane                  -         570,820           86,727                  -         657,547
2013 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         145,949           34,630           14,291                  -         194,870
Soybean           82,476         106,276           31,601                187         220,540
Wheat             3,111                  -             1,281                  -             4,392
Sorghum             3,766                  -             2,638                305             6,709
Sunflower           12,090                  -                347                  -           12,437
Other             2,644             2,358                  -                  -             5,002
Total Grains and Other         250,036         143,264           50,158                492         443,950
Sugarcane                  -      1,014,234         142,614                  -      1,156,848
2012 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         153,889           72,387           21,563                  -         247,839
Soybean           83,221           83,319           29,976                  -         196,516
Wheat           17,637                  -                988                  -           18,625
Sorghum             3,360                  -             4,431                  -             7,791
Sunflower           13,210                  -             1,293                  -           14,503
Other             5,494             1,280                  -                  -             6,774
Total Grains and Other         276,811         156,986           58,251                  -         492,048
Sugarcane                  -         576,030                  18                  -         576,048
Sales
Below is the total volume of grains and sugarcane sold broken down into geographical areas, measured in millions of tons:
Volume of Sales(3)
FY2016FY2015FY2014FY2013FY2012
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
Corn217.337.9255.2269.70.0269.7179.90.0179.9233.337.8271.1 202.321.8 224.1
Soybean182.515.8198.3172.977.2250.1188.933.2222.1153.455.4208.8 228.623.0 251.6
Wheat17.329.346.67.00.17.111.40.011.410.70.010.7   15.25.5   20.7
Sorghum1.00.01.01.60.01.63.80.03.85.80.05.8     8.50.0     8.5
Sunflower10.40.010.45.20.05.29.70.09.710.60.010.6   18.10.0   18.0
Other5.90.05.91.90.01.96.20.36.514.00.114.1   12.00.0   12.0
Total
Grains (tons)
434.483.0517.4458.377.3535.6399.933.5433.4427.893.3521.1484.2503534.5
Sugarcane (tons)1,219.70.01,219.7924.5-924.5675.7-675.71,179.9-1,179.9636.3-636.3
Cattle herd8.30.08.38.90.08.98.80.08.89.60.09.6   15.0-   15.0
Milking cows0.70.00.70.90.00.90.50.00.50.50.00.5        0.5-        0.5
Beef-Cattle (tons)9.00.09.0     9.8-     9.8     9.3           -     9.3      10.1-      10.1   15.5-   15.5
Milk (in millions of liters)15.50.015.5   16.9-   16.9   18.8           -   18.8      17.9-      17.9   16.3-   16.3
(1) Domestic Market.
(2) Foreign Market.
(3) Includes Brasilagro and CRESCA at 50%, Acres del Sud, Ombú, Yatay and Yuchán. Does not include Agro-Uranga.
The following table shows the sown surface area assigned to supplement our expansion strategy, using our liquiditycrop production, classified into owned, under lease, under concession and leased to make production investmentsthird parties for the fiscal years indicated below, measured in our principal agricultural activities. On the other hand, our leasing strategy provides us with an added levelhectares:
 
2016(1)(2)
2015(1)(2)
2014(1)(2)
2013(1)(2)
2012(1)(2)
Own112,112128,795122,632127,952127,793
Under lease43,30958,16758,03045,62444,508
Under concession23,19621,54720,9868,9378,778
Leased to third parties2,3653,2677,61618,22323,595
Total180,982211,776209,264200,736204,674
(1)  
Sown land may differ from that indicated under “Uses of flexibilityLand”, since some hectares are sown twice in the sharesame season and therefore are counted twice.
(2)  
Includes CRESCA at 50%. Does not include Agro-Uranga.
Stock2016 Season2015 Season2014 SeasonYoY var 2016/2015YoY var 2015/2014
Corn        21,233        61,157        17,604(65.3%)247.4%
Soybean        69,665        99,972        75,885(30.3%)31.74%
Sunflower             913          8,594          1,825(89.4%)370.9%
Sorghum             369             198             52286.4%(62.1%)
Wheat          4,964          9,377             681(47.1%)1,276.9%
Cotton               -               -               -0.0%0.0%
Sugarcane               -               -               -0.0%0.0%
Other          2,975          4,500        32,608(33.9%)(86.2%)
Total      100,119      183,798      129,125(45.5%)42.3%

We seek to diversify our mix of eachproducts and the geographic location of our productsfarmlands to achieve an adequate balance between the two principal risks associated with our activities: weather conditions and the fluctuations in totalthe prices of commodities. In order to reduce such risks, we own and lease land in several areas of Argentina with different climate conditions that allow us to sow a diversified range of products. Our leased land for crops is mostly located in the Pampas region, a favorable area for crop production. The leased farms are previously studied by technicians who analyze future production providing for greater diversification.
expectations based on the historic use of the land. The initial duration of lease agreements is typically one crop season.or three seasons. Leases of farms for production of crops generally consist inof lease agreements with payments based on a fixed amount of Pesos per hectare or crop sharingsharecropping agreements (“sharecropping”) with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. LeasesThe principal advantage of farmlandsleasing farms is that leases do not require us to commit large amounts of capital to the acquisition of lands but allow us to increase our scale in the short term and reduce the risk of inclement weather. The disadvantage of this strategy is that the cost of leasing can increase over time, in part, because increased demand for cattle breeding consist in lease agreements with fixed payments based on a fixed amount of Pesos per hectare or steer kilograms or capitalization agreements with payments in kind or in cash based on the weight gain in kilograms.
During fiscal year 2015, we leased to third parties a total of 53 fields, covering 72,679 hectares, including 14,263 hectares in Brazil. Out of the total leased area, 58,167 hectares were assigned to agricultural production, including double crops, and 13,501 hectares to cattle raising. The properties for agricultural production were leased, primarily, for a fixed price prior to harvest and only a small percentage consisted of crop sharing agreements.
The following table shows a breakdown of the number of hectares of leased land used for each of our principal production activities:
  2015  2014  2013  2012 
Crops  59,178   58,030   45,624   44,508 
Cattle  13,501   18,549   12,635   12,635 
Due to the rise inincreases the price of land, we adopted a policy of not validating excessive prices and applying strict criteria upon adopting the decision to lease, selecting those lands with values that would ensure appropriate margins.leased land.
 
Results
The following table shows the Company’s results for fiscal year 2015, comparedIn order to the two preceding fiscal years:
Crops
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  986.7   836.8   750.4   17.9%
Costs  (1,795.4)  (1,540.7)  (1,227.8)  16.5%
Initial recognition and changes in the fair value of biological assets and agricultural products  at the point of harvest  918.3   868.4   572.1   5.8%
Changes in the net realizable value of agricultural products after harvest  (34.5)  (17.6)  11.8   95.6%
Gross profit  75.1   146.9   106.4   (48.9%)
General and administrative expenses  (159.0)  (147.2)  (89.6)  8.0%
Selling expenses  (160.4)  (117.8)  (115.9)  36.1%
Other operating results, net  (8.6)  (29.4)  (11.0)  (70.6%)
Loss from operations  (252.9)  (147.5)  (110.1)  71.5%
Share of profit / (loss) of associates and joint ventures  0.8   11.0   8.1   (92.3%)
Segment Loss  (252.1)  (136.5)  (102.0)  84.7%
Sugarcane
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  197.8   123.9   160.3   59.7%
Costs  (368.2)  (206.8)  (302.2)  78.1%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest  187.5   96.2   197.3   94.8%
Gross profit  17.1   13.3   55.4   28.5%
General and administrative expenses  (19.8)  (28.3)  (24.2)  (29.9%)
Selling expenses  (7.8)  (4.9)  (4.0)  59.5%
Other operating results, net  (1.7)  0.1   (0.0)  (1,704.8%)
(Loss)/Profit from operations  (12.1)  (19.7)  27.2   (38.4%)
Segment (Loss)/Profit  (12.1)  (19.7)  27.2   (38.4%)


56

Cattle
Our cattle production involves the breeding and fattening of our own animals. In some cases, if market conditions are favorable, we also purchase and fatten cattle which we sell to slaughterhouses and supermarkets.  As of June 2015, our cattle aggregated 70,660 heads, and we had a total surface area of 88,643 hectares of own and leased lands devoted to this business activity.  In addition, we have leased to third parties 13,501 hectares assigned to these activities.
During the fiscal year ended June 30, 2015,increase our production was 8,336 tons, a 12% year-on-year increase. The following table sets forth, for the fiscal years indicated below, the beef cattle production volumes measured in tons.
The following table sets forth, for the fiscal years indicated below, the cattle production volumes measured in tons:
  
2015(1)
  
2014(1)
  
2013(1)
 
Cattle production  8,336   7,459   8,193 
(1)Production measured in tons of live weight.  Production is the sum of the net increases (or decreases) during a given period in live weight of each head of cattle owned by us.
Our cattle breeding activities are carried out with breeding cows and bulls and our fattening activities apply to steer, heifers and calves. Breeding cows calve approximately once a year and their productive lifespan is from six to seven years. Six months after birth, calves are weaned and transferred to fattening pastures. Acquired cattle are directly submitted to the fattening process. Upon starting this process, cattle have been grazing for approximately one year to one and a half year in order to be fattened for sale. Steer and heifers are sold when they have achieved a weight of 380–430 kg and 280–295 kg, respectively, depending on the breed.
Pregnancy levels, which have been improving over the years, showed satisfactory levels of efficiency notwithstanding the adverse weather conditions. Genetics and herd management are expected to further improve pregnancy levels in the coming years. Reproductive indicators improved thanks to the implementation of technologies, which have included handling techniques and females artificial insemination with cattle genetics especially selected for the stock which is purchased from specialized companies in quality semen elaboration for meat production. We use veterinarian products manufactured by leading national and international laboratories. It is important to emphasize the work of a veterinarian advising committee, who are external to us and visit each establishment monthly to control and agree tasks.
Currently, the cattle raising farms are officially registered as export farmlands pursuant to the identification and traceability rules in force in Argentina. Animals are individually identified, thus allowing for the development of special businesses in this area.
Our cattle stock is organized into breeding and fattening activities. The following table shows, for the fiscal years indicated, the number of head of beef cattle for each activity:
  2015  2014  2013 
Breeding stock  52,052   54,808   36,531 
Winter grazing stock  12,950   11,607   21,107 
Milk farmstock  5,658   6,450   6,529 
Total Stock (heads)  70,660   72,865   64,167 
We seek to improve cattle production and quality in order to obtain a higher price through advanced breeding techniques. We cross breed our stock of Indicus, British (Angus and Hereford) and Continental breeds to obtain herds with characteristics better suited to the pastures in which they graze. To enhance the quality of our herds even further, we plan to continue improving our pastures through permanent investment in seeds and fertilizers, an increase in the watering troughs available in pastures, and the acquisition of round bailers to cut and roll grass for storage purposes.
Our emphasis on improving the quality of our herd also includes the use of animal health-related technologies. We comply with national animal health standards that include laboratory analyses and vaccination aimed at controlling and preventing disease in our herd, particularly FMD.
Direct costs of beef production consist primarily of crops for feeding and dietary supplementation purposes, animal health and payroll costs, among others.
Results
The following table shows this segment’s results for fiscal year 2015, compared to the two preceding fiscal years:
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  143.6   90.3   82.9   59.0%
Costs  (224.6)  (160.7)  (147.3)  39.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest  166.7   145.3   79.3   14.7%
Changes in the net realizable value of agricultural products after harvest  0.0   0.2   0.0   (98.3%)
Gross Profit  85.7   75.2   14.9   14.1%
General and administrative expenses  (25.8)  (27.2)  (13.7)  (5.3%)
Selling expenses  (20.1)  (13.9)  (11.5)  45.1%
Other operating results, net  (3.2)  (2.0)  (3.5)  58.0%
Profit/ (Loss) from operations  36.7   32.1   (13.8)  14.3%
Share of profit / (loss) of associates and joint ventures  0.0   0.0   0.0   (85.7%)
Segment Profit / (Loss)  36.7   32.1   (13.8)  14.3%


57


Dairy
As of June 30, 2015, we conducted our diary business in the dairy facility located in “El Tigre” farm in the Province of La Pampa, Argentina. We have a capacity of 2,189 cows in milking per day and seek to increase total productivity through the application of new technologies including improved genetic management for milk production, feeding strategic planning based on cattle specific requirements and the use of individual traceability to know the productivity history of each animal. Alsoyields, we use, computer science in milk business to make more efficientbesides state-of-the-art technology, labor control methods which imply the manual labor by surveying the information supplied by the farm.
Within the process of de-commoditization and technological innovation, we implemented an identification and tracking system in compliance with European and SENASA standards. We also obtained Global Gap and HCCP certification. Our goal in this respect is to distinguish our production and obtain higher prices in production sales.
Our milk production is based on a herd of Holando Argentina dairy cows, genetically selected through the use of imported frozen semen of North American Holando bulls. Male calves are sold, at calving, for a given amount per head, whereas female calves are weaned after 24 hours, spend approximately 60 days in raising and approximately 100 days being fed on the basis of grass, grains and supplements. Young heifers then graze for an additional 12 to 15 month period, prior to artificial insemination at the age of 18 to 20 months and they calve nine months later. Heifers are subsequently milked for an average of 300 days. Milking dairy cows are once again inseminated during the 60 to 90 day subsequent period. This process is repeated once a year during six or seven years. The pregnancy rate for our dairy cows is 80-90%.
Our dairy herd is milked mechanically twice a day. The milk obtained is cooled to less than five degrees centigrade to preserve quality and is then stored in a tank for delivery once a day to trucks sent by buyers. Dairy cows are fed mainly with grass, supplemented as needed with grains, hay and silage. We have invested in certain technologies that focus on genetic improvement, animal health and feeding in order to improve our milk production. These investments include imports of top quality frozen semen from genetically improved North American Holstein bulls, agricultural machinery and devices such as feed-mixer trucks, use of dietary supplements and the installation of modern equipment to control milk cooling. We are currently acquiring dietary supplements for our dairy cows and have made investments with the aim of increasing the quantity and quality of forage (pasture, alfalfa and corn silage) in order to reduce feeding costs.
The following table sets forth, for the periods indicated, the average number of our dairy cows and average daily production per cow:
  2015  2014  2013 
Average dairy cows per day (heads)  2,189   2,439   2,392 
Milk Production/Dairy Cow/Day (liters)  21.48   19.69   20.44 
At the closing of fiscal year 2015, we had 5,658 heads of cattle on 2,864 hectares involved in the production of milk; whereas as of June 30, 2014, we had 6,450 heads of cattle on 2,864 hectares.
Results
The following table shows this segment’s results for fiscal year 2015, compared to the two preceding fiscal years:
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  71.9   53.9   38.8   33.4%
Costs  (133.3)  (104.3)  (74.8)  27.7%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest  74.9   62.8   40.7   19.2%
Gross Profit  13.6   12.4   4.7   9.3%
General and administrative expenses  (4.9)  (5.9)  (3.1)  (14.4%)
Selling expenses  (3.7)  (2.2)  (1.8)  63.1%
Other operating results, net  (0.8)  (0.4)  (0.8)  85.4%
Profit / (Loss) from operations  4.2   4.0   (1.0)  5.2%
Segment Profit / (Loss)  4.2   4.0   (1.0)  5.2%

Agricultural Rental and Services
We lease own farms to third parties for agriculture, cattle breeding and seed production, mainly in two types of farms. On the one hand, we lease our farms under irrigation in San Luis (Santa Bárbara and La Gramilla) to seed producers. These farms are ideal for obtaining steady production levels, given the quality of their soil and the weather conditionssupervision of the area, along with the even humidity providedseeding’s quality (density, fertilization, distribution, and depth), crop monitoring (determination of natural losses and losses caused by irrigation.
On the other hand, we lease farms recently put into production after agricultural development.harvester) and verification of bagged crop quality. In this way, we managework jointly with our suppliers to reduceachieve the best management of inputs, water and soil.
Wheat seeding takes place from June to August, and harvesting takes place from December to January. Corn, soybean and sunflower are sown from September to December and are harvested from February to August. Grains are available to be sold as commodities after the harvest from December to June and we usually store part of our production risk, ensuringuntil prices recover after the drop that normally takes place during the harvesting season. A major part of production, especially soybean, wheat, corn and sorghum, is sold and delivered to buyers pursuant to agreements in which price conditions are fixed rental income untilby reference to the new farms reach stable productivity levels.market price at a specific time in the future that we determine. The rest of the production is either sold at current market prices or delivered to cover any futures contract that we may have entered into.
 
In addition, in this segment we include the irrigation service we provide to our own farms leased to third parties.
Results
The following table shows this segment’s results for fiscal year 2015, compared to the two preceding fiscal years:
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  37.2   29.1   30.8   27.6%
Costs  (19.2)  (17.4)  (12.1)  10.5%
Gross Profit  18.0   11.8   18.8   52.7%
General and administrative expenses  (2.1)  (2.7)  (4.4)  (19.8%)
Selling expenses  (0.7)  (0.8)  (1.7)  (8.0%)
Other operating results, net  (0.3)  (0.2)  (1.1)  51.4%
Profit from operations  14.8   8.1   11.5   82.5%
Segment Profit  14.8   8.1   11.5   82.5%

Land Transformation and Sales
Land AcquisitionsAgro-Uranga S.A.
 
We intendhave a 35.72% interest in Agro-Uranga S.A. (“Agro-Uranga”). This company optimizes production processes and attains excellent results, with special emphasis in soil conservation, the application of rational techniques and care of the environment.
At present, with the assistance of its foreign trade team it is seeking to increase our farmland portfolio by acquiring large extensions of land with high appreciation potential. We also intend to transform the land acquired from non-productive to cattle breeding, from cattle breeding to farming, or applying state-of-the-art technology to improve farming yieldsdevelop new products so as to generate higher land appreciation.significantly increase export volumes, encouraged by the world’s growing demand.
 
In our view, the sector’s potential lies in developing marginal areas and/or under-utilized areas. Thanks to the current technology, we may achieve similar yields with higher profitability than core areas, resulting in the appreciation of land values.
Over the past 10 years, prices of farmlands intended for agricultural production have increased in the southern hemisphere (mainly South America) but continue to be relatively low compared to the northern hemisphere (U.S. and Europe). Our financial strength relative to other Argentine producers gives us the chance to increase our land holdings at attractive prices, improve our production scale and create potential for capital appreciation.
Several important intermediaries, with whom we usually work, bring farmlands available for sale to our attention. The decision to acquire farmlands is based on the assessment of a large number of factors. In addition to the land’s location, we normally carry out an analysis of soil and water, including the quality of the soil and its suitability for our intended use (crops, beef cattle, or milk production), classify the various sectors of the lot and the prior use of the farmland; analyze the improvements in the property, any easements, rights of way or other variables in relation to the property title; examine satellite photographs of the property (useful in the survey of soil drainage characteristics during the different rain cycles) and detailed comparative data regarding neighboring farms (generally covering a 50-km area). Based on the foregoing factors, we assess the farmland in terms of the sales price compared against the production potential of the land and capital appreciation potential. We consider that competition for the acquisition of farmlands is, in general, limited to small farmers for the acquisition of smaller lots, and that there is scarce competition for the acquisition of bigger lots.
In addition, we may consider the acquisition of farmlands in marginal zones and their improvement by irrigation in non-productive areas as well as the installation of irrigation devices in order to obtain attractive production yields and create potential for capital appreciation.
The following chart shows certain information concerning our land acquisitions for each of the last 10 fiscal years ended on June 30:
Fiscal Year Number of Farmlands  
Amount of Acquisitions
(Ps. million)
 
2006 (1)
  1   45.9 
2007 (2)
  1   7.3 
2008 (3)
  2   4.5 
2009 (4)
  7   133.2 
2010 (5)
  -   5.0 
2011 (6)
  3   61.5 
2012  -   - 
2013  -   - 
2014  -   - 
2015  -   - 
(1)  Includes the acquisition of “San Pedro” farmland of 6,022 hectares.
(2)  Includes the acquisition of “8 de Julio” farmland of 90,000 hectares.
(3)  Includes the acquisition of the remaining 25% of “La Adela” farmland of 18 hectares and 80% of “La Esperanza” farmland of 980 hectares.
(4)  Includes the acquisition of "Estancia Carmen", "Puertas de Luján", "Las Londras", "San Cayetano", "San Rafael", and "La Fon Fon" farmlands and 50% of "Jerovia" farmland, of 10,911, 115, 4,566, 883, 2,969, 3,748 and 20,966 hectares, respectively.
(5)  Includes exercise of the option over 50% of the “Jerovía” farmland of 3,646 hectares.
(6)  Includes the acquisition of “La Primavera” and “4 Vientos” farmlands of 2,341 hectares and 2,659 hectares, respectively.
In addition, it includes the acquisition of 943 hectares of the Mendoza farlmland.
Land Sales
We periodically sell properties that have reached a considerable appraisal to reinvest in new farms with higher appreciation potential. We analyze the possibility of selling based on a number of factors, including the expected future yield of the farmland for continued agricultural and livestock exploitation, the availability of other investment opportunities and cyclical factors that have a bearing on the global values of farmlands.

58

The following chart shows certain information concerning our land sales for each of the last 10 fiscal years ended on June 30:
Fiscal Year Number of Farmlands  
Gross Proceeds from Sales
(Ps. million)
  
Profit (1)
(Ps. million )
 
2006 (2)
  1   16.1   9.9 
2007 (3)
  3   29.9   22.3 
2008 (4)
  2   23.0   20.0 
2009 (5)
  2   2.0   1.9 
2010 (6)
  1   18.6   13.7 
2011 (7)
  2   84.5   54.6 
2012 (8)
  3   118.3   63.2 
2013 (9)
  4   332.6   149.6 
2014 (10)
  2   148.5   91.4 
2015(11)
  4   814.3   569.6 

(1)  Includes the difference between the gross proceeds from sales (net of all taxes and commissions) and the book value of the assets sold.
(2)  Includes the sale of “El Gualicho” farmland of 5,727 hectares.
(3)  Includes the sale of 20,833 hectares of “Tapenagá” farmland and the partial sale of 14,516 hectares of “Los Pozos” farmland and 50 hectares of “El Recreo” farmland.
(4)  Includes the partial sale of 4,974 hectares of “Los Pozos” farmland and the partial sale of 2,430 hectares of “La Esmeralda” farmland.
(5)  Includes the partial sale of 1,658 hectares of “Los Pozos” farmland and the partial sale of 1,829 hectares of “El Recreo” farmland.
(6)  Includes the sale of 12,071 hectares of “Tali Sumaj.”
(7)  Includes the sale of “La Juanita” farmland, of 4,302 hectares, and the partial sale of 910 hectares of “La Fon Fon.”
(8)  Includes the sale of 2,447 hectares of “San Pedro” farmland, the partial sale of 1,194 hectares of “La Fon Fon” farmland, and the partial sale of 115 hectares of “Puerta de Lujan” farmland.
(9)  Includes the sale of 14,359 hectares of “Horizontina” farmland, the partial sale of 394 hectares of “Araucaria” farmland, the partial sale of “Cremaq” farmland of 4,985 hectares, and the partial sale of  5,613 hectares of La “Suiza” farmland.
(10)Includes the sale of 883 hectares of “San Cayetano” farmland and the partial sale of 1,164 hectares of “Araucaria” farmland.
(11)Includes the sale of 1,058 hectares of “La Adela” farmland, 24,624 hectares of “Chaco Paraguayo” farmland, 1,643 hectares of “Fon Fon” farmland and the remainder sale of 27,745 hectares of “Cremaq” farmland.
On July 31, 2014, we sold “La Adela” farm, of approximately 1,058 hectares, located in the District of Luján, Province of Buenos Aires, for a total amount of Ps. 210 million to our subsidiary IRSA, given the degree of development of the farm, its closeness to the city and high urban potential. Under IFRS accounting standards, this kind of sale transactions within the Company does not impact on our financial statements.
On April 3, 2014, CRESCA, a company in which our subsidiary Brasilagro holds 50% of its stock capital, executed a sale agreement for 24,624 hectares of undeveloped land in Paraguay for US$ 600 per hectare, for a total sales price of US$ 14.7 million. The purchaser paid US$ 1.8 million upon execution of the purchase agreement, and the balance in three installments. The transaction was recorded in our books on July 15, 2014 with the transfer of the title deed and surrender of possession of the land. The gain recorded as a result of this transaction was Ps. 19.1 million.
In June 2015 we sold the remaining fraction of our “Fon Fon” farm consisting of 1,643 hectares intended for agriculture located in Santa Cruz de la Sierra (Bolivia) for a total amount of US$ 7.21 million equivalent to US$ 4,388 per hectare. As of such date, possession was surrendered and the sum of US$ 1.5 million was received, with a balance of US$ 5.71 million still remaining that will be paid in six semi-annual installments from December of this year until June 2018. The gain recorded as a result of this transaction was Ps. 24.6 million.
On June 10, 2015, through our subsidiary Brasilagro, we sold the remaining 27,745 hectares in our “Cremaq” farm in the district of Baixa Grande do Ribeiro (Piaui). The total transaction amount was BRL 270.0 million (ps. 694.0 million). Out of this sum, 25% has already been collected and the balance will be paid upon execution of the title deed, scheduled to be signed 90 days after the execution of the sale undertaking (June 10, 2015). The gain recorded as a result of this transaction was Ps. 525.9 million.
Farmland Development
 
We consider that there is great potential in farmland development where, through the use of current technology, we may achieve similar yields with higher profitability than in core areas.
 
As of June 30, 2015,2016, we owned land reserves in the region extending over more than 356,907365,306 hectares of own farmlands that were purchased at very attractive prices. In addition, we have a concession over 107,584107,984 hectares reserved for future development. We believe that there are technological tools available to improve productivity in these farms and, therefore, achieve appreciation in the long term. However, current or future environmental regulations could prevent us from fully developing our land reserves by requiring that we maintain part of this land as natural woodlands not to be used for production purposes.
 
During fiscal year 2015,2016, we conducted our land development business in Argentina mainly in Los Pozos, where we developed 1,4932,486 hectares in La Paz and Don Mario modules. Moreover, we developed 548 hectares in La Suiza intended for agricultural production so as to reach 24,416 hectares in operation. Furthermore, we continued with the development of our “Agro Riego” farm in the province of San Luis, where we developed 210 hectares intended for agriculture including spray irrigation infrastructure, reaching 4,295 hectares in operation.

59

production.
 
Our developments in Brazil, through our subsidiary Brasilagro, we developed 7,475consisted of 4,416 hectares of developed land intended for agriculture.
 
In connection with our business in Paraguay, we developed, through CRESCA, 2,3671,400 hectares for agricultural production.
 
Results
 
The following table shows this segment’s results for fiscal year 2015,2016, compared to the two preceding fiscal years:
 
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 Fiscal Year  2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
Revenues  -   -   -   - ---
Costs  (9.0)  (8.2)  (5.7)  9.4%(9)(9)(8)0.0%
Gross Loss  (9.0)  (8.2)  (5.7)  9.4%(9)(9)(8)0.0%
Gain from disposition of farmlands  569.5   91.4   149.6   523.4%
Profit from operations  551.4   78.0   132.6   606.6%
Segment Profit  551.4   78.0   132.6   606.6%
(Loss)/Gain from disposition of farmlands(2)57091-
Profit/(Loss) from operations(12)55278-
Segment Profit/(Loss)(12)55278-
Area under Development (hectares)Developed 2014/2015Developed 2015/2016
Argentina                               1,703                               3,034
Brazil                               7,475                               4,416
Paraguay (1)                               2,367                               1,400
Total                             11,545                             8,850
(1) Includes the farms of Cresca S.A. at 100%.
Agricultural Production
Crops and Sugarcane
Our crop production is mainly based on grains, oilseeds and sugarcane. Our main crops include soybean, wheat, corn, and sunflower. Other crops, such as sorghum and peanut, are sown occasionally and represent only a small percentage of total sown land.
Production
The following table shows, for the fiscal years indicated, our crop production volumes measured in tons:
Production Volume(1)
FY 2016FY2015FY2014FY2013FY2012
Corn229,893             310,874                 155,759           194,870           247,839
Soybean168,916             279,608                 242,349           220,540           196,515
Wheat16,186               15,990                   12,373               4,392             18,625
Sorghum1,127                 1,740                     4,502               6,709               7,791
Sunflower3,053               11,992                     5,803             12,437             14,503
Other6,432                 6,999                     2,476               5,002               6,774
Total Crops (tons)425,607             627,203                 423,262           443,950           492,047
Sugarcane  (tons)1,228,830             928,273                 657,547        1,156,848           576,048
Cattle herd7,714                 7,812                     6,970               7,723               8,936
Milking cows491                    524                        489                  470                  445
Cattle (tons)8,205                 8,336                     7,459               8,193               9,381
Milk (thousand of liters)16,723        17,526            19,320      18,459      16,563
(1)  
Includes CRESCA at 50%. Does not include Agro-Uranga S.A.
Below is the geographical distribution of our agricultural production for the last five seasons (in tons):
2016 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn189,70819,98213,2336,969229,893
Soybean117,74426,25215,4169,505168,916
Wheat15,525-661-16,186
Sorghum56-7732981,127
Sunflower3,053---3,053
Other5,3671,065--6,432
Total Grains and Other331,45347,29930,08316,772425,607
Sugarcane-1,075,183153,648-1,228,830

2015 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         253,929           40,102           10,199             6,644         310,874
Soybean         132,101         111,751           30,471             5,285         279,608
Wheat           15,990                  -                  -                  -           15,990
Sorghum                538                  -                406                796             1,740
Sunflower           11,992                  -                  -                  -           11,992
Other             6,917                  -                  -                  82             6,999
Total Grains and Other         421,467         151,853           41,076           12,807         627,203
Sugarcane                  -         830,204           98,069                  -         928,273
2014 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn           93,388           50,102           11,445                826         155,761
Soybean         108,088         108,107           20,821             5,334         242,350
Wheat           12,373                  -                  -                  -           12,373
Sorghum             1,367                  -             2,487                648             4,502
Sunflower             5,756                  -                  47                  -             5,803
Other             1,926                534                  -                  16             2,476
Total Grains and Other         222,898         158,743           34,800             6,824         423,265
Sugarcane                  -         570,820           86,727                  -         657,547
2013 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         145,949           34,630           14,291                  -         194,870
Soybean           82,476         106,276           31,601                187         220,540
Wheat             3,111                  -             1,281                  -             4,392
Sorghum             3,766                  -             2,638                305             6,709
Sunflower           12,090                  -                347                  -           12,437
Other             2,644             2,358                  -                  -             5,002
Total Grains and Other         250,036         143,264           50,158                492         443,950
Sugarcane                  -      1,014,234         142,614                  -      1,156,848
2012 SeasonArgentinaBrazilBoliviaParaguayTotal
Corn         153,889           72,387           21,563                  -         247,839
Soybean           83,221           83,319           29,976                  -         196,516
Wheat           17,637                  -                988                  -           18,625
Sorghum             3,360                  -             4,431                  -             7,791
Sunflower           13,210                  -             1,293                  -           14,503
Other             5,494             1,280                  -                  -             6,774
Total Grains and Other         276,811         156,986           58,251                  -         492,048
Sugarcane                  -         576,030                  18                  -         576,048
Sales
Below is the total volume of grains and sugarcane sold broken down into geographical areas, measured in millions of tons:
Volume of Sales(3)
FY2016FY2015FY2014FY2013FY2012
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
D.M.(1)
F.M.(2)
Total
Corn217.337.9255.2269.70.0269.7179.90.0179.9233.337.8271.1 202.321.8 224.1
Soybean182.515.8198.3172.977.2250.1188.933.2222.1153.455.4208.8 228.623.0 251.6
Wheat17.329.346.67.00.17.111.40.011.410.70.010.7   15.25.5   20.7
Sorghum1.00.01.01.60.01.63.80.03.85.80.05.8     8.50.0     8.5
Sunflower10.40.010.45.20.05.29.70.09.710.60.010.6   18.10.0   18.0
Other5.90.05.91.90.01.96.20.36.514.00.114.1   12.00.0   12.0
Total
Grains (tons)
434.483.0517.4458.377.3535.6399.933.5433.4427.893.3521.1484.2503534.5
Sugarcane (tons)1,219.70.01,219.7924.5-924.5675.7-675.71,179.9-1,179.9636.3-636.3
Cattle herd8.30.08.38.90.08.98.80.08.89.60.09.6   15.0-   15.0
Milking cows0.70.00.70.90.00.90.50.00.50.50.00.5        0.5-        0.5
Beef-Cattle (tons)9.00.09.0     9.8-     9.8     9.3           -     9.3      10.1-      10.1   15.5-   15.5
Milk (in millions of liters)15.50.015.5   16.9-   16.9   18.8           -   18.8      17.9-      17.9   16.3-   16.3
(1) Domestic Market.
(2) Foreign Market.
(3) Includes Brasilagro and CRESCA at 50%, Acres del Sud, Ombú, Yatay and Yuchán. Does not include Agro-Uranga.
The following table shows the sown surface area assigned to crop production, classified into owned, under lease, under concession and leased to third parties for the fiscal years indicated below, measured in hectares:
 
2016(1)(2)
2015(1)(2)
2014(1)(2)
2013(1)(2)
2012(1)(2)
Own112,112128,795122,632127,952127,793
Under lease43,30958,16758,03045,62444,508
Under concession23,19621,54720,9868,9378,778
Leased to third parties2,3653,2677,61618,22323,595
Total180,982211,776209,264200,736204,674
(1)  
Sown land may differ from that indicated under “Uses of Land”, since some hectares are sown twice in the same season and therefore are counted twice.
(2)  
Includes CRESCA at 50%. Does not include Agro-Uranga.
Stock2016 Season2015 Season2014 SeasonYoY var 2016/2015YoY var 2015/2014
Corn        21,233        61,157        17,604(65.3%)247.4%
Soybean        69,665        99,972        75,885(30.3%)31.74%
Sunflower             913          8,594          1,825(89.4%)370.9%
Sorghum             369             198             52286.4%(62.1%)
Wheat          4,964          9,377             681(47.1%)1,276.9%
Cotton               -               -               -0.0%0.0%
Sugarcane               -               -               -0.0%0.0%
Other          2,975          4,500        32,608(33.9%)(86.2%)
Total      100,119      183,798      129,125(45.5%)42.3%

We seek to diversify our mix of products and the geographic location of our farmlands to achieve an adequate balance between the two principal risks associated with our activities: weather conditions and the fluctuations in the prices of commodities. In order to reduce such risks, we own and lease land in several areas of Argentina with different climate conditions that allow us to sow a diversified range of products. Our leased land for crops is mostly located in the Pampas region, a favorable area for crop production. The leased farms are previously studied by technicians who analyze future production expectations based on the historic use of the land. The initial duration of lease agreements is typically one or three seasons. Leases of farms for production of crops generally consist of lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. The principal advantage of leasing farms is that leases do not require us to commit large amounts of capital to the acquisition of lands but allow us to increase our scale in the short term and reduce the risk of inclement weather. The disadvantage of this strategy is that the cost of leasing can increase over time, in part, because increased demand for leased land increases the price of leased land.
In order to increase our production yields, we use, besides state-of-the-art technology, labor control methods which imply the supervision of the seeding’s quality (density, fertilization, distribution, and depth), crop monitoring (determination of natural losses and losses caused by harvester) and verification of bagged crop quality. In this way, we work jointly with our suppliers to achieve the best management of inputs, water and soil.
Wheat seeding takes place from June to August, and harvesting takes place from December to January. Corn, soybean and sunflower are sown from September to December and are harvested from February to August. Grains are available to be sold as commodities after the harvest from December to June and we usually store part of our production until prices recover after the drop that normally takes place during the harvesting season. A major part of production, especially soybean, wheat, corn and sorghum, is sold and delivered to buyers pursuant to agreements in which price conditions are fixed by reference to the market price at a specific time in the future that we determine. The rest of the production is either sold at current market prices or delivered to cover any futures contract that we may have entered into.
Agro-Uranga S.A.
We have a 35.72% interest in Agro-Uranga S.A. (“Agro-Uranga”). This company optimizes production processes and attains excellent results, with special emphasis in soil conservation, the application of rational techniques and care of the environment.
At present, with the assistance of its foreign trade team it is seeking to develop new products so as to significantly increase export volumes, encouraged by the world’s growing demand.
Lease of Farmlands
We conduct our business on owned and leased land. Rental payments increase our production costs, as the amounts paid as rent are accounted for as operating expenses. As a result, production costs per hectare of leased land are higher than for the land owned by us.
Our land leasing policy is designed to supplement our expansion strategy, using our liquidity to make production investments in our principal agricultural activities. On the other hand, our leasing strategy provides us with an added level of flexibility in the share of each of our products in total production, providing for greater diversification.
The initial duration of lease agreements is typically one crop season. Leases of farms for production of crops consist in lease agreements with payments based on a fixed amount of Pesos per hectare or sharecropping agreements with payments in kind based on a percentage of the crops obtained or a fixed amount of tons of grains obtained or their equivalent value in Pesos. Leases of farmlands for cattle breeding consist in lease agreements with fixed payments based on a fixed amount of Pesos per hectare or steer kilograms or capitalization agreements with payments in kind or in cash based on the weight gain in kilograms.
During fiscal year 2016, we leased to third parties a total of 35 farmlands, covering 56,003 hectares, including 11,718 hectares in Brazil. Out of the total leased area, 43,309 hectares were assigned to agricultural production, including double crops, and 12,635 hectares to cattle raising. The properties for agricultural production were leased, primarily, for a fixed price prior to harvest and only a small percentage consisted of sharecropping agreements.
The following table shows a breakdown of the number of hectares of leased land used for each of our principal production activities:
 20162015201420132012
Crops(1)
43,30958,16758,03045,62444,508
Cattle12,63513,50118,54912,63512,635
(1)  
Includes Brasilagro.
Due to the rise in the price of land, we adopted a policy of not validating excessive prices and applying strict criteria upon adopting the decision to lease, selecting those lands with values that would ensure appropriate margins.

Results
The following table shows the Company’s results for fiscal year 2016, compared to the two preceding fiscal years:
Crops
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues 1,152      98783716.8%17.9%
Costs (1,813)  (1,819)(1,539)(0.3%)18.1%
Initial recognition and changes in the fair value of biological assets and agricultural products  at the point of harvest 1,071      91886816.6%5.8%
Changes in the net realizable value of agricultural products after harvest208       (34)(17)-100%
Gross profit618      521491088.5%(65.1%)
General and administrative expenses(174)     (159)(147)9.4%8.2%
Selling expenses(216)     (161)(115)34.2%40.0%
Other operating results, net(74)       (9)(27)722.2%(66.6%)
Profit/(Loss) from operations154     (277)(140)--
Share of profit/(loss) of associates and joint ventures26        111(2500.0%)(90.9%)
Segment Profit/(Loss)180     (276)(129)--
Sugarcane
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues29419812448.5%59.7%
Costs(511)(368)(207)38.8%77.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest3181879670.5%94.8%
Gross profit1011713494.1%30.8%
General and administrative expenses(34)(20)(28)70.0%(28.6%)
Selling expenses(8)(8)(8)--
Other operating results, net4(2)---
(Loss)/Profit from operations63(13)(23)--
Segment (Loss)/Profit63(13)(23)--
Cattle
Our cattle production involves the breeding and fattening of our own animals. In some cases, if market conditions are favorable, we also purchase and fatten cattle which we sell to slaughterhouses and supermarkets.  As of June 2016, our cattle aggregated 69,873 heads, and we had a total surface area of 85,392 hectares of own and leased lands devoted to this business activity.  In addition, we have leased to third parties 70 hectares assigned to these activities.
During the fiscal year ended June 30, 2016, our production was 7,714 tons, a 1.2% year-on-year decrease.
The following table sets forth, for the fiscal years indicated below, the cattle production volumes measured in tons:
 
2016(1)
2015(1)
2014(1)
2013(1)
2012(1)
Cattle production7,7147,8126,9707,7238,936
(1)
Production measured in tons of live weight.  Production is the sum of the net increases (or decreases) during a given period in live weight of each head of cattle owned by us.
Our cattle breeding activities are carried out with breeding cows and bulls and our fattening activities apply to steer, heifers and calves. Breeding cows calve approximately once a year and their productive lifespan is from six to seven years. Six months after birth, calves are weaned and transferred to fattening pastures. Acquired cattle are directly submitted to the fattening process. Upon starting this process, cattle have been grazing for approximately one year to one and a half year in order to be fattened for sale. Steer and heifers are sold when they have achieved a weight of 380–430 kg and 280–295 kg, respectively, depending on the breed.
Pregnancy levels, which have been improving over the years, showed satisfactory levels of efficiency notwithstanding the adverse weather conditions. Genetics and herd management are expected to further improve pregnancy levels in the coming years. Reproductive indicators improved thanks to the implementation of technologies, which have included handling techniques and females artificial insemination with cattle genetics especially selected for the stock which is purchased from specialized companies in quality semen elaboration for meat production. We use veterinarian products manufactured by leading national and international laboratories. It is important to emphasize the work of a veterinarian advising committee, who are external to us and visit each establishment monthly to control and agree tasks.
Currently, the cattle raising farms are officially registered as export farmlands pursuant to the identification and traceability rules in force in Argentina. Animals are individually identified, thus allowing for the development of special businesses in this area.
Our cattle stock is organized into breeding and fattening activities. The following table shows, for the fiscal years indicated, the number of head of cattle for each activity:
 201620152014
Breeding stock58,74752,05254,808
Winter grazing stock11,12612,10210,932
Total Stock (heads)69,87364,15465,740
We seek to improve cattle production and quality in order to obtain a higher price through advanced breeding techniques. We cross breed our stock of Indicus, British (Angus and Hereford) and Continental breeds to obtain herds with characteristics better suited to the pastures in which they graze. To enhance the quality of our herds even further, we plan to continue improving our pastures through permanent investment in seeds and fertilizers, an increase in the watering troughs available in pastures, and the acquisition of round bailers to cut and roll grass for storage purposes.
Our emphasis on improving the quality of our herd also includes the use of animal health-related technologies. We comply with national animal health standards that include laboratory analyses and vaccination aimed at controlling and preventing disease in our herd, particularly FMD.
Direct costs of beef production consist primarily of crops for feeding and dietary supplementation purposes, animal health and payroll costs, among others.

Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year 2015Fiscal Year 2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues1781439024.5%58.9%
Costs(268)(225)(161)19.1%39.8%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest25416714552.1%15.2%
Changes in the net realizable value of agricultural products after harvest-----
Gross Profit164857492.9%14.9%
General and administrative expenses(40)(26)(27)53.8%(3.7%)
Selling expenses(19)(20)(14)(5.0%)42.9%
Other operating results, net(2)(3)(2)(33.3%)50.0%
Profit/ (Loss) from operations1033631186.1%16.1%
Segment Profit / (Loss)1033631186.1%16.1%
Dairy
As of June 30, 2016, we conducted our milk business in the dairy facility located in “El Tigre” farm in the Province of La Pampa, Argentina. We have a milking capacity of 1,788 cows per day and seek to increase total productivity through the application of new technologies including improved genetic management for milk production, strategic feeding plans, based on cattle specific requirements and the use of individual traceability to know the productivity history of each animal. We also use computer science applied to the milk business to make more efficient the manual labor by surveying the information supplied by the farm.
Within the process of de-commoditization and technological innovation, we implemented an identification and tracking system in compliance with European and SENASA standards. We also obtained Global Gap and HCCP certification. Our goal in this respect is to distinguish our production and obtain higher prices in production sales.
Our milk production is based on a herd of Holando Argentina dairy cows, genetically selected through the use of imported frozen semen of North American Holando bulls. Male calves are sold, at calving, for a given amount per head, whereas female calves are weaned after 24 hours, spend approximately 60 days in raising and approximately 100 days being fed on the basis of grass, grains and supplements. Young heifers then graze for an additional 12 to 15 month period, prior to artificial insemination at the age of 18 to 20 months and they calve nine months later. Heifers are subsequently milked for an average of 300 days. Milking dairy cows are once again inseminated during the 60 to 90 day subsequent period. This process is repeated once a year during six or seven years. The pregnancy rate for our dairy cows is 80-90%.
Our dairy herd is milked mechanically twice a day. The milk obtained is cooled to less than five degrees centigrade to preserve quality and is then stored in a tank for delivery once a day to trucks sent by buyers. Dairy cows are fed mainly with grass, supplemented as needed with grains, hay and silage. We have invested in certain technologies that focus on genetic improvement, animal health and feeding in order to improve our milk production. These investments include imports of top quality frozen semen from genetically improved North American Holstein bulls, agricultural machinery and devices such as feed-mixer trucks, use of dietary supplements and the installation of modern equipment to control milk cooling. We are currently acquiring dietary supplements for our dairy cows and have made investments with the aim of increasing the quantity and quality of forage (pasture, alfalfa and corn silage) in order to reduce feeding costs.
The following table sets forth, for the periods indicated, the average number of our dairy cows and average daily production per cow:
 201620152014
Average dairy cows per day (heads)1,788               2,189               2,439
Milk Production/Dairy Cow/Day (liters)23.81               21.48               19.69
At the closing of fiscal year 2016, we had 5,047 heads of cattle on 2,231 hectares involved in the production of milk; whereas as of June 30, 2015, we had 5,658 heads of cattle on 2,864 hectares.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues657254(9.7%)33.3%
Costs(135)(133)(104)1.5%27.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest747563(1.3%)19.0%
Gross Profit41413(71.4%)7.7%
General and administrative expenses(8)(5)(6)60.0%(16.7%)
Selling expenses(4)(4)(2)--
Other operating results, net-(1)---
Profit / (Loss) from operations(8)45--
Segment Profit / (Loss)(8)45--
Agro-industrial Activities
 
This segment consists in the fattening of beef cattle in feedlots and the slaughtering and processing of beef in meat packing plants. Feedlot cattle breeding requires specific care and diets that differ from those applicable to natural grass-fed beef cattle breeding.
 
Our feedlot operations are developed through our subsidiary Cactus and take place in a 170-hectare farm located in Villa Mercedes, Province of San Luis, which started to operate in September 1999. Cactus has been a pioneer in feedlot services with 18,000 heads of cattle capacity, depending on the size of the cattle.
Towards the end of this fiscal year, given the closeness of the feedlot facility to the district of Villa Mercedes, we decided to discontinue our livestock fattening business there.
Moreover, throughThrough our subsidiary Sociedad Anónima Carnes Pampeanas S.A. (“Carnes Pampeanas”) we own a meat packing plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,600 cattle heads per month.
 
During the last years, the smaller supply of beef cattle has adversely affected the value chain by reducing cold-storage plant utilization. This has left several plants struggling to remain operational in view of the poor returns and shortage of raw materials. Our investment in Carnes Pampeanas has not escaped unscathed of this situation.
 
Since December 2011, the packing plant had remained closed due to the difficult situation experienced by the industry. With the support of the Provincial Government of La Pampa and the Federal Government, combined with the Company’s confidence that the business could be successfully resumed, in August 2012 the packing plant was reopened and restarted production.
During fiscal year 2015,2016, this segment recorded a net loss of Ps. 35.963.0 million compared to a net incomeloss of Ps. 1.935.0 million in the previous fiscal year, mainlyyear. Although the business was favored by the new government policies consisting in raising the exchange rate and lowering withholding taxes on beef exports, the positive impact of these measures was offset by a deterioration in the input/product ratios, explained by an increasethe fact that livestock prices and labor costs significantly outpaced the rise in beef prices for domestic consumption and in the numberinternational markets, as well as the prices of employees to support the higher operational volumes and higher consulting and SOX testing expenses related to the SAP implementation project. In addition, average slaughtering was 6,398 heads per month, as compared to 5,472 in fiscal year 2014.leather, this business’ main by-product.

 
Results
 
The following table shows this segment’s results for fiscal year 2015,2016, compared to the two preceding fiscal years:
 
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 
Revenues  806.0   554.1   208.9   45.5%
Costs  (739.2)  (479.7)  (204.7)  54.1%
Gross profit / (loss)  66.8   74.4   4.2   (10.2%)
General and administrative expenses  (25.3)  (16.9)  (11.0)  50.1%
Selling expenses  (77.1)  (54.8)  (21.5)  40.9%
Other operating results, net  (0.3)  (0.9)  (1.3)  (66.8%)
(Loss)/Profit from operations  (36.0)  1.9   (29.6)  - 
Segment (Loss)/Profit  (36.0)  1.9   (29.6)  - 

Other Segments
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues96680655419.8%45.4%
Costs(925)(739)(480)25.2%54.0%
Gross profit416774(38.8%)(9.5%)
General and administrative expenses(38)(25) (17)52.0%47.1%
Selling expenses(67)(77) (55)(13.0%)40.0%
Other operating results, net1- (1)-100.0%
(Loss)/Profit from operations(63)(35)180.0%3,600%
Segment (Loss)/Profit(63)(35)180.0%3,600%
 
Futuros y Opciones.Com S.A.Leases andAgricultural Services
We lease own farms to third parties for agriculture, cattle breeding and seed production, mainly in two types of farms. On the one hand, we lease our farms under irrigation in San Luis (Santa Bárbara and La Gramilla) to seed producers. These farms are ideal for obtaining steady production levels, given the quality of their soil and the weather conditions of the area, along with the even humidity provided by irrigation.
On the other hand, we lease farms recently put into production after agricultural development. In this way we manage to reduce our production risk, ensuring fixed rental income until the new farms reach stable productivity levels.
 
In May 2000,addition, in this segment we acquired 70% ofinclude the shares of FyO for Ps. 3.5 million. The site was launched in November 1999 and was aimed at becoming the most important agriculture business community in Latin America. FyO launched its e-commerce strategy in March 2001, in orderirrigation service we provide to sell products, buy inputs, arrange loans, and obtain insurance, among other things. Currently, the main activity of FyO is grain broker.our own farms leased to third parties.
 
The areas with the greatest potential for growth are: input commercialization and grain brokerage. Regarding input commercialization, the business volume was concentrated in a small number of suppliers, the agreements with the suppliers were improved in order to increase the margin of the business, and contracts of direct distribution were achieved. In terms of cereals, the grain trading unit was created, with the purpose of participating directly in the business by trading and offering services.
During fiscal year 2007, FyO started to trade futures and options: it acquired a share in the Buenos Aires futures and options exchange market (Mercado a Término de Buenos Aires) and has also become a dealer. The service consisting in hedging with futures has consolidated into an essential tool for our customers to manage their price risks. 

60

FyO is committed to excellence through quality and continued improvement. For this reason, since 2008 all its business and administrative processes have been certified under ISO 9001:2008 standards.
As of June 30, 2015, our interest in FyO was 59.59 %.
As of the end of fiscal year 2015, the company’s total revenues from its grains brokerage business unit were Ps. 36.2 million with a trading volume of 1.8 million tons, in line with the volume traded in the 2014 period despite the drop in prices. The main crops traded were corn and soybean.
At the closing of fiscal year 2013, FyO acquired Granos Olavarría S.A., by purchasing a 96.37% interest in it. This company is engaged in cereal storage and brokerage activities, and during its second year of business it traded approximately 0.7 million tons.
In turn, invoicing by the inputs business fell 9% as compared to the previous fiscal year, reflecting the Argentine context, since in light of the fall in grain prices, growers did not invest in technology and rather sought to preserve their margins.
FyO’s Internet business is one of the most comprehensive and better positioned businesses in the sector, as it offers a full suite of products and services for customers and users. It has the leading portal in agricultural trading and in the social networks it has the largest community in the farming industry. Moreover, it leads the mobile sector through its two apps. From its onset, it has been adding to its customer portfolio leading international and domestic companies and reaching an increasing number of users and ascending presence in search engines such as Google. In August 2013, it revamped its site and launched new products, becoming one of the sites with the most advanced technology and innovations in the industry. At the closing of this fiscal year, it has reached over 600,000 visits per month and 95,000 registered users.
FyO’s goal is to continue consolidating itself as a leading company in grain trading, standing out from its competitors by offering a full suite of advisory services to its clients and contributing its broad experience in the industry along with its staff’s expertise.
 
Results
 
The following table shows this segment’s results for fiscal year 2015,2016, compared to the two preceding fiscal years:
 
In millions of Ps. Fiscal Year 2015  Fiscal Year 2014  Fiscal Year 2013  
YoY var
2015 vs. 2014
 Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues  117.8   124.0   83.3   (5.0%)78612927.9%110.3%
Costs  (96.8)  (100.3)  (71.2)  (3.4%)(20)(21)(17)4.8%23.5%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest  -   -   (1.0)  - 
Gross Profit  20.9   23.7   11.1   (11.7%)58401245.0%233.4%
General and administrative expenses  (7.4)  (10.6)  (7.1)  (30.4%)(4)(2)(4)100%(100.0%)
Selling expenses  (12.7)  (10.7)  (6.9)  18.0%(1)-
Other operating results, net  1.3   3.3   21.3   (59.4%)--
Profit from operations  2.2   5.7   18.4   (60.6%)5337743.2%428.6%
Share of Profit of associates and joint ventures  -   0.4   1.1   - 
Segment Profit  2.2   6.1   19.5   (63.5%)5337743.2%428.6%

Other
This segment includes part of our business through Futuros y Opciones (FyO), as grain trading is reflected in the Grains segment.
Futuros y Opciones.Com S.A. (FyO)
Futuros y Opciones.com’s main business is grain trading (grain brokerage, storage, futures and options, consulting and logistics services) and sale and distribution of own inputs and third-party products.
During this fiscal year FyO sold its website to Agrofy S.A., a company in which Cresud holds an equity interest.
As concerns the Grains business, revenues grew thanks to the increase in traded volumes as compared to the previous fiscal year, the effect of the devaluation and strong growth in trading revenues. The inputs business started to recover, and invoicing increased 6% as compared to the previous fiscal year.
During this fiscal year, financial income increased as compared to the previous year as a result of the investments made in mutual investment funds, LEBACS and government securities.
FyO continues to invest in systems for the inputs and grains businesses.
Concerning the goals for next year, the Grains business is expected to keep growing at the same pace as in the past years, aspiring to lead the grain trading business and to consolidate storage operations. As concerns inputs, FyO’s goals include consolidating its suite of products, increasing sales and improving margins. Other objectives include becoming a leading company in the knowledge of the grains markets, offering all businesses and services related to grain trading, and being digital innovators.
Results
The following table shows this segment’s results for fiscal year 2016, compared to the two preceding fiscal years:
In millions of Ps.Fiscal Year 2016Fiscal Year  2015Fiscal Year  2014
YoY var
2016 vs. 2015
YoY var
2015 vs. 2014
Revenues17912812539.8%2.4%
Costs(140)(105)(101)33.3%3.9%
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest-----
Gross Profit39232469.6%(4.2%)
General and administrative expenses(15)(8)(11)87.5%(27.3%)
Selling expenses(23)(13)(11)76.9%18.2%
Other operating results, net111--
Profit from operations23333.3%-
Share of Profit/(loss) of associates and joint ventures(3)----
Segment Profit(1)33--
 



1 Note that the shareholders’ agreement was originally signed between Dolphin and ETH MBA Extra Holdings. On April 2014, Dolphin and CAA Extra Holding received the rights to become holders of the shares.

2 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 2,040 million according to the Statement of cash flows, and non-cash transactions for Ps. 418 million as described in Note 20 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2016.

3 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 486 million according to the Statement of cash flows, and non-cash transactions for Ps. 2 million as described in Note 21 - Cash flow information, of the Consolidated Financial Statements as of June 30, 2015.

4 Includes the acquisition of investment properties, the acquisition of property, plant and equipment and suppliers advances for acquisition of property, plant and equipment for Ps. 435 million according to the Statement of cash flows, non-cash transactions for Ps. 1 million as described in Note 21 - Cash flow information of the Consolidated Financial Statements as of June 30, 2014.
 
6155

 
Farmland Portfolio
 
As of June 30, 2015,2016, we owned, together with our subsidiaries, 3127 farms, with a total surface area of 622,220622,217 hectares.
 
The following table sets forth our farm portfolio as of June 30, 2015:2016:
 
Use of Farmlands Owned and under Concession as of June 30, 2015 
Use of Farmlands Owned and under Concession as of June 30, 2016Use of Farmlands Owned and under Concession as of June 30, 2016
LocalityProvinceDate ofSurface AreaMain BusinessCattleSheepDairyAgricultureCattle
LocalityProvince Date of Acquisition  Surface Area (has) Main Business Cattle (has)  Sheep (has)  Dairy (has)  Agriculture (has)  Cattle (has)   Acquisition(has) (has)(has)(has)(head)
El RecreoRecreoCatamarca May 95   12,395 Natural woodlands               RecreoCatamarcaMay 9512,395Natural woodlands    
Los PozosJV GonzálezSalta May ’95   239,639 Cattle/ Agriculture/ Natural woodlands  43,276         15,012   43,136 JV GonzálezSaltaMay ’95239,639Cattle/ Agriculture/ Natural woodlands44,010  13,93844,914
San Nicolás (1)RosarioSanta Fe May ‘97   1,432 Agriculture            1,409     RosarioSanta FeMay ‘971,431Agriculture  1,409 
Las Playas (1)IdiazabalCórdoba May ‘97   1,534 Agriculture/ Dairy            1,534     IdiazabalCórdobaMay ‘971,534Agriculture/ Dairy  1,534 
La Gramilla/ Santa BárbaraMerloSan Luis Nov ‘97   7,072 Agriculture Under irrigation            4,295     MerloSan LuisNov ‘977,072Agriculture Under irrigation  4,294 
La SuizaVilla AngelaChaco Jun ‘98   36,380 Agriculture/ Cattle  30,200         3,692   18,853 Villa AngelaChacoJun ‘9836,380Agriculture/ Cattle26,700  3,41415,300
La EsmeraldaCeresSanta Fe Jun ‘98   9,370 Agriculture/ Cattle            8,491     CeresSanta FeJun ‘989,370Agriculture/ Cattle  7,885 
El TigreTrenelLa Pampa Apr ‘03   8,360 Agriculture/ Dairy         2,864   4,803   5,658 TrenelLa PampaApr ‘038,360Agriculture/ Dairy 2,2315,2395,047
El InviernoRanculLa Pampa Jun ‘05   1,946 Agriculture             1,839     
El Invierno(4)
RanculLa PampaJun ‘051,946Agriculture  1,839 
San PedroConcepción de UruguayEntre Rios Sep ‘05   6,022 Agriculture  1,143          4,216     Concepción de UruguayEntre RiosSep ‘056,022Agriculture  4,083 
8 De Julio/ Estancia CarmenPuerto DeseadoSanta Cruz May ‘07/ Sep ‘08   100,911 Sheep      85,000             Puerto DeseadoSanta CruzMay ‘07/ Sep ‘08100,911Sheep 85,000   
Administración CactusVilla MercedesSan Luis Dec ‘97   171 Natural woodlands  171                 
Cactus ArgentinaVilla MercedesSan LuisDec ‘97171Natural woodlands171    
Las VertientesLas VertientesCordoba  -   4 Silo                    Las VertientesCordoba-4Silo    
La EsperanzaRanculLa Pampa Mar ‘08   980 Agriculture              334     
La Esperanza(4)
RanculLa PampaMar ‘08980Agriculture  402 
Las LondrasSanta CruzBolivia Nov ‘08   4,566 Agriculture              3,735     Santa CruzBoliviaNov ‘084,566Agriculture  3,736 
San RafaelSanta CruzBolivia Nov ‘08   2,969 Agriculture              2,735     Santa CruzBoliviaNov ‘082,969Agriculture  2,269 
La PrimaveraSanta CruzBolivia Jun ‘11   2,340 Agriculture              1,099     Santa CruzBoliviaJun ‘112,340Agriculture  636 
Cuatro VientosSanta CruzBolivia Jun ‘11   2,658 Agriculture              790     Santa CruzBoliviaJun ‘112,658Agriculture  1,844 
Jeroviá/Marangatú/Udra (2)Mariscal EstigarribiaParaguay Feb ‘09   58,754 Agriculture/ Natural woodlands  626           5,562   1,697 Mariscal EstigarribiaParaguayFeb ‘0958,754Agriculture/ Natural woodlands1,126  5,870 
Finca MendozaLujan de CuyoMendoza Mar ‘11   389 Natural woodlands                    Lujan de CuyoMendozaMar ‘11389Natural woodlands    
Establecimiento MendozaFinca LavalleMendoza Nov’03   9 Natural woodlands                    Finca LavalleMendozaNov’039Natural woodlands    
JatobaJaborandi/BABrazil Oct '06    31,606 Agriculture              10,731     Jaborandi/BABrazilOct ‘0631,606Agriculture  12,510 
Alto TaquariAlto Taquari/MTBrazil Aug '07    5,395 Agriculture              3,622     Alto Taquari/MTBrazilAug ‘075,395Agriculture  3,190 
AraucariaMineiros/GOBrazil Mar '07    8,124 Agriculture              4,844     Mineiros/GOBrazilMar ‘078,124Agriculture  4,020 
ChaparralCorrentina/BABrazil Nov '07    37,183 Agriculture              13,075     Correntina/BABrazilNov ‘0737,182Agriculture  14,398 
Nova BurutiJanuária/MGBrazil Dec '07    24,212 Forestry                    Januária/MGBrazilDec ‘0724,211Forestry    
PreferenciaBarreiras/BABrazil Sep '08    17,799 Cattle  6,554                 Barreiras/BABrazilSep ‘0817,799Cattle  6,566 
Subtotal Own Farms        622,220    81,970   85,000   2,864   91,816   69,344   622,217 72,00785,0002,23199,07665,261
Agropecuaria Anta SA (3)Las LajitasSalta      132,000    869  ��        23,547   1,316 Las LajitasSalta 132,000 820  23,5472,460
Subtotal Farms under Concession        132,000    869           23,547   1,316   132,000 820  23,5472,460
Total        754,220    82,839   85,000   2,864   115,363   70,660   754,217 72,82785,0002,231122,62367,721
        
(1)      Hectares in proportion to our 35.72% interest in Agro-Uranga S.A.
(2)Hectares in proportion to our 50.0% interest in CRESCA through Brasilagro.
(2)
Hectares in proportion to our 50.0% interest in CRESCA through Brasilagro.
(3)    Hectares underin concession. IncludesThey include 2,000 hectares operated by third parties.
(4)    On July 2016, we sold these farmlands.
56
 
Additional information about our Farmlands
Argentina
 
El Recreo
 
“El Recreo” farm, located 970 kilometers northwest of Buenos Aires, in the Province of Catamarca, was acquired in May 1995. It has semi-arid climate and annual rainfall not in excess of 400 mm. This farm is maintained as a productive reserve.
 
Los Pozos
 
The “Los Pozos” farm, located 1,600 kilometers northwest of Buenos Aires, in the Province of Salta, was acquired in May 1995. This property is located in a semi-arid area with average annual rainfall of 500 mm. The area is naturally suited to cattle raising and forestry activities (poles and fence posts), and it has agricultural potential for summer crops such as sorghum and corn, among others. For the fiscal year ended June 30, 2015,2016, we used 15,01213,938 hectares in agricultural production. We completed the development of tropical pastures in almost 45,000 hectares. As of June 30, 2015,2016, there were 40,27441,914 heads of cattle in this farm.
 
San Nicolás
 
“San Nicolás” is a 4,005 hectares farm owned by Agro-Uranga S.A., and is located in the Province of Santa Fe, approximately 45 kilometers from the Port of Rosario. As of June 30, 2015, 7,0322016, 5,918 hectares were planted for agricultural production, including double crops. The farm has two plants of silos with a storage capacity of 14,950 tons.
 
Las Playas
 
The “Las Playas” farm has a surface area of 4,294 hectares and is owned by Agro-Uranga S.A. It is located in the Province of Córdoba, and it is used for agricultural purposes. As of June 30, 2015,2016, the farm had a sown surface area, including double crops, of 7,7617,079 hectares for grain production.
 
La Gramilla and Santa Bárbara
 
These farms have a surface area of 7,072 hectares in Valle de Conlara, in the Province of San Luis. Unlike other areas in the Province of San Luis, this valley has a high quality underground aquifer which makes these farms well suited for agricultural production after investments were made in the development of lands, wells and irrigation equipment. In the course of the 2014/20152015/2016 farm season, a total of 4,2954,294 hectares were sown, 569513 hectares of which were sown under contractual arrangements with seed producers. We leased, in turn, 1,2671,259 hectares to third parties. The remaining hectares are kept as land reserves.
 
La Suiza
 
 The “La Suiza” farm has a surface area of 36,380 hectares and is located in Villa Ángela in the Province of Chaco. It is used for raising cattle. As of June 30, 2015,2016, “La Suiza” had a stock of approximately 18,85315,300 heads of cattle. During the 2014/152015/16 season, we used 3,6923,414 hectares for agricultural production and 200 hectares for timber production.
 
La Esmeralda
 
The “La Esmeralda” farm has a surface area of 9,370 hectares and is located in Ceres in the Province of Santa Fe. This farm was acquired in June 1998. During the 2014/152015/16 farm season, we used 8,4917,885 hectares for production of corn, soybean, wheat, sunflower and sorghum.
 
El Tigre
 
The “El Tigre” farm was acquired on April 30, 2003 and has a surface area of 8,360 hectares. This farm has a high-tech dairy facility where we develop our milk production business in compliance with the highest quality standards. It is located in Trenel in the Province of La Pampa. As of June 30, 2015, 4,8032016, 5,239 hectares were assigned to crop production, including double crops, and 2,8642,231 hectares were assigned to milk production. This farm produced 17.5216.2 million liters of milk in the fiscal year ended June 30, 2015,2016, with an average of 2,1891,838 cows being milked and an average daily production of 21.4824.16 liters per cow.
 
El Invierno
 
The “El Invierno” farm was acquired on June 24, 2005 and has a surface area of 1,946 hectares.  It is located in Rancul in the Province of La Pampa, 621 kilometers to the west of Buenos Aires. During the fiscal year ended June 30, 2015,2016, we used the land exclusively for crop production and planted 1,839 hectares. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 90.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
 
San Pedro
 
 The “San Pedro” farm was purchased on September 1, 2005. It has a surface area of 6,022 hectares and is located in Concepción del Uruguay, Province of Entre Ríos, which is 305 kilometers north of Buenos Aires. In the course of the 2014/20152015/2016 farm season, 4,2164,083 hectares were used for agricultural production, including double crops, and 1,143 hectares were leased to third parties for livestock activities.crops.
 
8 de Julio and Estancia Carmen
 
The “8 de Julio” farm was acquired on May 15, 2007 and has a surface area of 90,000 hectares. It is located in the department of Deseado in the Province of Santa Cruz. Due to its large surface area, this farm offers excellent potential for sheep production. In addition, we believe the land has potential for future tourism and recreational activities, as the southeast border of the farm stretches over 20 kilometers of coast. "Estancia Carmen" was acquired on September 5, 2008 and has a surface area of 10,911 hectares. It is located in the Province of Santa Cruz, next to our "8 de Julio" farm.
 

62

 
Cactus
 
The feedlot has a surface area of 171 hectares. It is located in Villa Mercedes, Province of San Luis. Given its degree of urban development and closeness to the city, we decided to discontinue fattening activities in this facility.
 
Las Vertientes
 
The “Las Vertientes” storage facility has a surface area of 4 hectares and 10,000 tons capacity, and is located in Las Vertientes, Río Cuarto, in the Province of Córdoba.
 
La Esperanza
 
In 2008 we acquired “La Esperanza” farm located in the Province of La Pampa with a surface area of 980 hectares. The transaction was agreed for a price of US$ 1.3 million that has been paid in full. During the year ended June 30, 2015, we used this farm solely for crop production. On July 5, 2016, we sold the farmlands “El Invierno” and “La Esperanza”. The total amount of the transaction was fixed at US$ 6.0 million (equivalent to Ps. 90.1 million). This transaction included 2,615 hectares of land suitable for agricultural production.
 
Finca Mendoza
 
On March 2, 2011, the Company purchased, jointly with Zander Express S.A., a rural property composed of thirteen plots of land located in the District of Perdriel, Luján de Cuyo Department, in the Province of Mendoza. As a result of this acquisition, CRESUD has become owner of a 40% undivided estate in all and each of the properties, while Zander Express S.A. holds the remaining 60%. The total agreed price for this transaction was US$ 4.0 million; therefore, the amount of US$ 1.6 million was payable by CRESUD.
 
Bolivia
 
Las Londras
 
On January 22, 2009, the bill of purchase for "Las Londras" farm was cast into public deed; it has a surface area of 4,566 hectares, and is located in the Province of Guarayos, Republic of Bolivia. During the 2014/20152015/2016 farm season it was used for crop production.
 
San Rafael
 
On November 19, 2008, the bill of purchase for "San Rafael" farm was cast into public deed. This farm is located in the Province of Guarayos, Republic of Bolivia, and has a surface area of 2,969 hectares, which were used for crop production during the 2014/20152015/2016 farm season.
 
Cuatro Vientos
 
On June 3, 2011, we executed the purchase agreement for the “Cuatro Vientos” farm, with a surface area of approximately 2,658 hectares, allocated to sugarcane production. Its purchase price was US$ 8.4 million.
 
La Primavera
 
On June 7, 2011 we acquired “La Primavera” farm, with a surface area of approximately 2,340 hectares. During the 20142015/2016 season, this farm was used for crop production.
 
Brazil (through our subsidiary Brasilagro)
 
Jatobá
 
Jatobá is a farm in the northeastern region of Brazil, with a total surface area of 31,606 hectares, 10,73112,510 of which are intended for agriculture. Jatobá was acquired in March 2007 for BRL 33 million. We consider that this farm is in a very advantageous location for the movement of crops, as it is close to the Candeias Port, in the State of Bahia.
 
Araucária
 
Araucária is a farm located in the municipal district of Mineiros, in the State of Goiás, and it has a total surface area of 8,124 hectares, 4,8444,020 of which are used for agriculture. Araucaria was acquired in 2007 for BRL 70.4 million. Before we purchased it, Araucária had been used for grain planting. The farm was transformed, and at present it is planted with sugarcane.
 
Alto Taquarí
 
Alto Taquarí is located in the municipal district of Alto Taquarí, State of Mato Grosso, and it has a total surface area of 5,3965,395 hectares, 3,6223,190 of which are used for agriculture. The farm was acquired in August 2007 for BRL 33.2 million. Before we purchased it, the farm had been used for agriculture and Cattle raising. Following its transformation, it is being used for sugarcane production.
 
Chaparral
 
Chaparral is a 37,183-hectare37,182hectare farm, with 13,07314,398 hectares used for agriculture. It is located in the municipal district of Correntina, State of Bahia. The farm was acquired in November 2007 for BRL 47.9 million.
 
Nova Buriti
 
Located in the municipal district of Januária, State of Minas Gerais, Nova Buriti has a surface area of 24,212 hectares, 19,004 of which are suitable for agriculture.24,211 hectares. Nova Buriti was acquired in December 2007 for BRL 21.6 million. It is located in the southeastern region of Brazil and it is close to the large iron industries. At present, it is undergoing proceedings for obtaining the environmental licenses required for starting operations.
 

63

 
Preferencia
 
Preferencia is located in the municipal district of Barreiras, in the State of Bahia. It has a total surface area of 17,799 hectares, 6,5546,566 of which are used for cattle activities. It was acquired for R$ 9.6 million in September 2008. The farm is being transformed into a pasturing area and will be later developed for agricultural purposes.
 
Paraguay (through our subsidiary Brasilagro)
 
Jeroviá / Marangatú /Udra
 
Cresud, through Brasilagro, who is in turn shareholder of CRESCA, holds a 50% undivided interest in the “Jeroviá”, “Marangatú” and “UDRA” farms and related undeveloped plots of land, all of them located in Mariscal José Félix Estigarribia, Department of Boquerón, Paraguayan Chaco, Republic of Paraguay, totaling 117,508 hectares.
 
Silos
 
As of June 30, 2015,2016, we had a storage capacity of approximately 27,34125,620 tons (including 35.723% of the storage capacity of over 14,950 tons available at Agro-Uranga S.A.).
 
The following table shows, for the fiscal years presented, our storage facilities:
 
  As of year ended June 30, 
As of year ended June 30,
 
2015(2)
  
2014(2)
  
2013(2)
  
2012(2)
 
2016(2)
2015(2)
2014(2)
2013(2)
2012(2)
Las Vertientes (1)
  10,000   10,000   10,000   10,000 10,000
San Nicolás (1)
  5,341   5,341   5,341   5,341 5,341
Brasilagro  12,000   74,000   74,000   74,000 10,27990,200
Total  27,341   89,341   89,341   89,341 25,620105,541
(1) Owned by us through Agro-Uranga (which represents 35.723% of the total capacity).
(2) Includes Brasilagro.
 
Land Management
 
In contrast to traditional Argentine farms, run by families, we centralize policy making in an Executive Committee that meets on a weekly basis in Buenos Aires. Individual farm management is delegated to farm managers who are responsible for farm operations. The Executive Committee lays down commercial and production rules based on sales, market expectations and risk allocation.
 
We rotate the use of our pasture lands between agricultural production and cattle feeding and the frequency depends on the location and characteristics of the farmland. The use of preservation techniques (including exploitation by no till sowing) frequently allows us to improve farm performance.
 
Subsequent to the acquisition of the properties, we make investments in technology in order to improve productivity and increase the value of the property. It may be the case that upon acquisition, a given extension of the property is under-utilized or the infrastructure may be in need of improvement. We have invested in traditional fencing and in electrical fencing, watering troughs for cattle herds, irrigation equipment and machinery, among other things.
 
Principal Markets
 
Crops
 
Our crop production is mostly sold in the domestic market. The prices of our grains are based on the market prices quoted in Argentine grains exchanges such as the Buenos Aires Grains Exchange (Bolsa de Cereales de Buenos Aires) and the cereal exchanges in each country, that take as reference the prices in international grains markets. The largest part of this production is sold to exporters who offer and ship this production to the international market. Prices are quoted in relation to the month of delivery and the port in which the product is to be delivered. Different conditions in price, such as terms of storage and shipment, are negotiated between the end buyer and ourselves.
 
Cattle
 
Our beef cattle production is sold in the local market. The main buyers are slaughterhouses and supermarkets.
 
Prices in the beef cattle market in Argentina are basically fixed by local supply and demand. The Liniers Market (on the outskirts of the ProvinceCity of Buenos Aires) provides a standard in price formation for the rest of the domestic market. In this market live animals are sold by auction on a daily basis. At Liniers Market, prices are negotiated by kilogram of live weight and are mainly determined by local supply and demand. Prices tend to be lower than in industrialized countries. Some supermarkets and meat packers establish their prices by kilogram of processed meat; in these cases, the final price is influenced by processing yields.
 
Dairy
 
During fiscal year 20152016 we sold our entire milk production to the largest Argentine dairy company, Mastellone S.A., which in turn manufactures a range of mass consumption dairy products sold in Argentina and abroad. The price of the milk we sell is mainly based on the percentage of fat and protein that it contains and the temperature at which it is cooled. The price we obtain from our milk also rises or drops based on the content of bacteria and somatic cells.
 

64

 
Customers
 
For the fiscal year 20152016 our sales from the agribusiness segment (excluding sales of farms) were made to approximately 300850 customers. Sales to our ten largest customers represented approximately 45%70% to 50%75% of our net sales. Of these customers, our biggest three customers were Mastellone Hnos. S.A.Bunge Argentina S. A., Brenco Companhia Brasileira de Energia RenovávelCargill S.A.C.I. and Molinos Río de la Plata S.A.Vicentin S.A.I.C. We have signed non-binding letters of intent with some of our largest customers that allow us to estimate the volume of the demand for certain products and to plan production accordingly. We generally enter into short-term agreements with a term of less than a year.
 
Marketing Channels and Sales Methods
 
Crops
 
We normally work with grains brokers and other intermediaries to trade in the exchanges. We sell part of our production in advance through futures contracts and buy and sell options to hedge against a drop in prices. Approximately 87% of the futures and options contracts are closed through the Buenos Aires Grains Exchange and 13% in the Chicago Board of Trade for hedging purposes.
 
Our storage capabilities allow us to condition and store grains with no third-party involvement and thus to capitalize the fluctuations in the price of commodities. Our largest storage facilities in Argentina, with capacity for 10,000 tons, are located in “Las Vertientes”, close to Río Cuarto, Province of Córdoba. In addition, we store grains in silo bags. On the other hand, in Brazil we have a total storage capacity of 90,200 tons.
 
Cattle
 
We have several marketing channels. We sell directly to local meat processors and supermarkets, as well as in markets and auctions. Our customers include Arre Beef S.A., Frigorífico Bermejo, Quickfood S.A., Frigorífico Forres Beltrán S.A., Madelán S.A., Colombo y Colombo S.A., Iván O’Farrell S.R.L. and Colombo y Magliano S.A., for prices based on the price at Liniers Market.
 
We usually are responsible for the costs of the freight to the market and, in general, we pay commissions on our transactions.
 
Inputs
 
The current direct cost of our production of grains varies in relation to each crop and normally includes the following costs: tillage, seeds, agrochemicals and fertilizers. We buy in bulk and store seeds, agrochemicals and fertilizers to benefit from discounts offered during off-season sales.
 
Competition
 
The agricultural and livestock sector is highly competitive, with a huge number of producers. We are one of the leading producers in Argentina and the region. However, if we compare the percentage of our production to the country’s total figures, our production would appear as extremely low, since the agricultural market is highly atomized. Our leading position improves our bargaining power with suppliers and customers. In general, we obtain discounts in the region in the acquisition of raw materials and an excess price in our sales.
 
Historically, there have been few companies competing for the acquisition and leases of farmlands for the purpose of benefiting from land appreciation and optimization of yields in the different commercial activities. However, we anticipate the possibility that new companies, some of them international, may become active players in the acquisition of farmlands and the leases of sown land, which would add players to the market in coming years.
 
Seasonality
 
As is the case with any company in the agro-industrial sector, our business activities are inherently seasonal. Harvest and sales of corn and soybean in general take place from March to September. Sunflower is harvested from December to May. Wheat is harvested from October to January. Peanut is harvested from April to July. With respect to our international market, in Bolivia climate conditions allow a double season of soybean, corn and sorghum production and, accordingly, these crops are harvested in March and October, while wheat and sunflower are harvested between August and September. In Brasil, our crops are harvested from March to May and our sugarcane is harvested from April to November. Other segments of our activities, such as our sales of cattle and milk and our forestry activities tend to be more of a successive character than of a seasonal character. However, the production of beef and milk is generally higher during the second quarter, when pasture conditions are more favorable. In consequence, there may be significant variations in results from one quarter to the other.
 
For information about main indicators for the fiscal years ended in June 30, 2015, 2014 and 2013, please see Section “B. Business Overview.”
 
Regulation and GovernmentGovernmental Supervision of our Agricultural Business
 
Farming and Animal Husbandry Agreements
 
Agreements relating to farming and animal husbandry activities are regulated by Argentine law, the Argentine Civil and Commercial Code and local customs.
 
According to Law No. 13,246, as amended by Law No. 22,298, all lease agreements related to rural properties and land are required to have a minimum duration of 3 years. Upon death of the tenant farmer, the agreement may continue with his successors. Upon misuse of the land by the tenant farmer or default on payment of the rent, the land owner may initiate an eviction proceeding.
 
Law No. 13,246, amended by Law No. 22,298, also regulates agreements for crop sharing pursuant to which one of the parties furnishes the other with farmland animals or land with the purpose to share benefits between tenant farmer and land owner. These agreements are required to have a minimum term of duration of 3 years. The tenant farmer must perform the obligations under the agreement himself and may not, assign it under any circumstances. Upon death, incapacity of the tenant farmer or other impossibility, the agreement may be terminated.
 

65

 
Quality control of Crops and Cattle
 
The quality of the crops and the health measures applied on the cattle are regulated and controlled by the Servicio Nacional de Sanidad y Calidad Agroalimentaria (“SENASA”), which is an entity within the Ministry of Economy and Public Finance that over sees the farming and animal sanitary activities.
 
Argentine law establishes that the brands should be registered with each provincial registry and that there cannot be brands alike within the same province.
 
Sale and Transportation of Cattle
 
Even though the sale of cattle is not specifically regulated, general contract provisions are applicable. Further, every province has its own rural code regulating the sale of cattle.
 
Argentine law establishes that the transportation of cattle is lawful only when it is done with the respective certificate that specifies the relevant information about the cattle. The required information for the certificate is established by the different provincial regulations, the inter-provinces treaties and the regulations issued by the SENASA.
 
Export Restriction of Beef
 
In addition, the Secretary of Agriculture, Livestock, Fishing and Food Products, within the orbit of the Ministry of Economy and Public Finance, oversees the farming and animal sanitary activities.
 
The Secretary of Agriculture, Livestock, Fishing and Food Products is in charge of distributing the annual regular quota of top quality chilled beef without bones, the “Cuota Hilton.” The destination of the Cuota Hilton is the European Union.
 
The Secretary of Agriculture, Livestock, Fishing and Food Products granted to our subsidiary Sociedad Anónima Carnes Pampeanas up to 1,175.851,400 tons to export beef under the Cuota Hiltonfor the July 2014-June 20152015-June 2016 period.
 
Environment
 
The development of our agribusiness activities depends on a number of federal, provincial and municipal laws and regulations related to environmental protection.
 
We may be subject to criminal and administrative penalties, including taking action to reverse the adverse impact of our activities on the environment and to reimburse third parties for damages resulting from contraventions of environmental laws and regulations. Under the Argentine Criminal Code, persons (including directors, officers and managers of corporations) who commit crimes against public health, such as poisoning or dangerously altering water, food or medicine used for public consumption and selling products that are dangerous to health, without the necessary warnings, may be subject to fines, imprisonment or both. Some courts have enforced these provisions in the Argentine Criminal Code to sanction the discharge of substances which are hazardous to human health. At the administrative level, the penalties vary from warnings and fines to the full or partial suspension of the activities, which may include the revocation or annulment of tax benefits, cancellation or interruption of credit lines granted by state banks and a prohibition against entering into contracts with public entities.
 
The Forestry Legislation of Argentina prohibits the devastation of forests and forested lands, as well as the irrational use of forest products. Landowners, tenants and holders of natural forests require an authorization from the Forestry Competent Authority for the cultivation of forest land. The legislation also promotes the formation and conservation of natural forests in properties used for agriculture and farming purposes.
 
As of June 30, 2015,2016, we owned land reserves extending over 356,907365.306 hectares, which are located in under-utilized areas where agricultural production is not yet fully developed. We also have 107,584107,984 hectares under concession as reserves for future developments. We believe that technological tools are available to improve the productivity of such land and enhance its long-term value. However, existing or future environmental regulations may prevent us from developing our land reserves, requiring us to maintain a portion of such land as unproductive land reserves.
 
In accordance with legislative requirements, we have applied for approval to develop certain parts of our land reserves and were authorized to develop them partially and to maintain other areas as land reserves. We cannot assure you that current or future development applications will be approved, and if so, to what extent we will be allowed to develop our land reserves. We intend to use genetically modified organisms in our agricultural activities. In Argentina, the development of genetically modified organisms is subject to special laws and regulations and special permits.
 
On November 28, 2007, Argentine Congress passed a law known as the Forest Law which sets minimum standards for the conservation of native forests and incorporates minimum provincial expenditures to promote the protection, restoration, conservation and sustainable use of native forests. The Forest Law prevents landowners, including owners of native forests, from deforesting or converting forested areas into non-forested land for other commercial uses without prior permission from each local government that gives the permit and requires the preparation, assessment and approval of an environmental impact report. The Forest Law also provides that each province should adopt its own legislation and regional regulation map within a term of one year. Until such provincial implementation is carried into effect, no new areas may be deforested. In addition, the Forest Law also establishes a national policy for sustainable use of native forests and includes the recognition of native communities and aims to provide preferential use rights to indigenous communities living and farming near the forest. In case a project affects such communities, the relevant provincial authority may not issue permits without formal public hearings and written consent of the communities.
 
In addition, the Rules issued by the CNV provide that publicly traded companies whose corporate purpose includes environmentally hazardous activities should report to their shareholders, investors and the general public their compliance with the applicable environmental laws and risks inherent to such activities, so as to be able to reasonably assess such hazards.
 

66

 
Our activities are subject to a number of national, provincial and municipal environmental regulations. Section 41 of the Argentine Constitution, as amended in 1994, provides that all Argentine inhabitants have the right to a healthy and balanced environment fit for human development and have the duty to preserve it. Environmental damage shall bring about primarily the obligation to redress it as provided by applicable law. The authorities shall protect this right, the rational use of natural resources, the preservation of the natural and cultural heritage and of biodiversity, and shall also provide for environmental information and education. The National Government shall establish minimum standards for environmental protection and Provincial and Municipal Governments shall determine specific standards and issue the applicable regulations.
 
On November 6, 2009, the Argentine Congress passed Law No. 25,675. This law regulates the minimum standards for the achievement of a sustainable environment and the preservation and protection of biodiversity and sets environmental policy goals. Moreover, Law No. 25,675 establishes the activities that will be subject to an environmental impact assessment procedure and certain requirements applicable thereto. In addition, the Law sets forth the duties and obligations that will be triggered by any damage to the environment and imposes the obligation to restore it to its former condition or, if that is not technically feasible, to pay a compensation in lieu thereof. The Law also fosters environmental education and provides for certain minimum obligations to be fulfilled by natural and artificial persons.
 
The new Argentine Civil and Commercial Code has introduced as a novel feature the acknowledgement of collective rights, including the right to a healthy and balanced environment. Accordingly, the Argentine Civil and Commercial Code expressly sets forth that the law does not protect an abusive exercise of individual rights if such exercise could have an adverse impact on the environment and the rights with a collective impact in general.
 
Other Regulations
 
Consumer Relationship. Consumer or End User Protection.The Argentine Constitution expressly establishes in Article 42 that consumers and users of goods and services have a right to protection of health, safety and economic interests in a consumer relationship. Consumer Protection Law No. 24,240, as amended, regulates several issues concerning the protection of consumers and end users in a consumer relationship, in the arrangement and execution of contracts.
 
The Consumer Protection Law, and the applicable sections of the Argentine Civil and Commercial Code are intended to regulate the constitutional right conferred under the Constitution on the weakest party of the consumer relationship and prevent potential abuses deriving from the stronger bargaining position of vendors of goods and services in a mass-market economy where standard form contracts are widespread.
 
As a result, the Consumer Protection Law and the Argentine Civil and Commercial Code deem void and unenforceable certain contractual provisions included in consumer contracts entered into with consumers or end users, including those which:
 
·  deprive obligations of their nature or limit liability for damages;
·  
deprive obligations of their nature or limit liability for damages;
 
·  imply a waiver or restriction of consumer rights and an extension of seller rights; and
·  
imply a waiver or restriction of consumer rights and an extension of seller rights; and
 
·  impose the shifting of the burden of proof against consumers.
·  
impose the shifting of the burden of proof against consumers.
 
In addition, the Consumer Protection Law imposes penalties ranging from warnings to the forfeiture of concession rights, privileges, tax regimes or special credits to which the sanctioned party was entitled, including closing down of establishments for a term of up to 30 days.
 
The Consumer Protection Law and the Argentine Civil and Commercial Code define consumers or end users as the individuals or legal entities that acquire or use goods or services free of charge or for a price for their own final use or benefit or that of their family or social group. In addition, both laws provide that those who though not being parties to a consumer relationship as a result thereof acquire or use goods or services, for consideration or for non-consideration, for their own final use or that of their family or social group are entitled to such protection rights in a manner comparable to those engaged in a consumer relationship.
 
In addition, the Consumer Protection Law defines the suppliers of goods and services as the individuals or legal entities, either public or private, that in a professional way, even occasionally, produce, import, distribute or commercialize goods or supply services to consumers or users.
 
The Argentine Civil and Commercial Code defines a consumer agreement as such agreement that is entered into between a consumer or end user and an individual or legal entity that acts professionally or occasionally or a private or public company that manufactures goods or provides services, for the purpose of acquisition, use or enjoyment of goods or services by consumers or users for private, family or social use.
 
It is important to point out that the protection under the laws afforded to consumers and end users encompasses the entire consumer relationship process (from the offering of the product or service) and it is not only based on a contract, including the consequences thereof.
 
In addition, the Consumer Protection Law establishes a joint and several liability system under which for any damages caused to consumers, if resulting from a defect or risk inherent in the thing or the provision of a service, the producer, manufacturer, importer, distributor, supplier, seller and anyone who has placed its trademark on the thing or service shall be liable.
 
The Consumer Protection Law excludes the services supplied by professionals that require a college degree and registration in officially recognized professional organizations or by a governmental authority. However, this law regulates the advertisements that promote the services of such professionals.
 
The Consumer Protection Law determines that the information contained in the offer addressed to undetermined prospective consumers, binds the offeror during the period in which the offer takes place and until its public revocation. Further, it determines that specifications included in advertisements, announcements, prospectuses, circulars or other media bind the offeror and are considered part of the contract entered into by the consumer.
 

67

 
Pursuant to Resolution No. 104/05 issued by the Secretariat of Technical Coordination reporting to the Argentine Ministry of Economy, the Consumer Protection Law adopted Resolution No. 21/2004 issued by the Mercorsur's Common Market Group which requires that those who engage in commerce over the Internet (E-Business) shall disclose in a precise and clear manner the characteristics of the products and/or services offered and the sale terms. Failure to comply with the terms of the offer is deemed an unjustified denial to sell and gives rise to sanctions.
 
On September 17, 2014, the Consumer Protection Law was modified by the enactment of Law Nº 26,993, which is called “System for Conflict Resolution in Consumer Relationships” as it provides for the creation of new administrative and judicial procedures for this field of Law. It has created a two-instance administrative system: the Preliminary Conciliation Service for Consumer Relationships (Servicio de Conciliación Previa en las Relaciones de Consumo, COPREC) and the Consumer Relationship Audit, and a number of courts assigned to resolution of conflicts between consumers and producers of goods and services (Fuero Judicial Nacional de Consumo). In order to file a claim, the amount so claimed should not exceed a fixed amount equivalent to 55 adjustable minimum living wages, which are determined by the Ministry of Labor, Employment and Social Security. The claim is required to be filed with the administrative agency. If an agreement is not reached between the parties, the claimant may file the claim in court. The administrative system known as Preliminary Conciliation Service for Consumer Relationships (COPREC) is currently in full force and effect. However, the court system (fuero judicial nacional de consumo) is not in force yet, therefore, any court claims should be currently filed with the existing applicable courts. A considerable volume of claims filed against us are expected to be settled pursuant to the system referred to above, without disregarding the full force and effect of different instances for administrative claims existing in the provincial sphere and the City of Buenos Aires, which remain in full force and effect, where potential claims related to this matter could also be filed.
 
Antitrust Law
 
Law No. 25,156, as amended, prevents trust practices and requires administrative authorization for transactions that according to the Antitrust Law constitute an economic concentration. According to this law, mergers, transfers of goodwill, acquisitions of property or rights over shares, capital or other convertible securities, or similar operations by which the acquirer controls or substantially influences a company, are considered as an economic concentration. Whenever an economic concentration involves a company or companies and the aggregate volume of business of the companies concerned exceeds in Argentina the amount of Ps. 200.0 million, in such case the respective concentration should be submitted for approval to the CNDC. The request for approval may be filed, either prior to the transaction or within a week after its completion.
 
When a request for approval is filed, the CNDC may (i) authorize the transaction, (ii) subordinate the transaction to the accomplishment of certain conditions, or (iii) reject the authorization. 
 
The Antitrust Law provides that economic concentrations in which the transaction amount and the value of the assets absorbed, acquired, transferred or controlled in Argentina, do not exceed Ps. 20.0 million each are exempted from the administrative authorization. Notwithstanding the foregoing, when the transactions effected by the companies concerned during the prior 12-month period exceed in the aggregate Ps. 20.0 million or Ps. 60.0 million in the last 36 months, these transactions must be notified to the CNDC.
 
As our consolidated annual sales volume and our parent’s consolidated annual sales volume exceed Ps. 200.0 million, we should give notice to the CNDC of any concentration provided for by the Antitrust Law.
 
Taxes on the Transfer of Property and Sale of Meat and Grains
 
Value Added Tax. This tax is applicable to the sale of personal property, the hiring of works, the rendering of services and the import of goods and services operated in Argentina. The general tax rate is 21%.
 
The value added tax law imposes a reduced rate, equal to 10.5% on the sale price of live animals (including cattle, sheep, camels and goats) as well as their meat and edible remains, fruits and vegetables, all of which whether fresh, chilled, or frozen, which have not undergone any cooking or manufacturing process turning them into a manufactured product. This 10.5% reduced rate is also applicable to the sale of grains (cereals and oilseeds, excluding rice), and dry pulses (beans, peas, and lentils). In the case of milk, the sale is subject to a 21% rate (except for sales to final consumers, the federal government, the provinces, municipalities or the City of Buenos Aires or any subordinate agencies, school or university kitchens, health funds or entities under the scope of paragraphs e), f), g) and m) of Section 20 of the Income Tax Law, which are exempt).
 
The sale of land and immovable property is not subject to this tax.
 
Gross Sales Tax. This is a local tax (collected by the provinces and the City of Buenos Aires) that levies gross revenues derived from the ordinary development of a given business for profit. When the same business is developed in more than one jurisdiction, the tax is applicable pursuant to the regulations set forth in the Multilateral Agreement, which establishes the proportions allocable to each of the jurisdictions involved, so as to prevent double or multiple taxation. In the City of Buenos Aires, gross revenues derived from livestock raising and milk production are subject to this tax at a general rate of 1%. In certain provinces, the sale or primary goods is not taxable.
 
Stamp Tax. This is a local tax that 23 provinces and the City of Buenos Aires collect based on similar rules regarding subject matter, tax base and rates. In general, this tax is levied on instrumented acts, i.e. executed and delivered by means of documents (e.g. acts related to the constitution, transmission, or expiration of rights, contracts, contracts for sales of stock and company shares, public deeds relating to real property, etc.).
 
Both in the Province and the City of Buenos Aires (federal district) the stamp tax rate applicable to the transfer by public deed of real property is 3.6%. The purchase and sale of real estate through public deed, however, is not taxable –up to a certain value of the property- if the real estate is used for permanent dwelling purposes, and provided that it is the only property owned by the purchaser.
Urban Properties and Investments Business (through our subsidiary IRSA)
We decided to break down the operations of our subsidiary IRSA Inversiones y Representaciones S.A. into an Operation Center in Argentina and an Operation Center in Israel. From the Operation Center in Argentina, we, through IRSA and its subsidiaries, manage the businesses in Argentina and the international investments in the Lipstick Building in New York and the Condor Hospitality Trust hotel REIT. From the Operation Center in Israel, we manage IDBD.

68


IRSA’s Segments – Urban properties and investments
 
As of June 30, 2015,2016, our investment in IRSA’s common shares amounts to 64.30%63.38%.
 
The following information corresponds to data of the segments extracted from our subsidiary IRSA Inversiones y Representaciones S.A.’s Annual Report and Financial Statements as of June 30, 2015.2016.
 
The revenue figures for fiscal year 20152016 described in the different tables correspond to the twelfth-monthtwelve-month period reported in IRSA’s Financial Statements.
 
OfficesDescription of main operations
Operation Center in Argentina.
Shopping Centers
We are engaged in purchasing, developing and managing shopping centers through our subsidiary, IRSA Commercial Properties. As of June 30, 2016, IRSA Commercial Properties operated and owned a majority interest in sixteen shopping centers in Argentina, seven of which are located in the City of Buenos Aires (Abasto, Alcorta Shopping, Alto Palermo, Patio Bullrich, Buenos Aires Design, Dot Baires Shopping and Distrito Arcos), two of which are located in the greater Buenos Aires metropolitan area (Alto Avellaneda and Soleil Premium Outlet) and the other ones located in different Argentine provinces: Alto NOA in the City of Salta, Alto Rosario in the City of Rosario, Mendoza Plaza in the City of Mendoza, Córdoba Shopping Villa Cabrera and Patio Olmos in the City of Córdoba, La Ribera Shopping in the City of Santa Fe, and Alto Comahue in the City of Neuquén.
As of June 30, 2016, we owned, through IRSA, 94.61% of IRSA Commercial Properties. The remaining shares are held by the public investor and traded on the Bolsa de Comercio de Buenos Aires and the related ADRs are listed and traded on the NASDAQ (USA) under the ticker “IRCP.”
As of June 30, 2016, IRSA Commercial Properties’s shopping centers comprised a total of 333,155 square meters of gross leasable area (“GLA”) (excluding certain space occupied by hypermarkets which are not our tenants). For fiscal year 2016, the occupancy rate of IRSA Commercial Properties’s shopping center portfolio was approximately 98.4%.
We centralized management of our shopping centers in IRSA Commercial Properties, which is responsible for providing common area electrical power, a main telephone switchboard, central air conditioning and other basic common area services.
The following table shows certain information concerning our shopping center as of June 30, 2016:
Shopping CentersDate of AcquisitionLocation
Gross Leasable Area
sqm (1)
Stores
Occupancy Rate
(2)
                 IRSA Commercial Properties’ Interest
(3)
Book Value
(in millions of Ps.)
(4)
 
Abasto (5)
Jul-94City of Buenos Aires, Argentina36,73817099.8%100.0%259 
Alto PalermoNov-97City of Buenos Aires, Argentina18,96614299.6%100.0%209 
Alto AvellanedaDec-97Province of Buenos Aires, Argentina35,887134100.0%100.0%128 
Alcorta ShoppingJun-97City of Buenos Aires, Argentina15,87711289.1%100.0%123 
Patio BullrichOct-98City of Buenos Aires, Argentina11,7838899.1%100.0%103 
Alto NoaMar-95Salta, Argentina19,04089100.0%100.0%33 
Buenos Aires DesignNov-97City of Buenos Aires, Argentina13,9036295.7%53.7%6 
Mendoza PlazaDec-94Mendoza, Argentina42,04313995.2%100.0%93 
Alto Rosario (5)
Nov-04Santa Fe, Argentina28,796143100.0%100.0%129 
Córdoba ShoppingDec-06Córdoba, Argentina15,58211099.2%100.0%49 
Dot Baires ShoppingMay-09City of Buenos Aires, Argentina49,641150100.0%80.0%374 
Soleil Premium OutletJul-10Province of Buenos Aires, Argentina13,99178100.0%100.0%80 
La Ribera ShoppingAug-11Santa Fe, Argentina9,8516399.3%50.0%24 
Distrito Arcos (6)
Dec-14City of Buenos Aires, Argentina11,1706097.0%90.0%279 
Alto Comahue (7)
Mar-15Neuquén, Argentina9,89010296.6%99.1%319 
Patio Olmos (8)
Sep-07Córdoba, Argentina---100%26 
TOTAL GENERAL  333,1581,64298.4% 2,210 
 (1) Corresponds to the total leaseable surface area of each property. Excludes common areas and parking spaces.
 (2) Calculated by dividing square meters leased under leases in effect by gross leaseable area as of fiscal year end.
 (3) Our effective interest in each of its business units.
 (4) Cost of acquisition, plus improvements, less accumulated depreciation. Values expressed in million of pesos (Ps.).
 
(5) Excludes Museo de los Niños (3,732 sqm in Abasto and 1,261 sqm in Alto Rosario).
(6) Opening December 18, 2014.
(7) Opening March 17, 2015.
(8) IRSA CP owns the historic building of the Patio Olmos shopping center in the province of Cordoba, operated by a third party.

Accumulated Rental Income as of June 30, 2016, 2015 and 2014
The following table shows certain information concerning Accumulated Rental Income as of June 30, 2016, 2015 and 2014 of our IRSA Commercial Properties subsidiary’s shopping centers:
As of June 30, 
                2016         2015          2014
 (In million of Ps.)
Abasto384302238
Alto Palermo392295244
Alto Avellaneda265200161
Alcorta Shopping187141106
Patio Bullrich1189879
Alto Noa735139
Buenos Aires Design453527
Mendoza Plaza1199274
Alto Rosario182138100
Córdoba Shopping- Villa Cabrera685440
Dot Baires Shopping261199158
Soleil Premium Outlet805944
La Ribera Shopping21139
Distrito Arcos (1)
7823-
Alto Comahue (2)
4812-
Total income(3)
2,3211,7121,319
(1) Opening was on December 18, 2014.
(2) Opening was on March 17, 2015.
(3) Does not include income neither from Fibesa or from Patio Olmos.
Tenant Retail Sales(1)(2)
The following table contains a breakdown of approximate total tenant retail sales in millions of Pesos at the shopping centers in which we had an interest for the fiscal years shown:
As of June 30, 
                2016         2015          2014
 (In million of Ps.)
Abasto4,0433,1502,447
Alto Palermo3,4992,6622,111
Alto Avellaneda3,7812,9132,334
Alcorta Shopping1,9001,4751,120
Patio Bullrich1,061889689
Alto Noa1,3691,069766
Buenos Aires Design414326272
Mendoza Plaza2,3691,9071,515
Alto Rosario2,6281,9521,378
Córdoba Shopping- Villa Cabrera991756547
Dot Baires Shopping3,2542,5712,008
Soleil Premium Outlet1,282938664
La Ribera Shopping634398281
Distrito Arcos (2)
962340-
Alto Comahue (3)
717182-
Total sales28,90421,52716,132
(1)  
Retail sales based upon information provided to us by retailers and prior owners. The amounts shown reflect 100% of the retail sales of each shopping center, although in certain cases we own less than 100% of such Shopping Center. Excludes sales from stands and spaces used for special exhibitions.
(2)  
Opening was on December 18, 2014.
(3)  
Opening was on March 17, 2015.

Accumulated Sales per type of Business
 As of June 30,
 201620152014
 (In millions of Ps.)
Anchor Store1,5911,2991,098
Clothes and footwear15,20111,1257,940
Entertainment1,026741547
Home784617486
Home Appliances3,8622,9942,527
Restaurant2,7221,9381,477
Miscellaneous3,3682,5891,922
Services352223136
Total28,90621,52616,133
Occupancy Rate
The following table showssets forth the occupancy rate expressed as a percentage of the gross leasable area as of the closing dates stated at the end of the following fiscal years set forth below:
 As of June 30,
 201620152014
Abasto99.8%100.0%99.4%
Alto Palermo99.6%99.7%98.9%
Alto Avellaneda100.0%99.9%99.5%
Alcorta Shopping89.1%100.0%99.8%
Patio Bullrich99.1%100.0%99.6%
Alto Noa100.0%100.0%99.7%
Buenos Aires Design95.7%94.6%92.3%
Mendoza Plaza95.2%96.1%95.0%
Alto Rosario100.0%97.9%97.0%
Córdoba Shopping Villa Cabrera99.2%99.8%99.8%
Dot Baires Shopping100.0%99.7%99.7%
Soleil Premium Outlet100.0%99.4%100.0%
La Ribera Shopping99.3%99.3%99.6%
Distrito Arcos97.0%97.3%-
Alto Comahue96.6%94.2%-
Total Percentage98.4%98.7%98.4%

Rental Price
The following table shows the annual average accumulated rental price per square meter for the fiscal years ended June 30, 2016, 2015 and 2014:(1)
 As of June 30,
 201620152014
 (in Ps.)
Abasto10,456.48,227.26,254.6
Alto Palermo20,663.915,107.912,618.5
Alto Avellaneda7,389.75,443.24,400.3
Alcorta Shopping11,759.49,106.17,000.2
Patio Bullrich10,056.98,452.86,762.3
Alto Noa3,814.72,656.62,022.5
Buenos Aires Design3,264.22,543.21,874.9
Mendoza Plaza2,831.32,181.11,802.8
Alto Rosario6,303.14,847.23,390.4
Córdoba Shopping Villa Cabrera4,367.33,552.02,503.8
Dot Baires Shopping5,265.14,001.73,389.3
Soleil Premium Outlet5,726.04,242.52,908.4
La Ribera Shopping2,109.41,340.31,129.7
Distrito Arcos (2)
6,993.81,891.1-
Alto Comahue (3)
4,832.11,236.1-
(1)  
Correspond to consolidated annual accumulated rental prices according to the IFRS divided by gross leaseable square meters. Does not include income from Fibesa or Patio Olmos.
(2)  
Opening was on December 18, 2014.
(3)  
Opening was on March 17, 2015.
Lease Expirations
The following table sets forth the schedule of estimated lease expirations for our shopping centers for leases in effect as of June 30, 2016, assuming that none of the tenants exercise renewal options or terminate their leases earlier:
Year of expiration
Number of Agreements (1)
Square meters to expirePercentage to expire
Amount                                 (In million of Ps.) (3)
Percentage of Agreements
201617133,155.2
10%(1)
96.298%
201748783,781.325%356.8330%
201840369,906.221%308.8626%
2019 and subsequent years581146,312.744%409.1335%
Total (2)
1,642333,155.4100%1,171.11100%
(1) Including vacant stores relating to leases expired as of June  30, 2016. A lease may be associated to one or more stores.
(2) Does not reflect our ownership interest in each property.
(3) Annual base rent of each agreement as in effect as of June 30, 2016.
New Agreements and Renewals
The following table shows certain information about lease agreements as of June 30, 2016:
Type of BusinessNumber of AgreementsAnnual Base Rent Amount     (million Ps.)Annual Admission Rights Amount (million Ps.)Average Annual Base Rent per sqm (Ps.)
Number of non-renewed agreements(1)
Non-renewed agreements(1) Annual Base Rent Amount     (million Ps.)
New and renewedFormer agreements
Clothing and footwear456345.395.96,394.04,029.7515366.1
Miscellaneous(2)
10376.125.03,622.42,904.111891.6
Restaurant8645.08.33,990.23,381.313074.5
Home & décor4319.55.43,735.32,480.84826.4
Houseware2639.54.04,997.93,216.92529.2
Entertainment913.51.1673.3322.92317.2
Services126.40.51,867.21,702.24820.7
Total735545.2140.34,435.82,550.3907625.9
(1)
Includes vacant stores as of June 30, 2016. Leasable Area with respect to such vacant stores is included under the type of business of the last tenant to occupy such stores.
(2)
Miscellaneous includes Anchor Store.

Depreciation.
Depreciation, based on a component approach, is calculated using the straight-line method to allocate the cost over the assets’ estimated useful lives.
Principal Terms of the Leases.
Under the Civil and Commercial Code, lease terms may not exceed fifty years, except for leases regulated by Law No.25,248. See Item. Key Information. “Risk Factors—Risks Relating to IRSA.” Generally, our lease agreements provide terms of three to ten years.
Leasable space in the Company’s shopping centers is marketed through an exclusive arrangement with its wholly owned subsidiary and real estate brokers Fibesa. The Company has a standard lease agreement, the terms and conditions of which are described below, which it uses for most tenants. However, the Company’s largest tenants generally negotiate better terms for their respective leases. No assurance can be given that lease terms will be as set forth in the standard lease agreement.
The rent which consists of the higher of (i) a monthly base rent (the “Base Rent”) and (ii) a specified percentage of the tenant’s monthly gross sales in the store (the “Percentage Rent”), which generally ranges between 4% and 12% of tenant’s gross sales. Furthermore, pursuant to the rent escalation clause in most leases, a tenant’s Base Rent generally increases between 18% and 27% on an annual and cumulative basis from the thirteenth (13th) month of effectiveness of the lease. Although many of our lease agreements contain readjustment clauses, these are not based on an official index nor do they reflect the inflation index. In the event of litigation, there can be no assurance that we may be able to enforce such clauses contained in our lease agreements.
In addition to rent, IRSA charges most of its tenants an admission right, which is required to be paid upon entering into a lease agreement and upon a lease agreement renewal. The admission right is normally paid in one lump sum or in a small number of monthly installments, which range between three and six. If the tenant pays this fee in installments, it is the tenant’s responsibility to pay for the balance of any such amount unpaid in the event the tenant terminates its lease prior to its expiration. In the event of unilateral termination and/or resolution for breach of duties by the tenant, a tenant will not be refunded its admission right without IRSAs consent.
 
IRSA is responsible for supplying each shopping center with electricity, a main telephone switchboard, central air conditioning and a connection to a general fire detection system. Each rental unit at our properties is connected to these systems. The Company also provides food court tenants with sanitation and with gas connections. Each tenant is responsible for completing all the necessary installations within its own rental unit, in addition to the direct expenses generated by these items within each rental unit. These direct expenses generally include: electricity, water, gas, telephone and air conditioning. Tenants must also pay for a percentage of total charges and general taxes related to the maintenance of the common areas. IRSA determines this percentage based on different factors. The common area expenses include, among others, administration, security, operations, maintenance, cleaning and taxes.
IRSA carries out promotional and marketing activities to increase consumer traffic at the shopping centers. These activities are paid for with the tenants’ contributions to the Common Promotional Fund (“CPF”), which is administered by IRSA. Every month, tenants contribute to the CPF an amount equal to approximately 15% of their total rent (Base Rent plus Percentage Rent), in addition to rent and expense payments. IRSA may increase the percentage that tenants must contribute to the CPF, but the increase cannot exceed 25% of the original amount set in the corresponding lease for the contributions to the CPF. IRSA may also require tenants to make extraordinary contributions to the CPF to fund special promotional and marketing campaigns or to cover the costs of special promotional events that benefit all tenants. IRSA may require tenants to make these extraordinary contributions up to four times a year provided that each such extraordinary contribution may not exceed 25% of the preceding monthly rental payment of the tenant.
Each tenant leases its rental unit as a shell without any fixtures. Each tenant is responsible for the interior design of its rental unit. Any modifications and additions to the rental units must be pre-approved by IRSA. IRSA has the option to decide tenants’ responsibility for all costs incurred in remodeling the rental units and for removing any additions made to the rental unit when the lease expires. Furthermore, tenants are responsible for obtaining adequate insurance for their rental units, which must include, among other things, coverage for fire, glass breakage, theft, flood, civil liability and workers’ compensation.
Sources of Shopping Center Sales
Set forth below is a breakdown of the sources of sales by tenants of the shopping centers stated in millions of Pesos for fiscal years ended June 30, 2016, 2015 and 2014:
  As of June 30, 
 201620152014
Anchor Store1,590.51,299.31,098.4
Clothing and footwear15,201.411,124.87,940.1
Entertainment1,025.7740.6546.5
Home783.9617.1486.4
Home Appliances3,861.52,994.22,526.5
Restaurants2,722.21,938.41,476.8
Miscellaneous3,368.22,589.41,922.3
Services351.5223.1135.8
Total28,904.921,526.916,132.8

Competition
Given that most of our shopping centers are located in densely populated areas, there are competing shopping centers within, or in close proximity to, our targeted areas. The number of shopping centers in a particular area could have a material effect on our ability to lease space in our shopping centers and on the amount of rent that we are able to charge. We believe that due to the limited availability of large plots of land and zoning restrictions in the City of Buenos Aires, it will be difficult for other companies to compete with us in areas through IRSA Commercial Properties,the development of new shopping.centers. Our principal competitor is Cencosud S.A. which owns and operates Unicenter Shopping and the Jumbo hypermarket chain, among others.

The following table sets forth certain information relating toconcerning the most importantsignificant owners and operators of shopping centers in Argentina:.
CompanyShopping Center
Location (1)
Gross Leasable Area (2)(sq.m.)
Stores
National GLA Percentage (2)
Stores Percentage (2)
IRSA Commercial Properties      
 Dot Baires ShoppingCABA49,6411502.14%2.16%
 Mendoza Plaza ShoppingMendoza42,0431391.81%2.00%
 Abasto de Buenos AiresCABA40,4701701.74%2.45%
 Alto AvellanedaGBA35,8871341.54%1.93%
 Alto RosarioRosario30,0571431.29%2.06%
 Alto Palermo ShoppingCABA18,9661420.82%2.05%
 Alto NoaSalta19,040890.82%1.28%
 Alcorta ShoppingCABA15,8771120.68%1.62%
 Córdoba ShoppingCórdoba15,5821100.67%1.59%
 Soleil Premium OutletGBA13,991780.60%1.12%
 Buenos Aires DesignCABA13,903620.62%0.89%
 Distrito ArcosCABA11,170600.48%0.87%
 Patio BullrichCABA11,738880.51%1.27%
 La Ribera ShoppingSanta Fe9,851630.42%0.91%
 Alto ComahueNeuquen9,8901020.43%1.47%
 Subtotal 338,1981,64214.55%23.67%
Cencosud S.A.     
 Subtotal 650,2561,45628.01%21.02%
Other      
Operators      
 Subtotal 1,334,8463,83657.44%55.32%
 Total 2,323,2786,934100%100%
(1)  
“GBA” means Greater Buenos Aires, the Buenos Aires metropolitan area, and “CABA” means the City of Buenos Aires.
(2)  
Percentage over total shopping centers in Argentina that are members of the Argentine Chamber of Shopping Centers (Cámara Argentina de Shopping Centers, CASC). Figures may not sum due to rounding.
Source: Argentine Chamber of Shopping Centers.
Seasonality.
Our business is affected by seasonality, influencing the level of our tenants’ sales. During summer holidays (January and February) our tenants’ sales typically reach their minimum level, whereas during winter holidays (July) and in December (Christmas) they reach their maximum level. Clothing retailers generally change their collections in spring and autumn, positively affecting our shopping centers’ sales. Sales at discount prices at the end of each season are also one of the main seasonal factors affecting our business.
Offices and Others
According to Colliers International, as of June 30, 2016, the A+ and A office inventory remained stable since end of 2015 at 1,655,954 sqm. In terms of rental availability, there was a 1% decrease in the vacancy rate to 6.4% during the second quarter of 2016 compared to the same period the previous year. Thus, the vacancy rate has remained stable between 6% and 8% since 2010. These values indicate that the market is healthy in terms of its operations, allowing an optimum level of supply with balanced values. According to the market segments, class A properties show a vacancy rate of 7% for the entire stock, while A+ properties buildings show a vacancy rate of 5%.
During the second quarter of 2016, net absorption was negative at 400 sqm, i.e., more meters have become vacants than the ones which have been occupied, a situation that had not be seen since 2012. This behavior of demand is mainly explained by the sub-market Zona Norte GBA, which concentrates most of the spaces that have become vacant. On the other hand, that area has experienced vacancies in A+ properties (-2,908 sqm) which mainly migrated to class A properties (as it increased by 2,474 sqm).
During the second quarter of 2016, rental prices remained steady as compared to the general average prices seen over the past ten years (US$24.80 per square meter). Compared to the previous quarter, a 2.5% increase was recorded (from US$24.10 per square meter to US$24.70 per square meter). This slight increase shows a 1.4% increase in rental prices for A+ properties (US$27.20 per square meter in the second quarter against US$26.80 per square meter in the first quarter) and a 2.4% increase in rental prices for A properties (US$23.40 per square meter in the second quarter against US$22.90 per square meter in the first quarter). The spread between both categories is US$3.80 and reached US$12 in low vacancy periods.
 In turn, the sub-market Catalinas currently features the lowest prices in the market. The average value of the properties in such area is US$27.90 per square meter. This value is expected to increase over the next few months due to the addition of new towers with prices already over US$35 per square meter in the inventory.
At June 30, 2016, the sub-market Zona Norte GBA shows average rental prices of US$23.30, comparable to values reported in June 2015. Moreover, during the same month, the vacancy rate was 8.9%, compared to 9.5% in June 2015.

We are engaged in the acquisition and management of office buildings and other rental properties in Argentina. As of June 30, 2015, IRSA2016, we directly and indirectly owned interests in office and other rental properties, in Argentina, which comprised 254,730333,962 square meters of gross leasableleaseable area. Out of these properties, 9eight were office properties, which comprised 111,67981,020 square meters of gross leasableleaseable area. For fiscal year 2015,2016, we had revenues from Offices and other non-shopping center rental properties of Ps. 332.7340 million.
 
All our office rental properties in Argentina are located in the City of Buenos Aires. For the year ended June 30, 2015,2016, the average occupancy rate for all our properties in the Offices and Others segment was approximately 91.7%84.7%.
On December 22, 2014, IRSA Commercial Properties acquired from IRSA, 83,789 m2 of its premium office portfolio including the buildings República, Bouchard 710, Della Paolera 265, Intercontinental Plaza and Suipacha 652 and the “Intercontinental II” plot of land in order to consolidate a vehicle which main corporate purpose is to develop and operate commercial properties in Argentina.
The purcase price of the transaction was US$308 million based on third party appraisals, US$61.6 million of which have already been paid,and the balance of US$246.4 million has been financed by IRSA at an annual effective rate of 8.5% maturing on January 23, 2017 and July 13, 2020.
 
Management
 
IRSAWe generally actsact as the managing agent of the office properties in which we own an interest. These interests consist primarily of the ownership of entire buildings or a substantial number of floors in a building. The buildings in which we own floors are generally managed pursuant to the terms of a condominium agreement that typically provides for control by a simple majority of the interests (based on the area owned) in the building. As the managing agent of operations, we are responsible for handling services, such as security, maintenance and housekeeping. These services are generally outsourced. The cost of the services is passed-through and paid for by the tenants, except in the case of our units not rented, in which case we absorb the cost. Our leasableleaseable space is marketed through commissioned brokers, the media and directly by us.
 
Leases
 
IRSAWe usually leaseslease our offices and other rental properties by using contracts with an average term of three years, with the exception of a few contracts with terms of five years. These contracts are renewable for two or three years at the tenant’s option. Contracts for the rental of office buildings and other commercial properties are generally stated in U.S. Dollars,dollars, and in accordance with Argentine law they are not subject to inflation adjustment. Rental rates for renewed periods are negotiated at market value.
 
PropertiesProperties.
 
The following table sets forth certain information regarding our direct and indirect ownership interest in offices and other non-shopping center rental properties:
 

 Date of Acquisition
Gross Leasable Area (sqm) (1)
Occupancy Rate (2)
IRSA’s Effective Interest
Monthly Rental Income (in thousands of Ps.) (3)
Annual accumulated rental income as of June 30, (in millions of Ps.)(4)
Book Value
(in millions of Ps.)
201620152014
Offices         
Edificio República(5)
04/28/0819,885100.0%100.0%7,637726246191
Torre BankBoston(5)
08/27/0714,873100.0%100.0%5,098564235130
Bouchard 55103/15/07--100.0%-310249
Intercontinental Plaza(5)
11/18/976,569100.0%100.0%2,03628564012
Bouchard 710(5)(6)
06/01/0515,014100.0%100.0%7,02068483479
Dique IV(9)
12/02/97----153225-
Maipú 130009/28/951,353100.0%100.0%486616156
Libertador 49812/20/95620100.0%100.0%6116234
Suipacha 652/64(5)
11/22/9111,46590.7%100.0%2,08522161312
Dot Building (5)
11/28/0611,242100.0%80.0%3,521312719121
Subtotal Offices 81,02198.7%N/A28,494307311254564
          
Other Properties         
Santa María del Plata10/17/97106,610100.0%100.0%67612  13
Nobleza Picardo (7)
05/31/11109,61074.8%50.0%1852887
Other Properties (8)
N/A38,64642.8%N/A1,714117344
Subtotal Other Properties 154,94280.3%N/A2,57525151164
          
Total Offices and others (7)
 335,88784.7%N/A31,069332326265628
 
(1) Corresponds to the total leaseable surface area of each property as of June 30, 2016. Excludes common areas and parking spaces.
(2) Calculated by dividing occupied square meters by leaseable area as of June 30, 2016.
(3) The lease agreements in effect as of June 30, 2016 were computed for each property.
(4) Corresponds to total consolidated lease agreements.
(5) Through IRSA CP.
(6) On July 29, 2016, we executed a bill of sale for 1,702 square meters corresponding to two office floors and 16 parking units to an unrelated party, for a total amount of US$6.01 million, US$1.60 million which has already been paid, while the remaining balance will be paid upon execution of the deed of conveyance and delivery of possession.
(7) Through Quality Invest S.A.
(8) Includes the following properties: Ferro, Dot Adjoining Plot, Anchorena 665, Anchorena 545 (Chanta IV) and La Adela, among others.
(9) On December 10, 2015, we sold the “Juana Manso 295” office building located in the “Puerto Madero” area of the City of Buenos Aires, composed of 8 office floors and 116 parking spaces.The transaction amount was Ps.649 million, which has been fully paid and the gross profit from the transaction amounts to approximately Ps.586.8 million.
 
69


 
                 
Annual accumulated rental income over fiscal years Ps./000(4)
    
   
Date of Acquisition
   
Gross Leasable Area (sqm) (1)
   
Occupancy (2)
   
IRSA’s Effective Interest
  Monthly Rental Income (in thousands of Ps.) (3)   
2015
   
2014
   
2013
   
Book Value
(in thousands of Ps.)
 
Offices                           
Edificio República 04/28/08   19,885   93.6%  100.0%  4,919   61,934   45,676   32,721   195,539 
Torre BankBoston 08/27/07   14,873   100.0%  100.0%  3,954   41,932   34,744   25,146   134,924 
Bouchard 551 03/15/07   -   -   100.0%  135   10,176   23,519   30,008   8,226 
Intercontinental Plaza(8)
 11/18/97   22,535   100.0%  100.0%  -   55,973   40,108   30,178   48,783 
Bouchard 710 06/01/05   15,014   100.0%  100.0%  4,170   48,327   34,606   26,025   82,044 
Dique IV, Juana Manso 295 12/02/97   11,298   99.5%  100.0%  2,634   32,171   25,195   18,282   56,266 
Maipú 1300 (9)
 09/28/95   4,759   90.9%  100.0%  1,020   15,848   15,499   15,147   18,366 
Libertador 498 12/20/95   620   100.0%  100.0%  372   1,952   3,184   2,946   4,511 
Suipacha 652/64 11/22/91   11,453   96.7%  100.0%  1,385   16,023   12,636   8,689   13,711 
Madero 1020 12/21/95   -   -   100.0%  2   26   24   24   120 
Dot Building (5)
 11/28/06   11,242   100.0%  80.0%  2,067   27,416   18,985   12,924   126,365 
Subtotal Offices     111,679   98.1%  N/A   20,658   311,778   254,176   202,090   688,855 
                                    
Other Properties                                   
Nobleza Picardo (6)
 05/31/11   106,610   74.8%  50.0%  144   7,960   8,238   7,117   4,297 
Other Properties (7)
  N/A   36,441   45.3%  N/A   659   6,960   2,792   2,000   82,264 
Subtotal Other Properties      143,051   67.4%  N/A   803   14,920   11,030   9,117   86,561 
                                     
Total Offices (7)
      254,730   80.7%  N/A   21,461   326,698   265,206   211,207   775,416 
(1)Corresponds to the total leasable surface area of each property as of June 30, 2015. Excludes common areas and parking spaces.
(2)Calculated by dividing occupied square meters by leasable area as of June 30, 2015.
(3)The lease agreements in effect as of June 30, 2015 were computed for each property.
(4)Corresponds to total consolidated lease agreements.
(5)Through IRSA Commercial Properties.
(6)Through Quality Invest S.A.
(7)Includes the following properties: Anchorena 665, Zelaya 3102, 3103 y 3105, Rivadavia 2768, Constitución 1111, Santa Maria del Plata, Puerto Retiro Plots 50%, Rio Parcel 50%, Libertador Parcel 50%.
(8)During May, 2015, IRSA reported that, through IRSA Commercial Properties, has signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, IRSA sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.”
(9) During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
 
The following table shows a schedule of the lease expirations of our office and other properties for leases outstanding as of June 30, 2015,2016, assuming that none of the tenants exercise renewal options or terminate their lease early. Most tenants have renewal clauses in their leases.
 
As of June 30, 2016As of June 30, 2016
Year of
expiration
 
Number of
Leases (1)
  
Surface area subject
to expiration (sqm)
(2) (3)
  
Percentage subject
to expiration
  
Amount
(Ps. ‘000)
  
Percentage of
Leases
 
Number of
Leases
Surface area subject
to expiration (sqm)
Percentage subject
to expiration
Amount
(Ps.)
Percentage of
Leases
2015  21   36,077   11%  34,851   10%
2016  44   39,579   12%  101,819   30%2934,94712%34,508,79710%
2017  61   70,084   22%  147,468   44%2023,4558%74,530,61122%
2018+  26   171,372   54%  54,468   16%
20184043,62715%148,854,01143%
2019+29185,54065%85,548,60125%
Total  152   317,112   100%  338,606   100%118287,569100%343,442,020100%
 
(1)  Includes Offices, thewhose lease agreement of which has not yet been renewed as of June 30, 2015.2016.
(2)  Does not include vacant leased square meters.
(3)  Does not include square meters or revenues from parking spaces.
 

70

The following table shows our offices occupancy percentage (1) as of the end of fiscal years endedof June 30, 2016, 2015 and 2014:
 
 
Occupancy Percentage(1)
 
Occupancy Rate(1)
 2015  2014 201620152014
Offices        
Edificio República  93.6%  94.0%100.0%93.6%94.0%
Torre BankBoston  100.0%  100.0%100.0%100.0%
Bouchard 551  -   100.0%
Intercontinental Plaza(2)
  100.0%  100.0%
Intercontinental Plaza100.0%100.0%
Bouchard 710  100.0%  99.8%100.0%99.8%
Dique IV, Juana Manso 295  99.5%  94.4%
Suipacha 652/6490.7%96.7%100.0%
DOT Building100.0%100.0%
Maipú 1300 (3)
  90.9%  87.3%100.0%90.9%87.3%
Libertador 498  100.0%  100.0%100.0%100.0%
Suipacha 652/64  96.7%  100.0%
DOT Building  100.0%  100.0%
Subtotal Offices  98.1%  97.7%
Juana Manso 295 (Dique IV)-99.5%94.4%
Total Offices98.7%98.1%97.7%

 
(1)Leased surface area in accordance with agreements in effect as of June 30, 2016 and 2015 and 2014 as applicable.considering the total leaseable office area for the same periods.
(2)During May, 2015, we reported that, through IRSA Commercial Properties, we have signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, we sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.
(3) During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
The following table sets forth the annual average income per square meter for our offices during fiscal years ended June 30, 2016, 2015 2014 and 2013.2014.
 
  
Annual average income per square meter (ps./sqm) (1)
 
  
2015(2)
  
2014(2)
  
2013(2)
 
Offices         
Edificio República  3,115   2,297   1,646 
Torre BankBoston  2,819   2,336   1,691 
Bouchard 557  -   -   2,484 
Intercontinental Plaza(4)
  2,484   1,780   1,339 
Bouchard 710  3,219   2,305   1,733 
Dique IV, Juana Manso 295  2,847   2,230   1,618 
Maipú 1300(5)
  3,330   3,257   1,612 
Libertador 498  3,149   5,137   4,752 
Suipacha 652/64  1,399   1,103   759 
DOT Building  2,439   1,689   1,150 
Others(3)
  61   47   96 
  
 
(1) Calculated by dividing annual rental income by the gross leasable area of offices based on our interest in each building as of June 30 for each fiscal year.
(2) Leasable square meters vary depending on availability for rent of land reserves (Nobleza Piccardo, Ferro etc.).
(3) Includes the following properties: Nobleza Piccardo, Ferro, Dot Adjoining Plot and Chanta 4, Constitución 1111 and Rivadavia 2774.
(4) During May, 2015, we reported that, through IRSA Commercial Properties, we have signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, we sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.” 
(5) During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
 
Annual average income per surface area as of June 30, 2016, 2015 and 2014.

 
Annual average income per square meter (1)
 201620152014
Offices   
Edificio República3,6153,1153,075
Torre BankBoston3,7782,8192,467
Bouchard 551--3,565
Intercontinental Plaza4,2912,4842,402
Bouchard 7104,5393,2192,844
Juana Manso 295 (Dique IV)-2,8472,722
Maipú 13004,7903,3303,000
Libertador 49810,4643,1495,227
Suipacha 652/641,9611,3991,512
DOT Building2,7782,4392,410
(1)  
Calculated by dividing annual rental income by the gross leaseable area of offices based on our interest in each building as of June 30 for each fiscal year.
 

71

 
New agreements and renewals
 
The following table sets forth certain information on lease agreements as of June 30, 2015:2016:
 
Property 
Number of Agreements(1)(5)
  
Annual Rental Income (2)
(Ps. ‘000)
  
Rental Income per sqm New and Renewed(3)
(Ps.)
  
Previous Rental Income per sqm(3) (Ps.)
  No. of Non-Renewed Agreements  
Non-Renewed Agreements Annual Rental Income (4)
 
Number of Agreements(1)(5)
Annual Rental income
(in millions of Ps.) (2)
Rental income per sqm New and Renewed (3)
Previous rental income per sqm (3)
N° of non-renewed agreements
Non-renewed agreements Annual rental income (4)         (in million Ps.)
Maipú 1300 (7)
  7.0   6,862   179.1   125.0   -   - 33.4269.8385.011
Av. Libertador 498  1.0   1,109   149.1   -   -   - 
Libertador 49813.2427.8413.6--
Intercontinental Plaza(6)
  17.0   40,828   191.6   -   -   - 12.5232.5232.5--
Bouchard 710  7.0   33,005   234.2   333.3   -   - 312.9399.2331.8--
Bouchard 557  2.0   5,997   253.3   -   -   - 
Della Paolera 265  4.0   20,997   178.4   -   -   - 
Torre BankBoston311.2375.5283.5132
Edificio República  6.0   25,356   250.9   260.5   -   - 418.5399.8477.4--
Juana Manso 295  4.0   27,770   211.6   -   -   - 
DOT Building  1.0   3,885   218.1   -   -   - 
Dot Building13.7374.1327.326
Suipacha 664  2.0   2,493   75.4   34.6   -   - 36.5151.0143.3314
Total Offices  51.0   168,302   205.5   97.5   -   - 1961.9312.9299.5753
 
(1)  
Includes new and renewed agreements executed in fiscal year 2015.
(2)  Agreements stated in US Dollars converted into Pesos at the exchange rate prevailing in the initial month of the agreement multiplied by 12 months.
Includes new and renewed agreements executed in fiscal year 2016.
(3)  Monthly value.
(2)  
(4)  Agreements stated in US Dollars converted into Pesos at the exchange rate prevailing in the last month of the agreement, multiplied by 12 months.
Agreements stated in US dollars converted into Pesos at the exchange rate prevailing in the initial month of the agreement multiplied by 12 months.
(5)  
(3)  
Monthly value.
(4)  
Agreements stated in US dollars converted into Pesos at the exchange rate prevailing in the last month of the agreement, multiplied by 12 months.
(5)  
Does not include agreements of parking spaces, antennas or terrace space.
(6)  During May, 2015, we reported that, through IRSA Commercial Properties, we have signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, we sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.”
(7)  During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
Additional information about our Offices
Edificio República, City of Buenos Aires
Edificio República was designed by the renowned architect César Pelli (the designer of the World Trade Center in New York and the Petronas Towers in Kuala Lumpur). It is a unique premium office building in downtown Buenos Aires with approximately 19,885 gross leasable square meters and 178 parking spaces. The main tenants include Apache Energía, Estudio Beccar Varela, BASF Argentina S.A., ENAP Sipetrol Argentina S.A., Facebook Argentina S.R.L., BACS Banco de Crédito y Securitización S.A., among other.
Torre BankBoston, City of Buenos Aires
The Bank Boston tower is a modern office building located at Carlos Maria Della Paolera 265 in the City of Buenos Aires. It was designed by the renowned architect Cesar Pelli and has 27 floors and 60 parking spaces and 31,670 square meters of gross leasable area. We have a 47% ownership interest in the building. At present, its main tenants include Exxon Mobile and Kimberly Clark de Argentina, among other.
Bouchard 551, City of Buenos Aires
Bouchard 551, known as “Edificio La Nación”, is an office building we acquired in March 2007, located in the Retiro area close to the intersection of the Leandro N. Alem and Córdoba avenues and opposite Plaza Roma. The building is a 23-story tower covering a surface area of 2,900 square meters in the low floors that becomes smaller as it goes higher up to 900 square meters approximately, and parking for 116 units.
Intercontinental Plaza, City of Buenos Aires
Intercontinental Plaza is a modern 24-story building located next to the Intercontinental Hotel in the historic neighborhood of Montserrat in downtown City of Buenos Aires. We own 61% of the building, which has a surface averaging 22,535 square meters of gross leasable area and 321 parking spaces. The principal tenants currently include Danone Argentina S.A., Cresud, IRSA Commercial Properties, and Industrias Pugliese S.A., among other. Until June 30, 2015, our main tenants included Total Austral S.A. During May, 2015, IRSA reported that, through IRSA Commercial Properties, has signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, IRSA sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.”
Dique IV, Juana Manso 295, Puerto Madero, City of Buenos Aires
About mid-May 2009 we completed an office building located in Puerto Madero’s Dock IV. It is a luxury building with a leasable area of approximately 11,298 square meters composed of large and versatile spaces. Its lay-out is optimum both for companies that require smaller office space at an average 200 square meters and for corporations that need the entire floor. The building has nine office stories and retail stores in the first story. The main tenant in the building is Exxon Mobile.

72

Bouchard 710, City of Buenos Aires
Bouchard 710 is an office building located in the Retiro area. The building is a 12-story tower, with an average area per floor of 1,251 square meters, with 165 units for car parking. Tenants include Sibille S.C. (KPMG), and Microsoft de Argentina S.A., Samsung Electronics Argentina S.A., Energy Consulting Services S.A., Chubb Argentina de Seguros S.A and Booking.com S.A., among other. It has 15,014 square meters of gross leasable area.
Maipú 1300, City of Buenos Aires
Maipú 1300 is a 23-story office tower opposite Plaza San Martín, a prime office zone facing Avenida del Libertador, an important north-to-south avenue. The building is also located within walking distance of the Retiro commuter train station, the city’s most important public transportation hub, connecting rail, subway and bus transportation. We own 4,758 sqm, with an average area per floor of 440 square meters. The building’s principal tenants currently include PPD Argentina S.A., TV Quality SRL, El Surco Compañía de Seguros and Petrolera San José. During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
Suipacha 652/64, City of Buenos Aires
Suipacha 652/64 is a 7-story office building located in the office district of the city. We own the entire building and 62 parking spaces. The building has unusually large floors, most measuring 1,580 square meters. The building’s principal tenants currently include Gameloft Argentina S.A., Monitor de Medios Publicitarios S.A, Organización de Servicios Directos Empresarios (OSDE) and Tarshop S.A., among other. It has 11,453 square meters of gross leasable area.
Libertador 498, City of Buenos Aires
Libertador 498 is a 27-story office tower at the intersection of three of the most important means of access to the city. This location allows for easy access to the building from northern, western and southern Buenos Aires. We are owners of 1 floor with an average area per floor of 620 sqm and approximately 100 parking spaces. This building features a unique design in the form of a cylinder and a circular view of the entire city. The main tenants include Sideco Americana S.A., Goldman Sachs Argentina LLC, Empresa Argentina de Soluciones Satelitales S.A., Japan Bank for the International Cooperation, Gates Argentina S.A., Kandiko S.A. and Allergan Productos Farmacéuticos S.A.
Dot Building, City of Buenos Aires
Panamerican Mall S.A., our subsidiary, developed an office building with a gross leasable area of 11,242 sqm adjacent to Dot Baires Shopping. This building was opened in July 2010, which meant our landing in the booming rental office corridor in the northern area of the City of Buenos Aires. The principal tenants include General Electric International Inc., Mallinckrodt Medical Arg. Limited, Carrier and Boston Scientific Argentina S.A., Astrazeneca S.A., Covidien S.A., etc.
Other Office Properties
We also have interests in other office properties, all of which are located in the City of Buenos Aires. These properties are either entire buildings or floors in buildings.
Retail and Other Properties
Our portfolio of rental properties as of June 30, 2015 includes 4 non-shopping center leasable properties that may be leased as shops on streets, a lot in industrial premises, land reserves or other properties for various uses. Most of these properties are located in the City of Buenos Aires, although some are located in other cities in Argentina. These properties include Constitución 1111, Solares de Santa María, Madero 1020, Zelaya 3102 and Rivadavia 2774.
Catalinas Norte Plot
On May 26, 2010, jointly with the Government of the City of Buenos Aires, we executed a deed of conveyance of title whereby we acquired a property located at Avenida Eduardo Madero 150, between Av. Córdoba and San Martín. The total price of the transaction was fixed in the amount of Ps. 95 million, Ps. 19 million of which were paid upon the execution of the preliminary sales agreement (on December 17, 2009), whereas the balance of Ps. 76 million was paid upon the execution of the deed on May 26, 2010.
Shopping Center Properties
We are engaged in purchasing, developing and managing shopping centers through our subsidiary, IRSA Commercial Properties. As of June 30, 2015, IRSA Commercial Properties operated and owned a majority interest in fifteen shopping centers in Argentina, seven of which are located in the City of Buenos Aires (Abasto, Alcorta Shopping, Alto Palermo, Patio Bullrich, Buenos Aires Design, Dot Baires Shopping and Distrito Arcos), two of which are located in the greater Buenos Aires metropolitan area (Alto Avellaneda and Soleil Premium Outlet) and the other ones located in different Argentine provinces: Alto NOA in the City of Salta, Alto Rosario in the City of Rosario, Mendoza Plaza in the City of Mendoza, Córdoba Shopping Villa Cabrera in the City of Córdoba, La Ribera Shopping in the City of Santa Fe, and Alto Comahue in the City of Neuquén.
As of June 30, 2015, we owned, through IRSA, 95.80% of IRSA Commercial Properties. The remaining shares are held by the public investor and traded on the Bolsa de Comercio de Buenos Aires and the related ADRs are listed and traded on the NASDAQ (USA) under the ticker “IRCP.”
As of June 30, 2015, IRSA Commercial Properties’s shopping centers comprised a total of 333,911.5 square meters of gross leasable area (“GLA”) (excluding certain space occupied by hypermarkets which are not our tenants). For fiscal year 2015, the occupancy rate of IRSA Commercial Properties’s shopping center portfolio was approximately 98.7%.
During fiscal year 2015 we opened two new shopping centers: “Distrito Arcos,” located in the area of Palermo, City of Buenos Aires, in December 2014 and “Alto Comahue,” located in the City of Neuquén, Argentine Patagonian region, in March 2015. Income from these new developments, were Ps. 22.9 million and Ps. 11.7 million, respectively.

73


We centralized management of our shopping centers in IRSA Commercial Properties, which is responsible for providing common area electrical power, a main telephone switchboard, central air conditioning and other basic common area services.
The following table shows certain information concerning our IRSA Commercial Properties subsidiary’s shopping centers as of June 30, 2015:
 Date of Acquisition 
Leasable Area
sqm (1)
  
IRSA Commercial Properties’ Interest
(3)
  
Occupancy Rate
(2)
  
Accumulated Annual Rental Income as of fiscal year ended (4)
 
  
Book Value
(in thousands of Ps.)
(5)
 
             2015    2014   2013    
Shopping Centers (6)
                      
Alto PalermoNov-97  19,545.0   100.00%  99.7%  295,285   244,214   196,001   221,506 
Abasto Shopping  (7)
Jul-94  36,669.1   100.00%  100.0%  301,685   238,021   192,495   271,860 
Alto AvellanedaNov-97  36,728.6   100.00%  99.9%  199,920   160,894   128,114   131,850 
Alcorta ShoppingJun-97  15,432.9   100.00%  100.0%  140,533   105,791   82,470   115,950 
Patio BullrichOct-98  11,636.2   100.00%  100.0%  98,359   79,374   66,424   106,248 
Alto NOAMar-95  19,072.9   100.00%  100.0%  50,669   38,746   31,150   31,316 
Buenos Aires DesignNov-97  13,888.2   53.70%  94.6%  35,320   27,360   23,145   12,930 
Alto Rosario (7)
Nov-04  28,395.6   100.00%  97.9%  137,639   100,072   78,743   115,908 
Mendoza PlazaDec-94  42,039.5   100.00%  96.1%  91,694   74,110   61,928   102,781 
Dot Baires ShoppingMay-09  49,847.9   80.00%  99.7%  199,474   158,306   128,196   382,624 
Córdoba Shopping Villa CabreraDec-06  15,328.0   100.00%  99.8%  54,445   39,763   32,314   56,451 
Soleil Premium OutletJul-10  13,993.1   100.00%  99.4%  59,366   44,178   27,927   84,301 
La Ribera Shopping (8)
Aug-11  9,750.3   50.00%  99.3%  13,068   9,360   7,236   21,185 
Distrito Arcos (9)
Dec-14  12,127.3   90.00  97.3%  22,934   -   -   229,800 
Alto Comahue (10)
Mar-15  9,456.9    90.10  94.2%  11,690   -   -   309,959 
TOTAL GENERAL   333,911.5       98.7%  1,712,081   1,320,189   1,056,143   2,194,669 
(1)Total leasable area in each property. Excludes common areas and parking spaces.
(2)Calculated dividing occupied square meters by leasable area on the last day of the fiscal year.
(3)IRSA Commercial Properties’ effective interest in each of its business units. IRSA has a 95.80% interest in IRSA Commercial Properties.
(4)Corresponds to total leases, consolidated according to IFRS. Does not include income relating to common maintenance expenses and collective promotion fund.
(5)Cost of acquisition plus improvements, less accumulated depreciation, plus adjustment for inflation, if applicable.
(6)Through IRSA Commercial Properties.
(7)Excludes Museo de los Niños (3,732 square meters in Abasto and 1,261 square meters in Alto Rosario).
(8)We jointly own La Ribera Shopping through a joint venture and therefore its results of operations are not consolidated with ours.
(9)Opening was on December 18, 2014.
(10)Opening was on March 17, 2015.


74



Tenant Retail Sales(1)
The following table contains a breakdown of approximate total tenant retail sales in million Pesos at the shopping centers in which we had an interest for the fiscal years shown:
    As of June 30
  2015  2014  2013
  (In Ps.)
Abasto  3,150.2   2,447.0   1,939.0 
Alto Palermo  2,662.1   2,111.2   1,609.8 
Alto Avellaneda  2,895.1   2,333.8   1,868.8 
Alcorta Shopping  1,474.7   1,120.4   822.7 
Patio Bullrich  888.5   689.3   548.3 
Alto NOA  1,068.6   766.1   609.2 
Buenos Aires Design  326.0   272.2   241.5 
Mendoza Plaza  1,906.7   1,514.7   1,206.7 
Alto Rosario  1,951.8   1,378.3   1,060.2 
Córdoba Shopping- Villa Cabrera  756.0   546.6   432.9 
Dot Baires Shopping  2,570.6   2,008.3   1,566.6 
Soleil Premium Outlet  938.4   664.0   366.4 
La Ribera Shopping  398.1   280.8   209.9 
Distrito Arcos (2)  339.9   0.0   0.0 
Alto Comahue (3)  182.1   0.0   0.0 
Total Sales  21,508.7   16,132.8   12,482.0 
 (1) Retail sales based upon information provided to us by tenants and past owners. The amounts shown reflect 100% of the retail sales of each shopping center, although in certain cases we own less than 100% of such shopping centers. Excludes sales from the booths and spaces used for special exhibitions.
(2) Opening December 18, 2014.
(3) Opening March 17, 2015.
Expiration of lease agreements
The following table shows a schedule of lease expirations for our shopping center properties for leases in place as of June 30, 2015, assuming that none of the tenants will exercise renewal options or terminate their lease earlier:
Leases Agreements Expiration as of June 30 
Number of Leases Agreements to Expire (1)
  Square Meters of Leases to Expire  Square Meter Percentage of Leasses to Expire  
Amount of Lease Agreement to Expire (Ps.) (3)
  Percentage of Leases Agreements to Expire 
2016  633   105,333.7   31%  321,158,626.4   38%
2017  413   62,978.6   19%  209,324,015.3   25%
2018  393   66,763.5   20%  205,918,292.3   24%
2019 and subsequent years  215   98,835.7   30%  106,729,754.2   13%
Total (2)
  1,654   333,911.5   100%  843,130,688.2   100%
(1)  Includes vacant stores relating to leases expired as of June 30, 2015. A lease agreement may be associated to one or more premises.
(2)  Includes the base rent and does not reflect our ownership interest in each property.
(3)  Annual basic rent as of June 30, 2015 under leases subject to expiration.

75

 
New Agreements and Renewals
The following table shows certain Information about lease agreements as of June 30, 2015:
               Average Annual Base Rent per sqm (Ps.)   Average Annual Base Rent per sqm (Ps.)         
 
Type of Business
  Number of Agreements   Annual Base Rent Amount (Ps.)   Annual Admission Rights Amount (Ps.)   New and renewed   Former agreements   
Number of non-renewed agreements (1)
   
Non-renewed agreements (1) Annual Base Rent Amount (Ps.)
 
Clothes and footwear  391   223,614,392.90   61,844,417.00   5,314.50   4,036.40   581   307,355,562.50 
Miscellaneous  90   47,196,397.60   19,970,450.30   3,160.80   2,415.70   137   49,714,790.90 
Restaurant  88   35,261,497.90   6,666,073.80   3,848.60   2,698.70   125   53,098,038.70 
Home  42   15,560,441.90   4,102,247.30   2,822.10   2,815.30   50   20,824,495.80 
Services  27   7,061,303.30   978,818.40   1,541.90   1,155.50   42   9,410,003.90 
Technology  23   15,404,643.00   1,849,358.60   2,500.70   2,122.50   31   35,472,465.20 
Entertainment  5   1,636,560.00   5,000.00   150.4   86.2   22   21,520,094.60 
 Total  666   345,735,236.60   95,416,365.40   3,705.50   2,841.70   988   497,395,451.60 
(1) Includes vacant stores as of June 30, 2015. Leasable Area with respect to such vacant stores is included under the type of business of the last tenant to occupy such stores
Occupancy Rate
The following table shows the occupancy rate as a percentage of gross leasable area as of the closing dates of the fiscal years set forth below:
  As of June 30 
  2015  2014  2013 
Abasto  100.0%  99.4%  99.8%
Alto Palermo  99.7%  98.9%  98.4%
Alto Avellaneda  99.9%  99.5%  99.9%
Alcorta Shopping  100.0%  99.8%  99.8%
Patio Bullrich  100.0%  99.6%  99.7%
Alto NOA  100.0%  99.7%  99.7%
Buenos Aires Design  94.6%  92.3%  99.0%
Mendoza Plaza  96.1%  95.0%  97.7%
Alto Rosario  97.9%  97.0%  97.1%
Córdoba Shopping Villa Cabrera  99.8%  99.8%  100.0%
Dot Baires Shopping  99.7%  99.7%  99.4%
Soleil Premium Outlet  99.4%  100.0%  100.0%
La Ribera Shopping  99.3%  99.6%  97.7%
Distrito Arcos (1)  97.3%  -   - 
Alto Comahue (2)  94.2%  -   - 
Weighted Average  98.7%  98.4%  99.1%
(1)  Opening December 18, 2014.
(2)  Opening March 17, 2015.
Rental Price
The following table shows the annual average accumulated rental price per square meter for the fiscal years ended June 30, 2015, 2014 and 2013:
  
Fiscal Year ended June 30,(1)
 
  2015  
2014(4)
  2013 
  (in Ps.) 
Abasto  8,227.2   6,254.6   5,104.9 
Alto Palermo  15,107.9   12,618.5   10,487.1 
Alto Avellaneda  5,443.2   4,400.3   3,467.9 
Alcorta Shopping  9,106.1   7,000.2   5,832.0 
Patio Bullrich  8,452.8   6,762.3   5,685.5 
Alto NOA  2,656.6   2,022.5   1,627.3 
Buenos Aires Design  2,543.2   1,874.9   1,683.7 
Mendoza Plaza  2,181.1   1,802.8   1,466.2 
Alto Rosario  4,847.2   3,390.4   2,843.6 
Córdoba Shopping Villa Cabrera  3,552.0   2,503.8   2,139.2 
Dot Baires Shopping  4,001.7   3,389.3   2,578.4 
Soleil Premium Outlet Shopping  4,242.5   2,908.4   2,052.1 
La Ribera Shopping  1,340.3   1,129.7   863.7 
Distrito Arcos (2)
  1,891.1   -   - 
Alto Comahue (3)
  1,236.1   -   - 
(1)  Corresponds to consolidated annual accumulated rental prices according to the IFRS divided by gross leasable square meters. Does not include income from Fibesa or Patio Olmos.
(2)  Opening December 18, 2014.
(3)  Opening March 17, 2015.
(4)  Does not include income relating to common maintenance expenses and collective promotion fund.
Depreciation
Depreciation, based on a component approach, is calculated using the straight-line method to allocate the cost over the assets’ estimated useful lives.
Principal Terms of the Leases
Under Argentine Law, which was substantially amended upon enactment of the Argentine Civil and Commercial Code (“ACCC”), effective as of August 1, 2015, terms of commercial leases must be between two to fifty years, with most leases in the shopping center business having terms of no more than five years. The Company’s lease agreements are generally denominated in Pesos.
Leaseable space in the Company’s shopping centers is marketed through an exclusive arrangement with its real estate broker, Fibesa S.A. (“Fibesa”). The Company has a standard lease agreement, the terms and conditions of which are described below, which it uses for most tenants. However, the Company’s largest tenants generally negotiate better terms for their respective leases. No assurance can be given that lease terms will be as set forth in the standard lease agreement.
The Company charges its tenants a rent which consists of the higher of (i) a monthly base rent (the “Base Rent”) and (ii) a specified percentage of the tenant’s monthly gross sales in the store (the “Percentage Rent”), which generally ranges between 4% and 10% of tenant’s gross sales. Furthermore, pursuant to the rent escalation clause in most leases, a tenant’s Base Rent generally increases between 7% and 24% each year on an annual and cumulative basis from the thirteenth month of the lease effective term. Although many of our lease agreements contain readjustment clauses, these are not based on an official index nor do they reflect the inflation index.
Sources of Shopping Center Revenues
Set forth below is a breakdown of the sources of sales by tenants of the shopping centers stated in millions of Pesos for our fiscal years ended June 30, 2015, 2014 and 2013:
  2015  2014  2013 
Anchor Store  1,299.3   1,098.4   869.5 
Clothes and footwear  11,124.8   7,940.1   6,149.9 
Entertainment  722.3   546.5   461.5 
Home  617.1   486.4   401.4 
Technology  2,994.2   2,526.5   1,921.1 
Restaurant  1,938.4   1,476.8   1,161.5 
Miscellaneous  2,589.4   1,922.3   1,438.2 
Services  223.2   135.8   78.9 
Total  21,508.7   16,132.8   12,482.0 

Additional Information about our Shopping Center Properties
Set forth below is information regarding our subsidiary IRSA Commercial Properties’ principal shopping centers.
Alto Palermo Shopping, City of Buenos Aires
Alto Palermo Shopping is a 146-store shopping center that opened in 1990 and is located in the densely populated middle-income neighborhood of Palermo in the City of Buenos Aires. Alto Palermo Shopping is located only a few minutes from downtown Buenos Aires and with nearby subway access at the intersection of Avenues Santa Fe and Coronel Díaz. Alto Palermo Shopping has a total constructed area of 65,029 square meters (including parking lot) that consists of 19,545.0 sqm of gross leasable area. The shopping center has an entertainment area and a food court with 18 stores. Alto Palermo Shopping is spread out over four levels and its parking lot may accommodate 654 cars for a fee over an area of 32,405 square meters. The shopping center target customer is a middle-income shopper aged 28 to 40.
In the fiscal year ended on June 30, 2015, the public visiting the shopping center generated nominal retail sales totaling approximately Ps. 2,662.1 million, 26.1% higher than the invoiced amount in the same period of the previous fiscal year. Sales per square meter reached Ps. 136,203.1. Total rental income increased from about Ps. 244.2 million for fiscal year ended June 30, 2014 to Ps. 295.3 million for fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 12,618.5 in 2014 and Ps. 15,107.9 in 2015. As of June 30, 2015, the occupancy rate of Alto Palermo Shopping was 99.7%.
Alto Avellaneda, Avellaneda, Greater of Buenos Aires
Alto Avellaneda is a 139-store shopping center that opened in October 1995 and is located in the densely populated neighborhood known as Avellaneda, on the southern border of the City of Buenos Aires. This shopping center is located near a railway station and close to downtown Buenos Aires City. Alto Avellaneda has a total constructed area of 108,598.8 square meters (including parking lot) that includes 36,728.6 sqm of gross leasable area. Alto Avellaneda has a six-screen multiplex movie theatre, the first Walmart megastore in Argentina, an entertainment center, a 19-restaurant food court and starting in April 28, 2008, it also hosts a Falabella department store. Walmart (whose occupied area is not included in the gross leasable area) acquired the space it occupies, but it pays a share of the common expenses of Alto Avellaneda’s parking lot. This shopping center offers free-of-charge parking space for 2,700 cars over an area of 47,856 square meters. Alto Avellaneda’s target customer is a middle-income shopper aged 16 to 30.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 2,895.1 million, which represents a year-on-year growth of 24.1%. Sales per square meter were Ps. 78,823.1. Total rental income increased from Ps. 160.9 million for fiscal year ended June 30, 2014 to Ps. 199.9 million for fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 4,400.3 in 2014 and Ps. 5,443.2 in 2015. As of June 30, 2015, the occupancy rate of Alto Avellaneda was 99.9%.
Alcorta Shopping, City of Buenos Aires
Alcorta Shopping is a 106-store shopping center that opened in 1992 and is located in the residential neighborhood of Palermo Chico, one of the most exclusive areas in the City of Buenos Aires, within a short drive from downtown Buenos Aires. Alcorta Shopping has a total constructed area of approximately 87,553.8 square meters (including parking lot) that consists of 15,432.9 square meters of gross leasable area. Alcorta Shopping has a 12-restaurant food court and a Carrefour hypermarket on the ground floor. Carrefour purchased the space it now occupies but it pays a share of the expenses of the shopping center’s parking lot. It is a three-level shopping center that includes a parking lot that charges a fee ( from June 2008) with approximately 1,300 spaces. Alcorta Shopping´s targeted clientele consists of high income individuals between the ages of 34 and 54.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 1,474.7 million, which represents fiscal year sales for approximately Ps. 95,554.7 per square meter and a year-on-year growth of 31.6%. Total rental income increased from approximately Ps. 105.8 million in fiscal year ended June 30, 2014 to Ps. 140.5 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 7,000.2 in 2014 and Ps. 9,106.1 in 2015. As of June 30, 2015, the occupancy rate of Alcorta Shopping was 100%.
Abasto Shopping, City of Buenos Aires
Abasto Shopping is a 169-store shopping center located in the City Buenos Aires. Abasto Shopping is directly accessible by Carlos Gardel subway station; it is six blocks away from Once railway station and near the highway to Ezeiza International Airport. Abasto Shopping opened on November 10, 1998. Our investment in Abasto amounted to US$ 111.6 million. The principal building is a landmark building, which during the period 1889 to 1984 operated as the primary fresh produce market for the City of Buenos Aires. The property was converted into a 116,646 square meter shopping center (including parking lot and common areas), with approximately 36,669.1 square meters of gross leasable area (40,401.4 sqm including Museo de los Niños). Abasto is ranked #4 in terms of gross leasable area in Argentina. The shopping center is near Torres de Abasto, our apartment complex, and Coto supermarket.
Abasto Shopping has a 26-restaurant food court, a 12-screen movie theatre complex seating approximately 3,100 people, covering a surface area of 8,021 sqm, entertainment area and Museo de los Niños with a surface area of 3,732.3 sqm (the latter is not included within the gross leasable area). The shopping center is distributed in five levels and includes a parking lot for 1,200 vehicles with a surface area of 40,169 sqm.
Abasto Shopping’s target customer is a middle-income shopper aged 25 to 45 that, in our opinion, represents an important portion of the population in this area of Buenos Aires.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 3,150.2 million, 28.7% higher than the sales recorded in the same period of the previous fiscal year. Sales per square meter were approximately Ps. 85,909.2. Total rental income increased from approximately Ps. 238.0 million in fiscal year ended June 30, 2014 to Ps. 301.7 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 6,254.6 in 2014 and Ps. 8,227.2 in 2015. As of June 30, 2015, the occupancy rate of Abasto Shopping was 100%.

76

Patio Bullrich, City of Buenos Aires
Patio Bullrich is an 87-store shopping center which opened in 1988 and the first shopping center to start operations in the City of Buenos Aires. We acquired Patio Bullrich on October 1, 1998 for US$ 72.3 million.
Patio Bullrich is located in the Recoleta neighborhood, one of the most prosperous areas of the City of Buenos Aires. This neighborhood is a residential, cultural and tourist center that includes distinguished private homes, historical sites, museums, theatres and embassies. The shopping center is located within walking distance of the most prestigious hotels of the City of Buenos Aires and the subway, bus and train systems. Additionally, the shopping center is only 10 minutes by car from the downtown area of the city.
Patio Bullrich has a total constructed area of 29,982 square meters (including parking lot) that consists of 11,636.2 sqm of gross leasable area and common areas consisting of 12,472 square meters. The shopping center includes a four-screen multiplex movie theatre seating 1,381 people and an 11-store food court. The four-story shopping center has a parking lot that charges a fee with 215 spaces over an area of 4,825 square meters.
Patio Bullrich is one of the most successful shopping centers in Argentina in terms of sales per square meter. Its targeted clientele consists of high-income individuals.
In the fiscal year ended June 30, 2015, the shopping center generated nominal retail sales of approximately Ps. 888.5 million, which represents annual sales for approximately Ps.76,353.1 per square meter and a year-on-year growth of 28.9% compared to fiscal 2014. Total rental income increased from approximately Ps. 79.4 million in fiscal year ended June 30, 2014 to Ps. 98.4 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 6,762.3 in 2014 and Ps. 8,452.8 in 2015. As of June 30, 2015, the occupancy rate of Patio Bullrich was 100%.
Alto NOA, Salta, City of Salta
Alto Noa is a 89-store shopping center that opened in 1994. Alto Noa is located in the City of Salta, the capital of the Province of Salta, in the northwestern region of Argentina. The province of Salta has a population of approximately 1.2 million inhabitants with approximately 0.6 million inhabitants in the City of Salta. The shopping center has a total constructed area of approximately 30,876 square meters (including parking) which consists of 19,072.9 square meters of gross leasable area. Alto Noa has a food court with 14 restaurants, a large entertainment center, a supermarket and a multiplex cinema with eight screens. The shopping center occupies one floor and has a free parking lot for 551 cars. Alto Noa’s target customer is a middle-income shopper aged 28 to 40.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 1,068.6 million, which represents period sales for approximately Ps. 56,027.2 per square meter and a year-on-year growth of 39.5%. Total rental income increased from approximately Ps. 38.7 million in fiscal year ended June 30, 2014 to Ps. 50.7 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 2,022.5 in 2014 and Ps. 2,656.6 in 2015. As of June 30, 2015, the occupancy rate of Alto Noa was 100%.
Buenos Aires Design, City of Buenos Aires
Buenos Aires Design is a shopping center with 63 stores specialized in home decoration which opened in 1993. We own a 53.68% interest in Emprendimientos Recoleta S.A. (“ERSA”), the company which has the concession to operate Buenos Aires Design. The other shareholder of ERSA is Hope Funds S.A., which has a 46.32% interest.
As a result of a public auction, in February 1991, the City of Buenos Aires granted to ERSA a 20-year concession to use a plot of land in the Centro Cultural Recoleta, pursuant to an agreement executed in June 1993. The concession effective date was scheduled for November 19, 1993 and was set to expire on November 18, 2013. In 2010 the Government of the City of Buenos Aires, pursuant to Decree No. 867, extended the concession term for an additional five-year period, and the expiration date under the agreement became due on November 17, 2018. The concession agreement provides for ERSA to pay the City of Buenos Aires a monthly amount of Ps. 49,029. The concession may be terminated for any of the following reasons, among others: material breach of the obligations of the parties, which with regard to ERSA include: (i) breach of applicable law, (ii) change of the purpose of the area under concession; (iii) non payment of the monthly fee for two consecutive periods; (iv) destruction or abandonment of the area under concession; (v) bankruptcy or liquidation; (vi) restitution of the plot of land under concession, which shall only take place for public interest reasons.
In June 1991, we entered into an agreement with the shareholders of ERSA providing administration by us of Buenos Aires Design for a monthly administration fee of 10% of the net expenditures of expenses.
Buenos Aires Design is located in an exclusive neighborhood named Recoleta in the City of Buenos Aires, near Libertador Avenue and downtown Buenos Aires. Buenos Aires Design is located in one of Buenos Aires’ most popular tourist attraction areas as the most exclusive hotels and restaurants are located in this area and due to its closeness to the National Museum of Fine Arts, the Museum of Modern Art and other popular cultural institutions.
Buenos Aires Design has a total constructed area of 26,131.5 sqm (including parking) that consists of 13,888.2 sqm of gross leasable area. The shopping center has 10 restaurants anchored by the Hard Rock Café and a terrace that covers 3,700 square meters. The shopping center is divided into two floors and has a 174-car pay parking lot.
Buenos Aires Design’s targeted clientele consists of upper-middle income individuals between the ages of 25 and 45.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 326.0 million, which represents approximately Ps. 23,474.2 per square meter. Total rental income increased from approximately Ps. 27.4 million in fiscal year ended June 30, 2014 to Ps. 35.3 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 1,874.9 in 2014 and Ps. 2,543.2 in 2015. As of June 30, 2015, the occupancy rate of Buenos Aires Design was 94.6%.

77

Alto Rosario, Santa Fe, City of Rosario
Alto Rosario is a 145-store shopping center located in the city of Rosario, the third largest city in Argentina in terms of population. It has a total constructed area of approximately 100,750 square meters (including parking), which consists of 28,395.6 square meters of gross leasable area (excluding Museo de los Niños). Alto Rosario has a food court with 17 restaurants, a large entertainment center, a supermarket and a Showcase cinema with 14 state-of-the-art screens. The shopping center occupies one floor and has a free parking lot for 1,736 cars. Alto Rosario’s targeted clientele consists of middle-income individuals between the ages of 28 and 40.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 1,951.8 million, which represents a year-on-year growth of 41.6%. Sales per square meter were approximately Ps. 68,735.0 million. Total rental income increased from approximately Ps. 100.1 million in fiscal year ended June 30, 2014 to Ps. 137.6 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 3,390.4 in 2014 and Ps. 4,847.2 in 2015. As of June 30, 2015, the occupancy rate of Alto Rosario was 97.9%.
Mendoza Plaza Shopping, Mendoza, City of Mendoza
Mendoza Plaza is a 144-store shopping center which opened in 1992 and is in the City of Mendoza, the capital of the Province of Mendoza. The city of Mendoza has a population of approximately 1.0 million inhabitants, making it the fourth largest city in Argentina. Mendoza Plaza Shopping consists of 42,039.5 square meters of gross leasable area and has a multiplex cinema covering an area of approximately 3,659 square meters with ten screens, the Chilean department store Falabella, a food court with 18 restaurants, an entertainment center and a supermarket, which is also a tenant. The shopping center has two levels and has a free parking lot for 2,600 cars. Mendoza Plaza’s targeted clientele consists of middle-income individuals between the ages of 28 and 40.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 1,906.7 million, which represents a year-on-year growth of 25.9%. Sales per square meter were approximately Ps. 45,354.3. Total rental income increased from approximately Ps. 74.1 million in fiscal year ended June 30, 2014 to Ps. 91.7 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 1,802.8 in 2014 and Ps. 2,181.1 in 2015. As of June 30, 2015, the occupancy rate of Mendoza Plaza Shopping was 96.1%.
Córdoba Shopping, Villa Cabrera, City of Córdoba
Córdoba Shopping Villa Cabrera is a 107-store shopping center with a covered area of 35,000 square meters, consisting of 15,328.0 square meters of GLA located in Villa Cabrera, City of Córdoba. It has a 12-screen movie theatre complex and a parking lot for 1,500 vehicles.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 756.0 million, which represents a year-on-year growth of 38.3%. Sales per square meter were approximately Ps. 49,323.6. Total rental income increased from Ps. 39.7 million in fiscal year ended June 30, 2014 to Ps. 54.4 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 2,503.8 in 2014 and Ps. 3,552.0 in 2015. As of June 30, 2015, the occupancy rate of Córdoba Shopping was 99.8%.
Dot Baires Shopping, City of Buenos Aires
Dot Baires Shopping is a shopping center that was opened in May 2009. It has 4 floors and 3 underground levels, a covered surface area of 173,000 square meters, out of which 49,847.9 constitute Gross Leasable Area, 156 retail stores, a hypermarket, a 10-screen multiplex movie theater and parking space for 2,200 vehicles.
Dot Baires Shopping is located in the Saavedra neighborhood, at the spot where Av. General Paz meets the Panamerican Highway and it is the largest shopping center in the City of Buenos Aires in terms of square meters. As of June 30, 2015, our equity interest in Panamerican Mall S.A. was 80%.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 2,570.6 million, which represents fiscal year sales for approximately Ps. 51,568.8 per square meter and a year-on-year growth of 28.0%. Total rental income increased from approximately Ps. 158.3 million in fiscal year ended June 30, 2014 to Ps. 199.5 million in fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 3,389.3 in 2014 and Ps. 4,001.7 in 2015. As of June 30, 2015, the occupancy rate of Dot Baires Shopping was 99.7%.
Soleil Premium Outlet, Greater Buenos Aires
In December 2007, we entered into an agreement with INC S.A. (“INCSA”), a non-related company, for the acquisition of Soleil Premium Outlet for an amount of US$ 20.7 million.
On July 1, 2010, we executed the final deed for partial conveyance of title of the going concern and closing minutes with INCSA, whereby INCSA transferred to us the shopping center’s going concern, which we started to operate on the referred date. The transaction was exclusive of any debt or credit prior to the transaction with respect to INCSA’s business, as well as the real property where a hypermarket currently operates located in the premises. On April 12, 2011, the Argentine Antitrust Authority (“CNDC”) granted its consent to the transaction.
From April 2013, as a result of its refurbishment and reengineering works, and a strong advertising campaign, it was renamed Soleil Premium Outlet. At present, it has a surface area of 48,313 square meters, 13,993.1 square meters of which are gross leasable area. It comprises 78 stores and 2,335 parking spaces. Soleil Premium Outlet is located in San Isidro, Province of Buenos Aires. It opened in Argentina more than 25 years ago and it is the first Premium Outlet in the country.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 938.4 million, which represents period average sales for approximately Ps. 67,063.3 per square meter and a year-on-year growth of 41.3%. Total rental income increased from approximately Ps. 44.2 million in fiscal year ended June 30, 2014 to Ps. 59.4 million for fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 2,908.4 in 2014 and Ps. 4,242.5 in 2015. As of June 30, 2015, the occupancy rate of Soleil Premium Outlet was 99.4%.

78

La Ribera Shopping, City of Santa Fe
We hold fifty percent of Nuevo Puerto Santa Fe S.A.’s (NPSF) shares, a corporation that is tenant of a building in which “La Ribera” shopping center was built and currently operates, which has a surface area of 43,219 square meters, comprising 60 retail stores and a seven 2D and 3D-screen multiplex cinema. It also comprises a 510-square meter Cultural Center and 24,553 square meters in outdoor areas and free parking space. Its gross leasable area is approximately 9,750.3 square meters.
The shopping center is strategically located within the Port of Santa Fe, the most developed area in terms of real estate in the City of Santa Fe, 27 km away from the City of Paraná (Province of Entre Ríos) and 96 km away from the City of Rafaela (Province of Santa Fe). Its influence area represents a potential market consisting of over one million people.
In the fiscal year ended June 30, 2015, the public visiting the shopping center generated nominal retail sales that totaled approximately Ps. 398.1 million, which represents period average sales for approximately Ps. 40,828.4 per square meter and a year-on-year growth of 41.7%. Total rental income increased from Ps. 9.4 million in fiscal year ended June 30, 2014 to Ps. 13.1 million for the fiscal year ended June 30, 2015, which represents annual revenues per gross leasable square meter of Ps. 1,129.7 in 2014 and Ps. 1,340.3 in 2015. As of June 30, 2015, the occupancy rate of La Ribera Shopping was 99.3%.
Distrito Arcos, City of Buenos Aires
Distrito Arcos is a shopping center we inaugurated on December 18, 2014, and it is our shopping center number 14. Distrito Arcos is a premium outlet located in the neighborhood of Palermo, City of Buenos Aires. It has 12,127.3 square meters of gross leasable area and its first stage consists of 63 stores, 115 parking spaces y 15 selling stands.
During a second stage, we plan to build a fitness center, a houseware store and a great cultural offer with 66 stores and 20 selling stands, covering approximately 2,000 square meters of additional gross leasable area. Since its opening, visitors to the shopping center generated nominal retail sales that totaled approximately Ps. 339.9 million, which represent sales per square meter of approximately Ps. 28,026.3. Total rental income was approximately Ps. 22.9 million, which represents total revenues for the period per gross leasable area of Ps. 1,891.1.  As of June 30, 2015, the occupancy rate of Distrito Arcos was 97.3%.
Alto Comahue, City of Neuquén
Alto Comahue is a shopping center we inaugurated on March 17, 2015. Alto Comahue is our shopping center number 15 and is located in the City of Neuquén, in the Patagonian region of Argentina. It has a total footage of 35,000 square meters and 9,456.9 square meters of gross leasable area, approximately 1,000 roof-covered and open-air parking spaces and a large entertainment and leisure area. Alto Comahue offers 102 retail stores that house the most prestigious brands in Argentina, and will have a 6-screen multiplex movie theater and a theme restaurant, which will open in the upcoming months. It is a three-storey building consisting of a basement where the parking lot and service area are located; the ground floor consisting of 5,100 square meters for retail stores, and the first floor consisting of 720 square meters for restaurants with unique views of the city and 2,700 square meters of retail stores.
The development is a part of a mixed-use complex that further includes a supermarket that is currently in operation and 2 additional parcels of land. One of these parcels is assigned to development of a hotel and the other, which extends over 18,000 sqm -owned by the company-, to future development of houses. Since its opening, visitors to the shopping center generated nominal retail sales that totaled approximately Ps. 182.1 million, which represent sales per square meter of approximately Ps. 19,254.4. Total rental income was approximately Ps. 11.7 million, which represents total revenues for the period per gross leasable area of Ps. 1,236.1. As of June 30, 2015, the occupancy rate of Alto Comahue was 94.2%.
Competition
Because most of our shopping centers are located in densely populated areas, there are competing shopping centers within, or in close proximity to, our targeted areas. The number of shopping centers in a particular area could have a material effect on our ability to lease space in our shopping centers and on the amount of rent that we are able to charge. We believe that due to the limited availability of large plots of land and zoning restrictions in the City of Buenos Aires, it will be difficult for other companies to compete with us in areas through the development of new shopping center properties. Our principal competitor is Cencosud S.A. which owns and operates Unicenter shopping center and the Jumbo hypermarket chain, among others.

79

The following table sets forth certain information relating to the most important owners and operators of shopping centers in Argentina:
CompanyShopping CenterLocation (1) Gross Leasable Area  Stores  National GLA Percentage (2)  Stores Percentage (2) 
IRSA Commercial Properties S.A.              
 Dot Baires ShoppingCABA  49,848   156   2.67%  2.25%
 Mendoza Plaza ShoppingMendoza  42,040   144   2.25%  2.07%
 Abasto de Buenos AiresCABA  40,401   170   2.17%  2.45%
 Alto AvellanedaGBA  36,729   139   1.97%  2.00%
 Alto RosarioRosario  29,656   146   1.59%  2.10%
 Alto Palermo ShoppingCABA  19,545   146   1.05%  2.10%
 Alto NoaSalta  19,073   89   1.02%  1.28%
 Alcorta ShoppingCABA  15,433   106   0.83%  1.53%
 Córdoba ShoppingCórdoba  15,328   107   0.82%  1.54%
 Soleil Premium OutletGBA  13,993   78   0.75%  1.12%
 Buenos Aires DesignCABA  13,888   63   0.74%  0.91%
 Distrito ArcosCABA  12,127   63   0.65%  0.91%
 Patio BullrichCABA  11,636   87   0.62%  1.25%
 La Ribera ShoppingSanta Fe  9,750   60   0.52%  0.86%
 Alto ComahueNeuquen  9,457   102   0.51%  1.47%
 Subtotal   338,904   1,656   18.16%  23.84%
Cencosud S.A.                 
Subtotal    651,105   1,465   34.90%(3)  21.08%
Other                  
Operators                  
Subtotal    875,557   3,827   46.95%  55.10%
Total    1,865,566   6,948   100%  100%
(1)  “GBA” means Greater Buenos Aires, the Buenos Aires metropolitan area, and “CABA” means the Autonomous City of Buenos Aires.
(2)  Percentage over all shopping centers in Argentina. The results may not add up to 100% due to rounding.
(3)  Includes supermarkets.
Source: Argentine Chamber of Shopping Centers
Seasonality
Our business is directly affected by seasonality, affecting the level of our tenants’ sales. During summer holidays in Argentina (January and February) our tenants’ sales reach their minimum level, whereas during winter holidays (July) and in December (Christmas) they reach their maximum level. Clothing stores generally change their collections in spring and autumn, positively affecting our shopping centers’ sales. Sales at discount prices at the end of each season have an adverse impact on our business.
Sales and Development of Properties and Land Reserves
 
Residential Development Properties
 
The acquisition and development of residential apartment complexes and residential communities for sale is one of our core activities. Our development of residential apartment complexes consists of the new construction of high-rise towers or the conversion and renovation of existing structures such as factories or warehouses. In connection with our development of residential communities, we frequently acquire vacant land, develop infrastructure such as roads, utilities and common areas, and sell plots of land for construction of single-family homes. We may also develop or sell portions of land for others to develop complementary facilities such as shopping areas within residential developments.
 
InDuring the fiscal year ended June 30, 2015,2016, revenues from the development and sale of properties segment amounted to Ps. 15.18 million, compared to Ps. 85.515 million posted in the fiscal year ended June 30, 2014.2015.
 
Construction and renovation works on our residential development properties are currently performed, under our supervision, by independent Argentine construction companies that are selected through a bidding process. We enter into turnkey contracts with the selected company for the construction of residential development properties pursuant to which the selected company agrees to build and deliver the development for a fixed price and at a fixed date. We are generally not responsible for any additional costs based upon the turnkey contract. All other aspects of the construction, including architectural design, are performed by third parties.
 
Another modality for the development of residential transactionsundertakings is the exchange of land for finished residential units.constructed square meters. In these barter transaction,this way, we deliver undeveloped plotspieces of land and another firm is in charge of developing the residentialbuilding the project. In this case, we receive finished square meters for commercialization, without taking part in the construction works.

80

 
The following table shows certain information and gives an overview regarding our sales and development properties as of June 30, 2016, 2015 2014 and 2013:2014:
 
    As of June 30,     As of June 30, 
Development 2015  2014  2013 201620152014
Residential apartments           
Caballito Nuevo (5)
  2,139   986   6,983 -2            1
Condominios I and II (1)
  6,616   51,917   4,262 
Condominios I y II (1)
-7             52
Horizons (4)(2)
  5,225   22,890   117,090 5          23
Other residential apartments (2)(3)
  -   44   811 2--
Subtotal residential apartments  13,980   75,837   129,146 71476
Residential Communities              
Abril (3)(4)
  644   1,750   1,113 -12
El Encuentro (5)
  461   7,944   11,698 -8
Subtotal Residential Communities  1,105   9,694   12,811 -110
Land Reserve              
Canteras Natal Crespo  -   -   39 
Neuquén(1)
  -   13,390   - 
Subtotal Land Reserves  -   13,390   39 
Neuquén-13
Subtotal Land Reserve-13
Total  15,085   98,921   141,996 71599
(1)  
Through IRSA Commercial Properties.
(2)  Includes the following properties: Torres Jardín, Alto Palermo Park (fully sold),
Belongs to CYRSA S.A.
(3)  
Refers to Entre Ríos 465 and San Martín de Tours.Caballito Plot.
(3)  
(4)  
Includes the sales of Abril’s shares.shares in April.
(4)  Owned by Cyrsa.
(5)  Through IRSA.
 

Sale of Investment Properties in Fiscal Year 2016 (in millions of Ps.)
 FY 2016FY 2015FY 2014
Revenues1,1752,517402
Costs(107)(1,354)(166)
Profit1,0681,163236
Partial sales of “Maipú 1300” building
In July and August 2015, 1,761 sqm were sold in the Maipú 1300 building, consisting of four floors, at a gain of Ps.57.1 million. In November and December 2015, 1,690 additional sqm were sold in this building, consisting of four additional floors, generating a profit of Ps.52.9 million.
Sale of Isla Sirgadero Land Reserve (Santa Fe)
On September 3, 2015, this 8,262,600 sqm parcel of land was sold for a total amount of US$ 4 million, at a gain of Ps.32.3 million.
Partial Sale of Intercontinental Plaza (through IRSA Propiedades Comerciales)
On September 10, 2015, our subsidiary IRSA CP sold 5,963 sqm consisting of seven office floors, 56 parking spaces and 3 storage units, for a total amount of Ps. 324.5 million, at a gain of Ps.300 million. Moreover, on February 4, 2016, our subsidiary IRSA CP sold 851 sqm consisting of one office floor and 8 parking spaces, at a gain of Ps. 39.2 million.
Sale of “Dique IV” building
On December 10, 2015, IRSA sold to a non-related party the “Juana Manso 295” office building located in the “Puerto Madero” area of the City of Buenos Aires, consisting of 8 office floors and 116 parking spaces for Ps. 649 million, which has been fully paid as of the date of this annual report. The gross profit from this sale was approximately Ps. 586.8 million.
Partial sale of the building to be developed in Catalinas (no impact on results for this fiscal year)
On December 4, 2015, the company sold to Globant S.A. 4,896 sqm corresponding to four office floors of a building to be developed in the “Catalinas” area in the City of Buenos Aires and 44 parking spaces located in the same building. Surrender of possession is expected within 48 months and the execution of the title deed within 60 months, in both cases counted as from even date.
The transaction amount was Ps. 180.3 million and US$ 12.3 million payable as follows: (i) Ps. 180.3 million paid on even date, (ii) US$ 8.6 million payable in 12 quarterly installments during a period of 3 years beginning in June 2016; and (iii) the remaining US$ 3.7 million upon execution of the title deed.
Partial sale of the building to be developed in “Catalinas” (no impact on results for this fiscal year)
On April 7, 2016, IRSA sold to its subsidiary IRSA Propiedades Comerciales S.A. (“IRSA CP”), controlled by a 94.61% interest, 16,012 square meters, consisting of 14 floors (from 13 to 16 and from 21 to 30) intended for long term lease and 142 parking spaces of the building to be built in the “Catalinas” area, City of Buenos Aires. The building to be built will have a gross leaseable area of 35,468 square meters distributed over 30 office floors and 316 parking spaces in 4 underground levels. Surrender of possession is expected to take place in December 2019, and the deed of conveyance is planned to be executed in December 2020.
The transaction price was set considering two components: a “Fixed” portion, relating to the incidence of the land over the square meters purchased by IRSA CP, for a total amount of Ps. 455.7 million (approximately US$ 1,600 + VAT per square meter), which was paid on that date, and a “Determinable” portion, as to which IRSA will pass through to IRSA CP only the actual cost of the works per square meter.
The remaining 14,820 sqm of gross leaseable area corresponding to the first 12 floors of the building are held the company since no decision has been made between development intended for rent and/or sale.

Estimated Capital Expenditures
 Developments
 GreenfieldsExpansions
 Polo Dot (First Stage)
Catalinas(1)
Alto Palermo
Beginning of WorksFY 2017FY 2017FY 2017
Estimated opening dateFY 2019FY 2020FY 2018
Total GLA (sqm)31,63535,4683,884
Investment amount at 100% (million US$)(2)
5410128.5
Investment amount at 100% (million Ps.)(3)
812.161, 519.04428.64
Work progress (%)0%0%0%
________________
(1) 45% of the development corresponds to our subsidiary IRSA Propiedades Comerciales S.A.
(2)  
The amount corresponds to the expected total amount of the project, not only for the Fiscal Year 17.
(3)  
We have translated U.S. dollars into Pesos at the offer exchange rate quoted by Banco de la Nación Argentina for June 30, 2016, which was Ps. 15.04=U.S.$1.00.
 Alto Palermo Expansion
The expansion project for the Alto Palermo shopping center adds approximately 4,000 square meters of GLA to the shopping center, which has the highest sales per square meter and consists of moving the food court to a third level using the area of an adjacent building acquired in 2015. Construction works are estimated to be completed in between 18 and 24 months.
First stage of Polo Dot
The project called “Polo Dot”, located in the commercial complex adjacent to our Dot Baires shopping center, has experienced significant growth since our first investments in the area. The total project will consist of three new office buildings (one of them could include a hotel) in land reserves owned by IRSA CP and the expansion of the shopping center by approximately 15,000 square meters of gross leaseable area. In the first phase of the project, we will develop an 11-floor office building with an area of approximately 30,000 square meters on an existing building, in respect of which we have already executed a lease agreement for approximately half the available square footage, before starting the works. Construction will begin during the next fiscal period and is estimated to last between 18 and 24 months before the building is operational. The second phase of the project will include two office/hotel buildings that will add 38,400 square meters of gross leaseable area to the complex. We have seen a significant demand for Premium office space in our new commercial complex and we believe that we will be able to open these buildings with attractive rent levels and full occupancy. As of June 30, 2016, 75% of the building has already leased.
Catalinas Building
The “Catalinas” project is located in one of the most sought-after spots for office development in Argentina. The building to be constructed will have 35,468 square meters of gross leaseable area in 30 office floors and 316 parking spaces. Construction is scheduled to begin towards the end of the current calendar year and will take approximately three years to be completed.
 
8174

 

DevelopmentCompany Interest  Date of Acquisition  Surface area sqm  Area intended for sale sqm  Area intended for Construction sqm  Sold  Title deed executed Location Accumulated income as of June 2015  Accumulated income as of June 2014  Accumulated income as of June 2013  Book Value 
Residential                                   
Available for sale (4)
                                   
Condominios del Alto IIRSA Commercial Properties  100% 04/30/1999   -   2,082   -   71%  67%Santa Fe  6,314   2,614   4,262   21 
Condominios del Alto IIIRSA Commercial Properties  100% 04/30/1999   -   5,009   -   96%  93%Santa Fe  302   49,303   -   526 
Caballito NuevoIRSA  100% 11/03/1997   -   8,173   -   98%  98%CABA  2,139   986   6,983   - 
San Martin de ToursIRSA  100% 03/01/2003   -   3,492   -   99%  99%CABA  -   -   -   181 
El EncuentroIRSA  100% 11/18/1997   -   127,795   -   100%  99%Buenos Aires  461   7,944   11,698   - 
Abril Club de Campo – Plot divisionIRSA  100% 01/03/1995   -   5,135   -   99%  99%Buenos Aires  644   1,75   1,113   - 
Abril Club de Campo - Casona (5)IRSA  100% 01/03/1995   31,224   34,605   -   -   - Buenos Aires  -   -   -   2,357 
Torres JardínIRSA  100% 07/18/1996   -   -       -   - CABA  -   44   811   - 
Apartment
Entre Ríos 465/9
IRSA Commercial Properties  100%  -   -   -       -   - Buenos Aires  -   -   -   1,4 
HorizonsIRSA  50% 01/16/2007   -   71,512   -   100%  98%Buenos Aires  5,225   22,89   117,09   3,13 
Units to be received               -                -   -   -   - 
Beruti (Astor Palermo) (1)IRSA Commercial Properties  100% 06/24/2008   -   2,632   -   -   - CABA  -   -   -   32,872 
Caballito Manzana 35IRSA  100% 10/22/1998   -   8,258   -   -   - CABA  -   -   -   52,205 
Canteras Natal Crespo (2 commercial parcels)IRSA   -   -   40,333   -   60,499   -   - Buenos Aires  -    -   39    - 
CONIL - Güemes 836 - Mz 99 and  Güemes 902 - Mz 95 and Retail StoresIRSA Commercial Properties  100% 07/19/1996   1,389   -   -   -   - Buenos Aires  -   -   -   5,409 
Subtotal Residential           71,557   308,327   60,499            15,085   85,531   141,996   98,101 
Land Reserves                                              
Isla SirgaderoIRSA  100% 02/16/2007   8,360,000   -   -   -   - Santa Fe  -   -   -   2,894 
San Luis Plot of LandIRSA  100% 05/29/1997   74,828   -   -   -   - Buenos Aires  -   -   -   1,564 
PontevedraIRSA  100% 02/28/1998   730,994   -   -   -   - Buenos Aires  -   -   -   918 
Mariano AcostaIRSA  100% 02/28/1998   967,29   -   -   -   - Buenos Aires  -   -   -   804 
MerloIRSA  100% 02/28/1998   1,004,987   -   -   -   - Buenos Aires  -   -   -   639 
Pilar R8 Km 53IRSA  50% 03/31/2008   3,250,523   -   -   -   - San Luis  -   -   -   1,584 
Subtotal Land Reserves           14,388,622   -   -                -   -   8,403 
Future Developments                                              
Mixed Used                                              
UOM Lujan (7)IRSA Commercial Properties  100% 05/31/2008   1,160,000   -   -   N/A   N/A Buenos Aires  -   -   -   41,972 
Nobleza Picardo (8)IRSA Commercial Properties  50% 05/31/2011   159,995   -   127,996   N/A   N/A Buenos Aires  -   -   -   40,059 
Puerto RetiroIRSA  50% 05/18/1997   82,051   -   -   N/A   N/A CABA  -   -   -   22,128 
Solares Santa María (9)IRSA  100% 07/10/1997   716,058   -   -   N/A   N/A CABA  -   -   -   171,461 
La Adela   100  08/01/2014   10,580,000   -   -   N/A   N/A Buenos Aires   -   -   -   10,115 
Residential                       -   -    -   -   -   - 
Coto Abasto Air SpaceIRSA Commercial Properties  100% 09/24/1997   -   -   21,536   N/A   N/A CABA  -   -   -   10,429 
Neuquén – Housing Plots of LandIRSA Commercial Properties  100% 07/06/1999   13   -   18   N/A   N/A Neuquén  -   13,39   -   803 
Uruguay ZetolIRSA  90% 06/01/2009   152,977   62,756   -   N/A   N/A Uruguay  -   -   -   62,568 
Pereirairaola (Greenville)IRSA  100 04/21/2010    -   39,634   -          Buenos Aires              8,200 
Uruguay Vista al MuelleIRSA  90% 06/01/2009   102,216   62,737   -   N/A   N/A Uruguay  -   -   -   43,362 
Retail                                              
Caballito Shopping Plot of Land(10)IRSA Commercial Properties  100%  -   23,791   -  -   N/A   N/A CABA  -   -   -   45,812 
Potential Dot ExpansionIRSA Commercial Properties  80%  -   15,881   -   47,643   N/A   N/A CABA  -   -   -   - 
Offices                                              
Philips Adjoining Plots– Offices 1 and 2IRSA Commercial Properties  80% 11/28/2006   12,8   -   38,4   N/A   N/A CABA  -   -   -   25,336 
BaicomIRSA  50% 12/23/2009   6,905   -   34,5   N/A   N/A CABA  -   -   -   4,183 
Intercontinental Plaza II (11)
IRSA Commercial Properties  100% 02/28/1998   6,135   -   19,598   N/A   N/A CABA  -   -   -   1,564 
Catalinas Norte Plot of LandIRSA  100% 12/17/2009   3,649   -   35,3   N/A   N/A CABA  -   -   -   109,496 
Subtotal Future Developments           13,035,458   165,127   342,973            -   13,390   -   597,528 
Total Land Reserves           27,495,637   435,209   403,472            15,085   98,921   141,996   704,032 
DevelopmentCompanyInterestDate of AcquisitionSurface area sqmArea intended for sale sqm (1)Area intended for constructionSold (2)LocationAccumulated Income as of June 2016Accumulated Income as of June 2015Book Value (ARS MM)
Residential properties          
Available for sale          
Condominios del Alto IIRSA CP100%04/30/1999-2,082-100%Santa Fe-71
Condominios del Alto IIIRSA CP100%04/30/1999-4,082-100%Santa Fe---
Caballito NuevoIRSA100%11/03/1997-7,323-100%CABA-2-
Barrio ChicoIRSA100%03/01/2003-2,872-100%CABA---
El EncuentroIRSA100%11/18/1997-127,748-100%Buenos Aires---
Abril Club de Campo – PlotsIRSA100%01/03/1995-5,135-100%Buenos Aires-1-
Abril Club de Campo – Manor House (3)
IRSA100%01/03/199531,22434,605-100%Buenos Aires--2
Torres JardínIRSA100%07/18/1996-- -CABA---
Departamento Entre Ríos 465/9IRSA CP100%--- 100%Buenos Aires1--
HorizonsIRSA50%01/16/2007-60,232-100%Buenos Aires551
Intangible – Receivable units   -   ---
Beruti (Astor Palermo) (4)
IRSA CP100%06/24/2008-2,170--CABA--33
Caballito Manzana 35IRSA100%10/22/1998-6,952--CABA--52
CONIL - Güemes 836 – Mz. 99 and  Güemes 902 – Mz. 95
and Retail Stores
IRSA CP100%07/19/19961,389-5,994-Buenos Aires--5
Canteras Natal Crespo (2 commercial parcels)IRSA--40,333---Buenos Aires---
Isla Sirgadero(10)
IRSA100%02/16/2007826,276---Santa Fe---
Pereiraola (Greenville)IRSA100%04/21/2010-39,634--Buenos Aires--8
         -  
Subtotal Residential properties   899,222292,8355,994  615102
Land Reserves          
Pilar R8 Km 53IRSA100%05/29/199774,828---Buenos Aires--3
PontevedraIRSA100%02/28/1998730,994---Buenos Aires--2
Mariano AcostaIRSA100%02/28/1998967,290---Buenos Aires--1
MerloIRSA100%02/28/19981,004,987---Buenos Aires--1
San Luis PlotIRSA50%03/31/20083,250,523---San Luis--1
Subtotal Land reserves   6,028,622--  --8

Future Developments          
Mixed Uses          
UOM Luján (5)
IRSA CP100%05/31/20081,160,000--N/ABuenos Aires -42
La AdelaIRSA100%08/01/201410,580,000--N/ABuenos Aires--216
Predio San Martin (Ex Nobleza Piccardo) (6)
IRSA CP50%05/31/2011159,995-127,996N/ABuenos Aires--60
Puerto RetiroIRSA50%05/18/199782,051--N/ACABA--34
Santa María del Plata (7)
IRSA100%07/10/1997716,058--N/ACABA--223
Residential     - ---
Coto Abasto Air SpaceIRSA CP100%09/24/1997--21,536N/ACABA--10
Neuquén – Residential parcelIRSA CP100%07/06/199913,000-18,000N/ANeuquén--1
Uruguay ZetolIRSA90%06/01/2009152,97762,756-N/AUruguay--92
Uruguay Vista al MuelleIRSA90%06/01/2009102,21662,737-N/AUruguay--64
         - 
Retail          
Caballito Shopping plot (8)
IRSA CP100%-23,791--N/ACABA1-4
Dot potential expansionIRSA CP80%-15,881-47,643N/ACABA---
Offices          
Philips Adjoining plots - Offices 1 and 2IRSA CP80%11/28/200612,800-38,400N/ACABA--25
BaicomIRSA50%12/23/20096,905-34,500N/ACABA--4
Intercontinental Plaza II (9)
IRSA CP100%02/28/19986,135-19,598N/ACABA--3
Catalinas Norte PlotIRSA100%12/17/20093,649-35,46813%CABA--112
Subtotal Future Developments   13,035,458125,493343,141   -890
Total Land Reserves  19,963,302418,328349,135  7151,000
(1)  
Saleable Area intended for sale means ownthe housing square meters of residential apartments, includingproper, excluding parking spaces and storage spaces. StatedIt is recorded at 100%, before making any sale.sales.
(2)  
% Sold % comprises suchincludes those sale transactions for which there is a PurchasePreliminary Sales Agreement, (Boleto) has been executed, for which Possession has been taken or a Title Deed has been signed.executed. Includes housing square meters of residential apartments,only, excludes parking and storage spaces.
(3)  The Title Deed executed % comprises such sale transactions for which a Title Deed has been executed. Includes the square meters of residential apartments, parking and storage spaces.
(4) In such case where IRSA/IRSA Commercial Properties received units under a barter agreement, the "Area intended for sale" corresponds to such area received rather than the entire development.
(5) TheSaleable Area intended for sale includes 31,224 sqm of landthe plot and 4,712.81 total sqm inof the aggregate of La Casona (deductingManor House (not including 1,331.76 sqm of ground floor)Ground Floor).
(6) The
(4)  
Saleable Area intended for sale does not includeexcludes 171 commercial parking spaces to be received or rebate units.and the units as compensation.
(7) The
(5)  
Mixed Used Feasibility of Mixed Uses Permit has been appliedrequested, pending provincial approval.
(6)  
127,996 sqm arise from current laws, a draft project is being made for and provincial approval is pending.
(8) The 127,996479,415 buildable square meters derive(pending approval).
(7)  
Feasibility requested for 716,058 buildable square meters, pending approval from the current regulations, we are working on a preliminary project of 479,415 square meters intended for construction (pending approval).
(9) The Feasibility permit has been applied for 716,058 square meters intended for construction, and approval is pending from the LegislatureLegislative body of the City of Buenos Aires.
(10) Preliminary
(8)  
Draft project of 71,374 buildable square meters, intended for construction,pending approval of urban parameters is pending.zoning parameters.
(11) The
(9)  
6,135 square meterssqm of Land are those ofsurface area correspond to the parcel, which includes InterIntercontinental I and II. During May, 2015, we reported that, through IRSA Commercial Properties, we have signed an agreement to transfer to a non related party 8,470 sqm corresponding to nine office floors and the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, we sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.”
(12) 
(10)  
On September 3, 2015, we signed the transfer deedentire property was sold for US$ 3.9 million, payable in 16 quarterly installments, plus an installment in kind, land resulting from the sale of “Isla Sirgadero” plot of land. The pricefinal blueprint, equivalent to 10% of the transaction was Ps. 10.7 million.surface area.

 
8276

 

Additional information about our Properties and Land Reserves
 
Residential Apartments and Lofts
 
In the residential market, we acquire undeveloped properties strategically located in densely populated areas ofmainly in the City of Buenos Aires, particularly properties located near shopping centers and hypermarkets or those to be constructed.developed. We then develop multi-building high-rise complexes targeting the middle- and high- income market. These are equipped with modern comforts and services, such as open “green areas,” swimming pools, sports and recreation facilities and 24-hour security. In the loft buildings market, our strategy is to acquire old buildings no longer in use located in areas with a significant middle and upper-income population. The properties are then renovated into unfinished lofts allowing buyers the opportunity to design and decorate them according to their preferences.
 
Residential Properties (available for Sale)
 
Condominios del Alto I – City of Rosario, Province of Santa Fe (IRSA Commercial Properties)
As of June 30, 2015, the project has been completed, and one parking space is available for sale.
Condominios del Alto II –City of Rosario, Province of Santa Fe (IRSACommercial Properties CP)
 
As of June 30, 2015,2016, works in parcel H have been completed; and all the units undersubject to the barter agreement have been received, andwith 13 parking spaces and two storage spaces are available for sale.
 
San Martín de Tours
Barrio Chico – City of Buenos Aires
 
This is a unique Project located in Barrio Parque, an exclusive residential area in the City of Buenos Aires. During May 2006, the commercialization of the project was launched with successful results. The image of the product was originally developed under the name “Barrio Chico” through advertisements in the most important media. As of June 30, 2015,2016, the project is completed and there are 2 parking spaces pending sale.yet to be sold.
 
El Encuentro - Benavidez, Tigre – Province of Buenos Aires
In the district of Benavidez, Municipality of Tigre, 35 kilometers north of downtown Buenos Aires, there is a 110-hectare gated residential complex known as “El Encuentro”, consisting of a total of 527 lots and a total saleable area of 610,785.15 sqm with two privileged front accesses: the main one to Vía Bancalari and the service one to Highway No. 9, allowing an easy way to and from the city. As of June 30, 2015, all the units have been sold.
 
Abril – Hudson – Province of Buenos Aires
 
Abril is a 312-hectare private residential community located near Hudson City, approximately 34 kilometers south of the City of Buenos Aires. We have developed this property into a private residential community for the construction of single-family homes targeting the upper-middle income market. The project includes 20 neighborhoods subdivided into 1,273 lots of approximately 1,107 square meters each. Abril also includes an 18-hole golf course, 130 hectares of woodlands, a 4,000-square meter mansion and entertainment and recreational facilities. A bilingual school, horse stables and sports centers and the construction of the shopping center were concluded in 1999. The project is highly consolidated, and as of June 30, 20152016 there is one lotare no lots pending execution of the relevant title deed.
 
“La Casona Abril” is located in the heart of the project. It is the antique manor of “Estancia Pereyra Iraola,” which was built in the decade of the thirties1930s by architect José Mille. This little French-style palace of the XIX century has 4,700 sqm distributed over four floors and a manicured garden of aroundapproximately 30,000 sqm.
 
Horizons, Vicente López, Olivos, Province of Buenos Aires
 
The IRSA-CYRELA Project, developed over two adjacent blocks, was launched in March last2008 under the name Horizons. Horizons is one of the most significant developments in Greater Buenos Aires, featuring a new concept in residential complexes given its emphasis on the use of common spaces. This project includes two complexes with a total of six buildings: one complex faces the river and consists of three 14-floor buildings, the “Río” complex, and the other one, facing Libertador Avenue, consists of three 17-floor buildings, the “Parque” complex, thus totalingencompassing 59,000 square meters built of saleable area distributed inover 467 units (excluding the units to be delivered as consideration for the purchase of the lands). Horizons is a unique and style-innovating residential complex offering 32 amenities, including a meeting room, work zone, heated swimming pools, mansioncommunity center with spa, sauna, gym, childrenchildrens’ room, teen room, thematically landscaped areas, and aerobic trail. The showroom was opened to the public in March 2008 with great success. As of June 30, 2015,2016, the project was fully built and 3two apartments 3and two parking spaces and 1 storage space are pending execution of the title deed. The stock available for sale consists of 8two parking spaces and 5240 storage spaces.
 
Intangibles - Units to be received under barter agreements
 
Beruti Plot of Land – City of Buenos Aires (IRSA Commercial Properties)CP)
 
On October 13, 2010, the Company, through itsour subsidiary IRSA Commercial Properties,CP, and TGLT S.A. (“TGLT”), entered into a barteran exchange agreement in connection with a plot of land located at Beruti 3351/59 in the City of Buenos Aires for cash and 2,170 square meters in future residential apartments to be constructed by TGLT inon the plot. The transaction value was agreed on US$18.8 million, of which US$10.7 million has already been paid.In addition, TGLT is currently building an apartment building withwill deliver 32 residential parking spaces and 171 commercial parking spaces in which, in accordance with the terms of the agreement, TGLT will transfer to IRSA Commercial Properties (i) certain units to be determined, representing 17.33% of the aggregate surface of the residential space, (ii) a number of parking spaces to be determined, representing 15.82% of the aggregate surface of the parking spaces, (iii) all the commercial parking spots in the future building. To ensure performance of the obligations assumed by TGLT under the deed of sale, a mortgage was granted in favor our subsidiary.IRCP.
 
An organization called “Asociación Amigos Alto Palermo” filed a write of relief in order to prevent the construction works and obtained a precautionary measure for the suspension of the construction works. The Contentious-Administrative and Tax Appellate Court for the City of Buenos Aires ordered the release of the precautionary measure that suspended the works. At present, the write of relief is in the discovery stage, and no judgment has been rendered in that regard. On December 4, 2013, the term for the delivery of the units involved was extended for 11 months and on November 4, 2014 a new 11 month extension was signed. On June 11, 2015 final judgment was rendered in favor of us and TGLT.
Caballito Plot – City of Buenos Aires (IRSA)
 
On June 29, 2011, the Companywe and TGLT, a residential developer, entered into ana barter agreement to barterfor a plot of land located inon Mendez de Andes street in the neighborhood of Caballito in the Autonomous City of Buenos Aires for cash and future residential apartments to be constructed by TGLT on the mentioned land.TGLT. The transaction was agreed upon at US$ 12.8 million. TGLT plans to construct an apartment building with parking spaces. InAs consideration, TGLT paid US$ 0.2 million (US$ 159,375)159,375 in cash and will transfer to IRSA: (i) a number of apartments to be determined representing 23.10% of total square meters of residential space;space developed; (ii) a number of parking spaces to be determined representing 21.10% of total square meters of parking space;spaces; and (iii) in caseif TGLT builds complementary storage rooms, asuch number to be determined,of storage rooms representing 21.10% of square meters of storage space.spaces developed. TGLT is committed to build, finish and obtain authorization for the three buildings making up the project within 36 to 48 months. TGLT mortgaged the land in favor of IRSA as guarantee.
 
A neighborhood association named Asociación Civil y Vecinal SOS Caballito secured a preliminary injunction which suspended the works to be carried outdeveloped by TGLT in the abovementioned property. Once said preliminary injunction was deemed final, the Government of the City of Buenos Aires and TGLT were served notice of the complaint. Both first and second instance, ruled against TGLT´s arguments. In consequence, the permission granted to TGLT in order to build in the area was declared null and void. TGLT and the Government of the City of Buenos Aires filed a federal appeal on The Supreme Court of Buenos Aires. Up to the date, the Court has not reached a decision yet.
 

83

CONIL – Avellaneda, Province of Buenos Aires (IRSA Commercial Properties)CP)
 
These plots of the Company face Alto Avellaneda shopping center, totaling 2,398 sqm distributed in two opposite corners and according to urban planning standards, aroundapproximately 6,000 sqm may be built. Its intended use, either through an ownowned development or sale to a third party, is residential with the possibility of a retail space as well. In November 2014, a barter deedBarter Deed was executed for the purpose of developingto carry out a residential project and as consideration for it, IRSA Commercial Propertiesthe Company will receive 1,365 sqm of retail stores located on the ground floors of blocks 99 and 95, onat Güemes 836 and Güemes 902, respectively. Delivery of the consideration for block 95 is expected to take place in January 2018, and thatconsideration corresponding to block 99 is scheduled for September 2018. The barter price was value at US$ 0.7 million.

Pereiraola (Greenville), Hudson – Province of Buenos Aires
In April 2010, we sold Pereiraola S.A., which owns certain lands adjacent to the Abril Club de Campo that comprises 130 hectares, for US$ 11.7 million. The purchaser would develop a project that would include the fractioning into lots, a condo-hotel, two polo fields, and apartment buildings. The delivery to the Company of 39,634 square meters of lots with a value of approximately US$ 3 million was included in the sale price. At present the project is at an advanced stage, and the 52 lots are expected to be received by the end of 2016.
Canteras Natal Crespo, La Calera – Province of Córdoba
 
On June 26, 2013, we sold 100% of our interest in Canteras Natal Crespo S.A. representing 50% of its capital stock, to Euromayor S.A. de Inversiones for US$ 4,215,000 according to the following payment schedule: US$ 3,815,000 in cash and US$ 400,000 through the transfer of almost 400,000approximately 40,000 sqm for business purposes within the project to be developed inon the site known as Laguna Azul. Delivery of the non-monetary consideration is expected forin March 2017.
 
Land Reserves and development properties
 
Other Land Reserves – Isla Sirgadero, Pilar,–Pilar, Pontevedra, Mariano Acosta, Merlo and San Luis Plot
 
We grouped here those plots of land with a significant surface area, the development of which is not feasible in the short term either due to their current urban and zoning parameters, their legal status or the lack of consolidation of their immediate environment. This group totals aroundapproximately 14 million sqm.
 
Isla Sirgadero
On September 3, 2015, this property was sold to several companies for US$ 3.9 million, payable in 16 quarterly installments, plus an installment in kind, consisting of land resulting from the final blueprint, equivalent to 10% of the surface area of the property.
Future Developments
 
Mixed Uses
 
Ex UOM – Luján, Province of Buenos Aires (IRSA Commercial Properties)CP)
 
This 115-hectare116-hectare plot of land is located in theat kilometer 62 Km of the West Highway, inat the intersection with Route 5 and was originally purchased by Cresudus on May 31, 2008 from Birafriends S.A. for US$ 3 million.2008. In May 2012, IRSA Commercial PropertiesCP acquired the property through a purchase and sale agreement entered into betweenwith a related parties, thus becoming theparty. The current owner. Our intention is to carry out a mixed-use project, taking advantage of the environment consolidation and the strategic location of the plot. IRSA Commercial Properties is seekingAt present, negotiations are underway to change the zoning parameters, to enablewhich would potentially make the consummation of the project.
La Adela (IRSA)project feasible.
 
“La Adela” farmland is located 60 kilometers northwest of the City of Buenos Aires, and it is one of our original farmlands. In December 2001, the dairy facility was closed down, using its total surface area for crop production. Between March 2005 and December 2007 we bought 72 additional hectares which were added to the existing 982 hectares. During the fiscal year ended June 30, 2014, 837 hectares were used for corn and soybean crops. In July 2014 we sold to our subsidiary IRSA the “La Adela” farm.
Ex Nobleza Piccardo Plant – San Martín, Province of Buenos Aires (IRSA Commercial Properties)CP)
 
On March 31, 2011, Quality Invest S.A. (a subsidiary of IRSA Commercial Properties, with a 50% equity interest) and Nobleza Piccardo S.A.I.C. y F. (Nobleza) executed the title deed for the purchase of a plot of land extending over 160,000 square meters located in the District of San Martín, Province of Buenos Aires, currently usedintended for industrial purposes and suitable in terms of characteristics and scales for mixed-use developments. The price for the property was US$ 33 million, 30 %30% of which was paid at such time.signing. A promissory note and a first-priority mortgage was createdissued for the balance of the purchase price onof the property, in favor of Nobleza. The balance plus interest at a nominal annual rate of 7.5% on the outstanding balance werewas paid in full –principal plus interest- in March 2013, by advancing payments.2013.
 
Simultaneously with the execution of the title deed, the parties entered into a lease agreement whereby Nobleza leased the whole property to Quality Invest S.A. for a term of up to 36 months as from May 2011. This lease agreement contained a clause providing for partial return of the property from month 8 (eight)eight to month 14 (fourteen)fourteen after the date of execution thereof. Prior to expiration, an extension was executed for 2 (two)two to 6 (six)six months due to expirewhich expired in December 2012, and Quality Invest S.A. obtained usufructuary rights to over half the plot of land.plot. The return of the remaining area set forth in the lease agreement, and due to occurset forth in May 2014 was once again extended until December 31, 2014. On March 2, 2015, a Certificate was executed by Nobleza and Quality Invest S.A. for full return of the property, and the contractualcontract relationship between the parties came to an end.was terminated.
 
On May 16, 2012, the Municipality of San Martín granted a pre-feasibility permit for commercial use, entertainment, events, offices, etc., which would enable performance of a mixed-use development thereon.
 
Pursuant to an Ordinance enacted on December 30, 2014, a process was initiated to obtain a rezoning permit for the plot of land to be used mainly for Commercial Purpose,commercial purposes, which considerably expands the uses and potential buildable square meters through new urban indicators; such process is pending approval ofindicators. On January 5, 2016, a Provincial Decree was published in the enacted Ordinance byOfficial Gazette, through which zoning parameters and the Government of the Province of Buenos Aires pursuant to a Decree.rezoning permit previously obtained became effective.
 
As approved in the Ordinance, on January 20, 2015, Quality Invest S.A. entered into a Zoning Agreement with the Municipality of San Martín which governs various issues related to applicable regulations and provides for a mandatory assignment of square meters in exchange for monetary contributions subject to fulfillment of certain administrative milestones of the rezoning process. The first monetary contribution (which amounted to Ps. 20,000,000) was paid to the Municipality ten days after execution of the above mentioned agreement.
Moreover, on June 27, 2016, the subdivision of the property was submitted to the Municipality, in compliance with another relevant aspect of the Zoning Agreement.
 
Solares de Santa María – City of Buenos Aires
 
Solares de Santa María is a 70-hectare property facing the Río de la Plata in the south of Puerto Madero, 10 minutes from downtown Buenos Aires. Through our subsidiary Solares de Santa María S.A. weWe are owners of this property. Weproperty in which we intend to develop this propertyan entrepreneurship for mixed purposes, i.e. our development project involves residential complexes as well as offices, stores, hotels, sports and sailing clubs, services areas with schools, supermarkets and parking lots.
 
In the year 2000, we filedsubmitted a master plan for the Santa María del Plata site, which was assessed by the Environmental Urban Plan Council (Consejo del Plan Urbano Ambiental, “COPUA”) and submitted to the Town Treasurer’s Office for its consideration. In 2002, the Government of the City of Buenos Aires issued a notice of public hearing and in July 2006, the COPUA made some recommendations about the project, and inrecommendations. In response to thethese recommendations, made by COPUA to the project on December 13, 2006, we filed an amendment to the project to adjust it to thesatisfy these recommendations, made by COPUA, making material amendments to our development plan, for the Area, which amendments included the donation of 50% of the site to the City of Buenos Aires for public use and convenience and a perimetrical pedestrian lanewalkway along the entire site on the river bank.banks of the river.

 
In March 2007, a committee of the Government of the City of Buenos Aires, composed of representatives from the Legislative and Executive Branches issued a report stating that such Committee had no objections to our development plan and requested that the General Treasury render a decision concerning the scope of the development plan submitted for the project. In November 2007, 15 years after the Legislative Branch of the City of Buenos Aires granted the general zoning standards for the site, the Government Chiefauthorities of the City of Buenos Aires executed
 
Decree No. 1584/07, which passed the specific ruling, set forth certain rules for the urban development of the project, including types of permitted constructions and the obligation to assign certain spaces for public use and convenience.
 
Notwithstanding the approval of Decree No. 1584/07 in 2007, several municipal approvals are still pending and in December 2007, a municipal court rendered a decision restricting the implementation of our proposed development plan, due toas a result of objections madelodged by a legislator of the City of Buenos Aires, alleging the suspension of Decree No. 1584/07, and each construction project and/or the municipal permits granted for business purposes. Notwithstanding the legality and validity of the Decree No. 1584/07, we entered into an agreement 5/10 that was executed with the Government of the City of Buenos Aires, which has beenwas sent with a legislative bill to the Legislature of the City of Buenos Aires under number 976-J-2010, for approval.
 
On October 30, 2012 a new agreement was executed with the Government of the City of Buenos Aires, replacing all those already executed,prior arrangements, whereby new obligations were agreed upon between the parties for the consummation of the project.agreed. To that end, such Agreement – as well as the previous ones – shall be countersigned and approved by the Legislative Branch of the City of Buenos Aires by enacting a bill that is attached toAires. The docket containing the project. AsBill of to date, the projectLaw was reserved and is pending such legislative treatment. The Agreement provided that if by February 28, 2014 the Bill of Law was not enacted, it would become invalidated -current status to date. In order to secure the desired rules a new Agreement must be executed with the Government of the City of Buenos Aires, to be subsequently confirmed by the Legislature. Currently we have resumed conversations with the Executive Branch through the Transportation and Urban Development Ministry in order to discuss the subscription of a new Agreement (which will also append the Bill of Law).
 

84

 
Puerto Retiro – City of Buenos Aires
 
Puerto Retiro is an 8.2 hectare undeveloped riverside property bounded by the Catalinas and Puerto Madero office zones to the west, the Retiro railway station to the north and the Río de la Plata to the south and east. One of the only two significant privately owned waterfront properties in the City of Buenos Aires, Puerto Retiro may currently be utilized only for port activities, soactivities. Consequently, we have initiated negotiations with municipal authorities in order to rezone the area. We own a 50% interest in Puerto Retiro.Retiro S.A.
 
On April 18, 2000, Puerto Retiro S.A. was served with notice of a filing made by the ArgentineNational Government, through the Ministry of Defense, seeking to extend the petition in bankruptcy of Inversora Dársena Norte S.A. ("Indarsa")(Indarsa) to the Company. Upon filingrequest of petitioner, the court hearing the bankruptcy case issued an injunction preventing the Company from selling or otherwise disposing of the complaint, the bankruptcy court issued an order restraining the ability of Puerto Retiro to dispose of, in any manner, the real property it had purchased in 1993 from Tandanor.land.
 
Indarsa had acquired 90% of the capital stock in Tandanor from the ArgentineNational Government in 1991. Tandanor’s main business involved ship repairs performed in a 19-hectare property located in the vicinity of La Boca neighborhood and where the Syncrolift is installed.
 
As Indarsa failed to comply with its payment obligation for acquisition of the shares of stock in Tandanor, the Ministry of Defense filed a bankruptcy petition against Indarsa, seeking to extend it to the Company.
 
The evidentiary stage of the legal proceedings has already concluded. The Company lodged an appeal from the injunction order, and such order was confirmed by the Court of Appeals on December 14, 2000. The parties filed the arguments in due time and proper manner. After the case was set for judgment, the judge ordered the suspension of the judicial order requesting the case records for issuance of a decision based on the alleged existence of pre-judgmental status in relation to the criminal case against former officials of the Ministry of Defense and former directorsexecutive officers of the Company, for which reason the case will not be adjudicated until a final judgment is entered in respect of the criminal case.
 
It has been made known to the commercial court that the expiration of the limitation periodstatute of limitations has been declared in the criminal action and the criminal defendants have been acquitted. However, this decision was reversed by the Criminal Court of Cassation (Cámara de Casación Penal). An extraordinary appeal was filed and rejected, therefore an appeal was directly lodged with the Argentine Supreme Court for improper refusal to permit the appeal, and a decision is still pending.
 
The Management and external legal counsel to the CompanyPuerto Retiro believe that there are sufficient legal and technical arguments to consider that the petition for an extension of the bankruptcy will be dismissed by the court. However, in view of the particular features and progresscurrent status of the case, this positionits result cannot be held to be conclusive.predicted.
 
Under the records of the proceedings for the extension of bankruptcy, Puerto Retiro S.A. requested authorization to execute both leases with the companies Los Cipreses S.A. and Flight Express S.A. for certain areas of the property acquired for a term of five years each. While authorization was granted by the lower court, the Court of Appeals in Commercial Matters reversed such decision upon request of the National Government and the receiver of INDARSA. Puerto Retiro S.A. filed an extraordinary appeal that was denied.
In turn, Tandanor filed a civil action against Puerto Retiro S.A. and the other defendants in the criminal case for violation of Section 174 (5) based on Section 173 (7) of the Criminal Code. Such action seeks -on the basis of the nullity of the decree that approved the bidding process involving the Dársena Norte property- a reimbursement in favor of Tandanor for all such amounts it has allegedly lost as a result of a suspected fraudulent transaction involving the sale of the property disputed in the case.
 
 In July 2013 theThe answer to the civil action was filed in due time, which contained a number of defenses. Tandanor requested the intervention of the National Government as third party co-litigant in this case, which petition was granted by the Court. In March 2015 both the National Government and the criminal complainant answered the asserted defenses. As
On July 12, 2016, Puerto Retiro S.A. was served with notice of the date hereof no resolution has beendecision issued by the Federal Court (Tribunal Oral Federal) No. 5 on the defenses asserted by all codefendants in such regard. Whilethe civil action. As regards the defenses asserted by Puerto Retiro S.A., the court rejected the defenses of legal defect and lack of legal standing to be sued, while with regard to the defenses of lack of legal standing to sue and the expiration of the statute of limitations, it decided to postpone discussion thereof to the time of entering judgment on the merits of the case. It should be pointed out that the defense of legal defect so dismissed is a dilatory defense, i.e. it does not issuedetermine a decision onsubstantive matter but refers to procedural issues and may be cured. On the asserted defenses, it is hardcontrary, the defense of lack of legal standing to foresee whetherbe sued, if accepted, determines the outcome of the dispute, because such admission would establish that Puerto Retiro will succeed orS.A. should not be a party to these proceedings. Puerto Retiro S.A. has filed an appeal (recurso de reposición) from such decision –reserving the right to file a new appeal (recurso de casación) against dismissal of both defenses. As regards the defenses of lack of legal standing to sue and the statute of limitations, they are central to the defense strategy, and because they were not dismissed by the court, a possible consideration thereof at final consideration of the merits of the case in this case.our favor could be determinative.

 
Residential
 
Coto Residential Project (IRSA Commercial Properties)CP)
 
IRSA Commercial PropertiesThe Company owns approximately 23,000 sqm inof air space over the top ofabove the Coto hypermarket that is nearclose to the Abasto Shopping Center in the heart of the City of Buenos Aires. IRSA Commercial PropertiesThe Company and Coto Centro Integral de Comercialización S.A. (Coto) executed and delivered a deed dated September 24, 1997, whereby IRSA Commercial Propertiesthe Company acquired the rights to receive parking units and the rights to build on topabove of the premises located in the block formed by the streets Agüero, Lavalle, Guardia Vieja and Gallo streets, in the Abasto neighborhood.
 
In June 2016, a preliminary barter agreement was signed, subject to certain conditions, for a term of one year, at the end of which the deed will be executed. The project will be a residential development and, as consideration, the Company will expect to receive 3,621 square meters in apartments plus a cash payment of US$ 1 million. The consideration for Torre I will be delivered by June 2021, while the consideration for Torre II will be delivered by September 2022. The value of the barter was set at US$ 7.5 million.
Córdoba Shopping Center Project (IRSA CP)
The Company owns a few plots adjacent to the Córdoba Shopping Center with a construction capacity of approximately 17,300 square meters in the center of the City of Córdoba.
In May 2016, a preliminary barter agreement was signed for 13,500 square meters of the total construction capacity, subject to certain conditions, for a term of one year, at the end of which the deed will be executed. It will be a mixed residential and office project and, as part of the consideration, the Company will receive 2,160 square meters in apartments, parking spaces, plus the management of permits, unifications and subdivisions in three plots. The consideration will be delivered by May 2021 for Torre I and by July 2023 for Torre II. The value of the barter was US$ 4 million.
Neuquén Parcela ViviendasResidential parcels – Neuquén, Province of Neuquén (IRSA Commercial Properties)CP)
 
Through Shopping Neuquén SA,S.A., we own a plot of 13,000 sqm and aplot with construction capacity per FOT of 18,000 sqm of residential properties in an area with significant growth potential. This area is located closeproximate to the recently openedinaugurated shopping center, Alto Comahue, thea recently opened hypermarket and a hotel to be constructedcompleted in months to come.approximately months.
 
Zetol S.A. and Vista al Muelle S.A. – District of Canelones – Uruguay
 
In the course of fiscal year 2009, we acquired a 100% ownership interest inof the equity of Liveck S.A., a company organized under the laws of Uruguay. In June 2009, Liveck had acquired a 90% stake inof the capital stock of Vista al Muelle S.A. and Zetol S.A., two companies incorporated under the laws of Uruguay, for US$ 7.8 million. The remaining 10% ownership interest in both companies is in the hands ofowned by Banzey S.A. These companies have undeveloped lands in Canelones, Uruguay, close to the capital city of Uruguay, Montevideo.
 
We intend to carry out an urban project consisting inof the development and commercialization of 13 apartment buildings. SuchThis project has the “urban feasibility” status for the construction of approximately 200,000 sqm for a term of 10 years, which was granted by the Mayor’s Office of the Canelones department and by its Local Legislature. Zetol S.A. and Vista al Muelle S.A. agreed to carry out the infrastructure works for US$ 8 million as well as delivery of a minimum amount of sqm of properties. The satisfaction of this commitment under the terms and conditions agreed upon will grant an additional 10-year effective term to the urban feasibility status.
 
The total purchase price for Zetol S.A. was US$ 7.07 million; of which US$ 2.02 million werehave been paid. Sellers may opt to receive the balance in cash or through the delivery of units in the buildings to be constructed in the land owned by Zetol S.A. equivalent to 12% of the total marketable meters to be constructed.
 
In addition, Vista al Muelle S.A. owned since September 2008 a plot of land purchased for US$ 0.83 million. Then, inIn February 2010, other plots of land were acquired for US$ 1 million, the balance of which as of to date amounts towas US$ 0.28 million plus interest and will be repaid in December 2014. In December 2010, Vista al Muelle S.A. executed the title deed of other plots for a total amount of US$ 2.66 million, of which US$ 0.3 million were paid. The balance will be repaid by delivering 2,334 sqm of units and/or retail stores to be constructed or in cash.
 
On June 30, 2009, the Company sold a 50% stake in Liveck S.A. to Cyrela Brazil Realty S.AS.A. for US$ 1.3 million. On December 17, 2010, together with Cyrela Brazil Realty S.A. we executed a stock purchase agreement pursuant to which we repurchased from Cyrela Brazil Realty S.A. a 50% shareholding in Liveck S.A. for US$ 2.7 million. Accordingly, as of June 30, 2015,2016, our stake, through Tyrus, in Liveck is 100%.

85

 
As a result of the plot barter agreements executed in due time between the Intendencia Municipal de Canelones (“IMC”),IMC, Zetol S.A. and Vista al Muelle S.A. in March 2014, the parcel redistribution dealing was concluded. This milestone, as set forth in the amendment to the Master Agreement executed in 2013, initiates the 10-year term for the investment in infrastructure and construction of the buildings mentioned above. At present, the urban project and the design of the first tower are being developed.
Pereiraola (Greenville), Hudson – Province of Buenos Aires
In April de 2010 we sold Pereiraola S.A., a company owner of certain lands adjacent to Abril Club de Campo that comprised 130 hectares, for US$ 11.7 million. The purchaser would develop a project that included the fractioning into lots, a condo-hotel, two polo fields, and apartment buildings. The delivery to the Company of 39,634 square meters of lots amounting to approximately US$ 3 million was included in the sale price. At present the project is at an advanced stage, and the 52 lots are expected to be received in 2016.
 
Retail
 
Caballito Plot – City of Buenos Aires (IRSA Commercial Properties)CP)
 
This is a property of approximately 23,791 sqm in the City of Buenos Aires, neighborhood of Caballito, one of the most densely populated of the city, which IRSA Commercial Propertieswe purchased in November 1997. This plot would allow developingto develop up to 71,000 sqm distributed in several uses including a shopping center having 30,000 sqm,, a hypermarket, a cinema complex, and several recreation and entertainment activity areas. At present, the legislatureLegislature of the City of Buenos Aires has received from the Executive Branch a legislative bill project to approve the zoning parameters corresponding to this property, which already hascurrently the consent ofproject is being reviewed by several committees within the Executive Branch.Legislature in order to be submitted to approval through voting.
 
Dot Adjoining Plot – City of Buenos Aires (IRSA Commercial Properties)CP)
 
On May 3, 2012, the Government of the City of Buenos Aires, through the General Office of Zoning Interpretation (Dirección General de Interpretación Urbanística) approved, through a pre-feasibility study, the parcel subdivision of the ex-PhilipsEx-Philips plot contingent upon the observance of the applicable building regulations in each of the resulting parcels. In addition, all the uses and parameters established under the municipal ordinance previously issued by the above mentioned authority are being observed.
 
On June 3, 2013, we were given notice that the Government of the City of Buenos Aires had approved the requested parcel subdivision of the ex-Philips plot. As a result, the property was divided into three parcels: 2two parcels of approximately 6,400 sqm each and a parcel adjoining DOT Baires Shopping of 15,900 sqm intended for the future extension of the shopping center in 47,000 sqm.
 

Offices
 
Philips Adjoining Plots 1 and 2 – City of Buenos Aires (IRSA Commercial Properties)CP)
 
These two parcels of 6,400 sqm with construction capacity of 19,200 sqm each, are at present a significant land reserve jointly with a plot where the extension of Dot Baires Shopping is planned. As a result of major developments, the intersection of Av. General Paz and the Panamerican Highway has experienced a significant growth in recent years. The project of theses parcels will conclude the consolidation of this area.
 
Baicom Plot - City of Buenos Aires
 
On December 23, 2009, we acquired 50% of a parcel located in the surroundings of the Buenos Aires Port, for a purchase price of Ps. 4.5 million. The property’s total surface area is 6,905 square meters and there is a construction permit associated for 34,500 square meters in accordance with the City of Buenos Aires urban construction rules and regulations.
 
Catalinas Norte Plot - CityOn December 21, 2015, a purchase option was executed in favor of Buenos AiresArgencons amounting to US$ 0.5 million, plus maintenance expenses, for a term of 12 months. The real property price at the time of execution amounted to US$ 14 million.
 
Facing the River Plate, this plot is in a privileged location. Having been witness to one of the largest vertical developments in the city, the Catalinas district has consolidated itself as the paramount office real estate area in the city. The project, featuring 35,300 square meters to be built on the ground floor comprises a tower of 37 floors including 4 ground floors, an open ground floor, mezzanine, dining and multipurpose room on the first floor, 28 office floors, 2 terrace floors and one mechanical room.
 
Intercontinental Plaza II Plot - City of Buenos Aires (IRSA Commercial Properties)CP)
 
The Intercontinental Plaza complex is located in the heart of the MontserratMonserrat district, situated a few meters away from the most important avenue in the city and the financial district. It comprisesconsists of an office tower and the exclusive Intercontinental Hotel. In the 6,135 square meter plot, it would be feasible to develop a second office tower, including 19,600 square meters and 25 floors,stories, that would supplement the one already erected in the intersection of Moreno and Tacuarí streets.
 
Hotels
According to the Hotel Vacancy Survey (EOH) prepared by INDEC, at June 2016, stays at hotel and parahotel establishments were estimated at 2.7 million, 6.8% lower than the same month the previous year. Stays by resident and nonresident travelers decreased by 11.2% and 8.0%, respectively. Total travelers who stayed at hotels during June were 1.2 million. The number of resident and nonresident travelers increased by 1.1% and deceased by 4.6%, respectively. Out of the total number of travelers who stayed at hotels, 81.4% were residents, reaching 1.0 million. The Room Occupancy Rate in June was 34.5%, showing a slight decline compared to the same month the previous year, and, as shown in the following chart, our Hotel’s occupancy was over this rate.  Moreover, the Bed Occupancy Rate for the same period was 24.8%, which represents a slight decrease compared to June 2015.
 
During fiscal year 2015, we2016, IRSA kept our  76.34% interest in Intercontinental hotel, 80.00% interest in Sheraton Libertador hotel and 50.00% interest in Llao Llao. We observed a decrease in the occupancy of our hotels due to a lower inflow of foreign and corporate tourists.
 
The following chart shows certain information regarding our luxury hotels:
 
                     Fiscal Year Sales as of June 30,     
HotelsDate of AcquisitionIRSA’s InterestNumber of rooms
Occupancy(1)
Average Price per Room Ps.(2)
Fiscal Year Sales as of June 30,Book Value
 Date of Acquisition   IRSA’s Interest   Number of rooms   
Occupancy(1)
   
Average Price per Room Ps.(2)
   2015   2014   2013   Book Value 201620152014
Intercontinental (3)
 11/01/1997   76.34%  309   68.74%  1,276   143,281   123,925   87,081   56,140 11/01/199776.34%30970.58%1,69419514312458
Sheraton Libertador (4)
 03/01//1998   80.00%  200   75.75%  1,142   93,801   74,178   52,089   31,690 03/01//199880.00%20073.42%1,506119947429
Llao Llao (5)
 06/01/1997   50.00%  205   51.37%  2,746   159,215   133,459   86,666   84,047 06/01/199750.00%20551.15%3,78422015913475
Total  -   -   714   65.69%  1,564   396,297   331,562   225,836   171,877 --71465.79%2,102534396332162
 
(1) Accumulated average in the twelve-month period.
(1) Accumulated average in the twelve-month period.
 
(2) Accumulated average in the twelve-month period.
(2) Accumulated average in the twelve-month period.
 
(3) Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(3) Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
 
(4) Through Hoteles Argentinos S.A.
(4) Through Hoteles Argentinos S.A.
 
(5) Through Llao Llao Resorts S.A.
(5) Through Llao Llao Resorts S.A.
 
 
(1)Accumulated average in the twelve-month period.
(2)Accumulated average in the twelve-month period.
(3)Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(4)Through Hoteles Argentinos S.A.
(5)Through Llao Llao Resorts S.A.

86


Additional information about our Hotels
 
Hotel Llao Llao, San Carlos de Bariloche, Province of Rio Negro
 
In June 1997 we acquired the Hotel Llao Llao from Llao Llao Holding S.A. Fifty percent is currently owned by the Sutton Group. The Hotel Llao Llao is located on the Llao Llao peninsula, 25 kilometers from San Carlos de Bariloche, andit is one of the most important tourist hotels in Argentina. Surrounded by mountains and lakes, this hotel was designed and built by the famous architect Bustillo in a traditional alpine style and first opened in 1938. The hotel was renovated between 1990 and 1993 and has a total constructed surface area of 15,000 sqm and 158 original rooms. The hotel-resort also includes an 18-hole golf course, tennis courts, health club,fitness facility, spa, game room and swimming pool. The hotel is a member of The Leading Hotels of the World, Ltd., a prestigious luxury hospitality organization representing 430 of the world’s finest hotels, resorts and spas. The Hotel Llao Llao is currently being managed by Compañía de Servicios Hoteleros S.A., operator, among others, of the Alvear Palace Hotel, a luxury hotel located in the Recoleta neighborhood of Buenos Aires. During 2007, the hotel was subject to an expansion and the number of suites in the hotel rose to 201 rooms.
Bariloche Plot, “El Rancho,” San Carlos de Bariloche, Province of Río Negro
On December 14, 2006, through our hotel operator subsidiary, Llao Llao Resorts S.A., we acquired a land covering 129,533 sqm of surface area in the City of San Carlos de Bariloche in the Province of Río Negro. The occupancytotal price of the hotel decreasedtransaction was US$7 million, of which US$4.2 million were paid in cash and the balance of US$2.8 million was financed by means of a mortgage to be paid in 36 monthly, equal and consecutive installments of US$0.086 million each. The land is in the April-June quarter due to eruptionborder of the Calbuco volcano which resultedLago Gutiérrez, close to the Llao Llao Hotel in an outstanding natural environment and it has a significant reductionlarge cottage covering 1,000 sqm of bookings for stays for such period.surface area designed by the architect Ezequiel Bustillo.
 
Hotel Intercontinental, City of Buenos Aires
 
In November 1997, we acquired 51% of the Hotel Intercontinental from Pérez Companc S.A. The Hotel Intercontinental is located in the downtown City of Buenos Aires neighborhood of Montserrat, near the Intercontinental Plaza office building. Intercontinental Hotels Corporation, a United States corporation, currently owns 24% of the Hotel Intercontinental. The hotel’s meeting facilities include eight meeting rooms, a convention center and a divisible 588 sqm ballroom. Other amenities include a restaurant, a business center, a sauna and a fitness facility with swimming pool. The hotel was completed in December 1994 and has 309 rooms. The hotel is managed by the Intercontinental Hotels Corporation. During this year the hotel remodeled floors 6, 7 and 8, totaling 61 remodeled rooms that required an investment of Ps. 8.8 million.

 
Hotel Sheraton Libertador, City of Buenos Aires
 
In March 1998, we acquired 100% of the Hotel Sheraton Libertador from Citicorp Equity Investment for an aggregate purchase price of US$ 23 million. This hotel is located in downtown Buenos Aires. The hotel contains 193 rooms and 7 suites, eight meeting rooms, a restaurant, a business center, a spa and fitness facilities with a swimming pool. In March 1999, we sold 20% of our interest in the Sheraton Libertador Hotel for US$ 4.7 million to Hoteles Sheraton de Argentina. The hotel is currently managed by Sheraton Overseas Management Corporation, a United States corporation. During this year the hotel lobby was remodeled. The investment amounted to Ps. 5.0 million.
 
Bariloche Plot, “El Rancho,” San Carlos de Bariloche, Province of Río Negro
On December 14, 2006, through our hotel operator subsidiary, Llao Llao Resorts S.A., we acquired a land covering 129,533 sqm of surface area in the City of San Carlos de Bariloche in the Province of Río Negro. The total price of the transaction was US$ 7.0 million, of which US$ 4.2 million were paid in cash and the balance of US$ 2.8 million was financed by means of a mortgage to be paid in 36 monthly, equal and consecutive installments of US$ 0.086 million each. The land is in the border of the Lago Gutiérrez, close to the Llao Llao Hotel in an outstanding natural environment and it has a large cottage covering 1,000 sqm of surface area designed by the architect Ezequiel Bustillo.
Savoy Hotel
On February 5, 2015, the Company indirectly sold 100% of its equity interest in Bitania 26 S.A., owner of Hotel “Savoy” in the city of Rosario (Province of Santa Fe), which accounts for 49% of its capital stock, for US$ 4.2 million. The income from the transaction amounted to approximately Ps. 13.3 million.
 
International Segment
 
Lipstick Building, New York, United States
 
The Lipstick Building is a landmark building in the City of New York, located on Third Avenue and 53rd Street, in Midtown Manhattan, New York. It was designed by architects John Burgee and Philip Johnson (Glass House and Seagram Buildings among other remarkable works) and it has been named afterfor its original elliptic form and the reddish color of its façade. Its gross leasableleaseable area is aroundapproximately 57,500 sqm distributed inover 34 stories.
 
As of June 30, 2015,2016, this building had an occupancy rate of 91.86%97.33% generating average revenues of US$ 64.7466.67 per sqm.
 
Lipstick Building Fiscal year ended June 30, 2015  Fiscal year ended June 30, 2014  YoY Var 
Gross Leasable Area (sqm)  58,094   58,092   - 
Occupancy  91.86%  88.94% 2.92pp 
Rent (US$./sqm)  64.74   63.69   1.65%
 
As of June 30, 2015, 2 additional
Lipstick BuildingJune 30, 2016June 30, 2015YoY Var
Gross Leasable Area (sqm)58,09458,094-
Occupancy97.33%91.86%5.47pp
Rent (US$./sqm)66.6764.742.98%
In March 2016, two lease agreements had been executed totalingwere executed: one for the lease of the entire Floor 28 and another for a portion of the basement floor, at an aggregate surface areaaverage rental price of 22,585 additionalUS$ 85 per square meters, to be actually occupied during the next fiscal year, causing itsmeter. This caused occupancy rate to rise to 95.47%over 97% of the total surface area.
Moreover, we successfully completed the building’s certification process and its average rental price to US$ 65.09 per sqm.obtained the LEED EB: O&M Gold certification. The implementation of this project started in July 2015, and it successfully achieved a certification that certifies compliance with the best environmental practices, transforming the building’s operational standards.
 
Finally, in the southern wing of the lobby there is an exhibition since September 2014 showcasing part of the work and life of the celebrated Argentine architect César Pelli. The exhibition has been conceived, designed and executed in close cooperation with César Pelli’s architectural firm.
 
Sale of 183 Madison Ave, New York, NY
In September 2014, the Company, acting through its subsidiary Rigby 183 LLC (“Rigby”) closed the sale of the Madison 183 building, located in the city of New York, United States of America, for US$ 185 million, and discharged the mortgage on this asset for US$ 75 million. In December 2010 we had acquired a 49% stake in Rigby, owner of the building, which we valued at US$ 85.1 million. In November 2012 we increased our interest by 25.5%, and thus became holders of a 74.50% stake in Rigby’s stock capital. At the time of this purchase the building was valued at US$ 147.5 million. The building’s sale price, of US$ 185 million, implies an appreciation of 117% during the investment period. During the second quarter of 2015 we recorded a balance of Ps. 188.3 million due to reversal of the conversion reserve generated in Rigby resulting from the partial repayment of principal.

87

Sale of remaining interest in Hersha Hospitality Trust
Hersha is a REIT listed on the New York Stock Exchange under the ticker “HT”. Hersha mainly invests in institutional hotels located in shopping centers, suburban commercial areas and secondary destinations and markets mainly located in the northeastern region of United States and in selected markets of the western coast of the United States. Hersha acquires properties in areas where it believes there is a developing market and has a proactive management that seeks to create and add value in the long term.
In the first quarter of 2015, IRSA indirectly held 1,000,000 common shares in Hersha, which were sold at an average price of US$ 6.74 per share. As a result, IRSA holds no share interest in Hersha.

Investment in Condor HospitalityTrust
 
We hold our investment in the Condor Hospitality Trust hotel REIT (NASDAQ:CDOR) through our subsidiary Real Estate Strategies, L.P. (“RES”), in which we hold a 66.8%66.3% interest. Condor is a REIT listed inon Nasdaq and is focused on middle-class and long-stay hotels, in 21various states inthroughout the United States, of America, which are operated by various operators and franchises such as Comfort Inn, Days Inn, Hampton Inn, Holiday Inn, Sleep Inn and Super 8, among others. In March 2015 a new CEO was appointed, who is working in relaunching the REIT. The REIT’s name has been changed from Supertel Hospitality Inc. to Condor Hospitality Trust, and its ticker in Nasdaq has been changed from “SPPR” to “CDOR”. The strategy is based on selective disposition of hotels within a lower category range and replace them with hotels in higher categories. The company’s
During recent months, Condor’s results for the first six months of 2015 showhave shown an improvement in operating levels and it has continued to deploy its rentalstrategy of selectively disposing of lower-class hotels at very attractive prices and hotel occupancy operating ratios and sales of assets for attractive prices.replacing them with higher-class hotels.
 
In March 2016, Condor exchanged its Class C preferred shares for newly issued Class D preferred shares. In this new issue, “Stepstone Real Estate” joined as new partner to the investment by contributing US$ 30 million, which were used to retire the Class A and B Preferred shares and to acquire new hotels.
The new Class D preferred shares accrue interest at an annual rate of 6.25% and will be convertible into common shares at a price of US$ 1.60 per share at any time upon the occurrence of an event of capitalization with respect to Condor.
Condor’s board of directors will be composed of four directors nominated by the Company, three by Stepstone and two independent directors. Moreover, the Company’s voting rights in Condor represent 49% of its total voting rights as of the date of this annual report.
Financial Operation and Others Segment
Our interest in Banco Hipotecario
As of June 30, 2016, we held a 29.91% interest in Banco Hipotecario. Established in 1886 by the argentine government and privatized in 1999, Banco Hipotecario has historically been Argentina’s leading mortgage lender, provider of mortgage-related insurance and mortgage loan services. All of its operations are located in Argentina where it operates a nationwide network of 62 branches in the 23 Argentine provinces and the City of Buenos Aires, and 15 additional sales offices. Additionally, its subsidiary Tarshop S.A. has 24 sales offices.
Banco Hipotecario is an inclusive commercial bank that provides universal banking services, offering a wide variety of banking products and activities, including a wide range of individual and corporate loans, deposits, credit and debit cards and related financial services to individuals, small-and medium-sized companies and large corporations. As of June 30, 2016, Banco Hipotecario ranked fifteenth in the Argentine financial system in terms of shareholders’ equity and  in terms of total assets. As of June 30, 2016, Banco Hipotecario’s shareholders’ equity was Ps. 5,816.2 million, its consolidated assets were Ps. 40,527.3 million, and its net income for the twelve-month period ended June 30, 2016 was Ps. 1,115.3 million. Since 1999, Banco Hipotecario’s shares have been listed on the Buenos Aires Stock Exchange in Argentina, and since 2006 it has had a Level I ADR program.
Banco Hipotecario continues to deploy its business strategy of diversifying its loan portfolio. As a result, non-mortgage loans increased from Ps. 10,708 million as of December 31, 2013 to Ps. 14,845.9 million as of December 31, 2014, Ps. 17,944.7 million as of December 31, 2015 and Ps. 19,339.6 million as of June 30, 2016, increasing the composition of its aggregate loan portfolio to the non-financial private sector from 82.8% as of December 31, 2013 to 88.7% as of June 30, 2016. Non-performing loans represented 2.1% of its total portfolio as of June 30, 2016.
Furthermore, Banco Hipotecario has diversified its funding sources, by developing its presence in the local and international capital markets and increasing its deposit base. Its financial debt represented 35.2% of the total financing as of June 30, 2016.
Its subsidiaries include BACS Banco de Crédito y Securitización S.A., a bank specialized in investment banking, securitization and asset management, BHN Vida S.A., a life insurance company, BHN Seguros Generales S.A., a fire insurance company for home owners and Tarshop S.A., a company specialized in the sale of consumer financing products and cash advances to non-banking customers.

Operation Center in Israel.
Investment in IDB Development Corporation
Acquisition of Control of IDBD
 
For this information, see “Item A. History and DevelopmentOn May 7, 2014, the Company, acting indirectly through Dolphin, acquired, jointly with E.T.H.M.B.M. Extra Holdings Ltd. (“ETH”, company incorporated under the laws of the Company—Significant acquisitions, dispositionsState of Israel) controlled by Mordechay Ben Moshé, entered into a transaction to acquire an aggregate of 106.6 million common shares in IDBD representing 53.30% of its stock capital, in the context of a debt restructuring transaction related to IDBD’s holding company, IDBH..Under the terms of the agreement, Dolphin and ETH executed a Shareholders’ Agreement and Dolphin and ETH each acquired a 50% interest in IDBD. The initial amount invested by each Company was NIS 950 million, equivalent to approximately US$272 million at the exchange rate prevailing on that date. On October 11, 2015, IFISA (a company indirectly controlled by Eduardo S. Elsztain) acquired ETH, and the directors appointed by ETH in IDBD tendered their irrevocable resignation from the Board of Directors and Dolphin became entitled to appoint new board members. Since that date, we started to consolidate IDBD into our results of operations. As of the date of this annual report, the investment made from IRSA in IDBD is US$ 515 million, and IRSA’s indirect equity interest reached 68.3% of IDBD’s undiluted stock capital.
Tender Offers
On March 31, 2016, Dolphin satisfied its commitments under the amendment to the debt restructuring agreement of IDBD’s controlling company, IDBH, with its creditors (the “Arrangement”). Such amendment was approved by 95% of IDBD’s minority shareholders on March 2, 2016 and by the competent court on March 10, 2016. As a result, as of March 3, 2016: (i) Dolphin purchased all the shares held by IDBD’s minority shareholders; (ii) all the warrants held by IDBD’s minority shareholders expired; and (iii) Dolphin made additional contributions to IDBD in the form of a subordinated loan, as described below.
The price paid for each IDBD share to holders of record as of March 29, 2016 was: (i) NIS 1.25 million in cash, resulting in a total payment of NIS 159.6 million (US$42.2 million); (ii) NIS 1.20 per share through the subscription and delivery of IDBD’s Series 9 bonds (“IDBD Bonds”) that was paid by Dolphin at par; therefore, it subscribed bonds for NIS 166.5 million, including the payments due to warrant holders (as detailed below); and (iii) the commitment to pay NIS 1.05 million (subject to adjustment) in cash if Dolphin receives authorization to assume control of Clal Insurance Company Ltd. and Clal Insurance Business Holdings Ltd. or IDBD sells its interest in Clal for a sale price per Clal share in excess of 75% of its book value Dolphin being would be required to pay approximately NIS 155.8 million (approximately US$40.8 million) in aggregate.
Any warrants held by minority shareholders that were not exercised as of March 28, 2016, would be convertible at a price equal to the difference (if positive) between NIS 2.45 and the warrant exercise price, and payable in IDBD Bonds.
In addition, Dolphin made a capital contribution of NIS 348.4 million into IDBD, in exchange for a subordinated loan, convertible into shares.
As security for payment of each cash due to Clal shareholders, on March 31, 2016, Dolphin gave a pledge over 28% of the stock capital in IDBD it owns and its rights under a NIS 210 million subordinated loan made on December 1, 2015 due from IDBD. If IDBD issues new shares, additional shares shall be pledged until reaching 28% of IDBD’s total stock capital.
Dolphin has committed to abstain from exercising its right to convert the subordinated loan into IDBD shares until the above mentioned pledge is released. However, if the pledge is enforced, the representatives of IDBH’s creditors will be entitled to convert the subordinated debt into IDBD shares, up to a maximum of 35% of all IDBD shares outstanding.
On April 3, 2016, IDBD’s shares were delisted from the TASE and all the minority warrants were cancelled. IDBD continues to be listed on TASE as a “Debentures Company” pursuant to Israeli law, as it has bonds listed on such exchange.
Within the Operations Center in Israel, the Company operates in the following segments.
Real Estate
Includes the assets and operating income generated by PBC and its subsidiaries. PBC is mainly engaged in the operation of income producing properties and in residential construction primarily in Israel and other parts of the world. In rental properties, PBC is the exclusive owner of the HSBC building located on Fifth Avenue in Manhattan. The building has an area of approximately 80,000 square meters. At present, the building is fully occupied by renowned tenants who have lease agreements in place for periods ranging from 10 to 15 years. In addition, PBC has partnered with IDBD in two projects based in Las Vegas (through IDBG Ltd.), including a commercial and office project known as Tivoli.
The PBC group is one of the largest and most experienced real estate developers in Israel. Most of its activities involve income generating assets and residential entrepreneurship in Israel and overseas, with additional activity in the agriculture sector, through its subsidiary Mehadrin. In this regard, PBC engages in: (i) income producing properties, consisting of development, construction, rental and management of business—Fiscalhi-tech parks, business and industrial parks, office buildings, commercial centers and industrial buildings, storage facilities and parking lots in high demand areas throughout Israel; and (ii) residential entrepreneurship, consisting of the development, planning, construction and sale of quality residential projects and neighborhoods in high demand areas throughout Israel. PBC also has reserves of land for construction. Our Real Estate segment generated operating income of Ps.617 million for the fiscal year ended June 30, 2015— Investment2016, representing 86% of our consolidated operating income for the Operations Center in IDBD” and “—Recent Developments.”Israel for such year.
 
PBC owns approximately  1.13 million square meters of income-producing properties in Israel, with an occupancy rate of 97%, with most tenants being quality tenants with long-term leases that provide a strong and steady cash flow. In addition, PBC owns land reserves of approximately 700,000 square meters with building rights for the construction of income-producing properties in Israel. In the Residential Construction Segment in Israel, PBC operates, as of June 30, 2016 (in some of the projects together with partners) in 9 sites around the country, on which 1,320 residential units are in various stages of marketing and construction and 820 have been sold.
Financial Operation
PBC owns several subsidiaries, the largest of which are: Gav-Yam, Nave-Gad, Ispro and Othersthe joint venture Mehadrin.
·  
Gav-Yam (approximately 69% ownership stake) is one of Israel’s largest and longest-standing real estate companies. Gav-Yam, itself and through its subsidiaries, deals in income-producing property, initiating, planning, developing, building, marketing, leasing, maintaining and managing hi-tech parks, commercial and industrial parks, office buildings, retail areas, storage buildings, and parking lots in high-demand locations throughout Israel.
·  
Nave-Gad (wholly-owned) is engaged in the planning, development and construction of quality residential neighborhoods. All neighborhoods are developed as unique all-inclusive “residential parks” that include various components of full environmental development and associated community services (public parks, trails, pavements and parking lots).
·  
 Ispro (wholly-owned) is engaged in the management, maintenance and development of commercial centers and malls, primarily power centers in areas of high demand. Ispro initiates various commercial projects on land it owns.
·  
Mehadrin (approximately 45% ownership stake) is Israel’s largest exporter of citrus fruit. In addition, Mehadrin is engaged in a wide range of agriculture-related activities including planting, cultivating, packing and processing fruits and vegetables, refrigeration services, storage and marketing.

PBC’s foreign operations consist of income generating assets and residential properties in the United States, India and England. In India, it develops and markets residential neighborhoods, together with partners, in the Indian city of Chennai. In addition, PBC is a partner in three Hilton hotels in the cities of London, Birmingham and Cardiff, England, together totaling 2,050 hotel rooms and conference facilities. All foreign operations are executed in cooperation with local partners in such a manner that allows efficient utilization of PBC’s extensive experience and capabilities, combined with the familiarity with relevant markets and advantages of the local partners.
As at June 30, 2016, PBC engages in marketing, construction and planning income producing properties in Israel of which the main projects are the following:
·  
MATAM-Yam. MATAM, a subsidiary of Gav Yam, is developing a new project with an above-ground space of 10,000 sqm, on a lot acquired in 2015, at the south-western edge of the MATAM Haifa Park. In addition, MATAM is expanding the above-ground parking lot. This expansion, which will add 22,000 square meters of space, will accommodate 815 parking spaces. After completion of this phase, the above-ground parking structure in MATAM Park will accommodate 2,100 parking spaces, with a total area of 56,000 sqm.
·  
Gav Yam Park, Rehovot. Gav Yam and the Weizmann Institute are the joint owners Gav Yam Park in Rehovot (PBC 72% and the Weizmann Institute 28%). In light of the existing demand in the park, in the first quarter of 2016 Gav Yam started marketing and construction of an additional building in the park (the fourth building), with an above ground area of 15,000 sqm and 13,000 sqm of underground parking area.
·  
Ispro Planet. This is an entertainment and retail project in Beer-Sheva being built in two phases. The first phase includes a Cinema Multiplex and a large entertainment facility, restaurants and retail shops and the second phase consists of a Power Center. During the first half of 2016, the leasing and the construction of Stage A of the project continued.  This stage consists of 18 cinema halls for the Yes Planet chain, with 3,400 seats and an IMAX screen, as well as commercial areas and Big Boxes, with total GLA of approximately 28,000 sqm of which approximately 86% have been leased up and was opened to the public at the end of June 2016.
·  
Modi’in – logistics building. In July 2016, Gav-Yam completed the construction of a logistics building with an area of approximately 7,000 sqm above ground, which is fully rented.
·  
Totzeret Ha’Aretz – Tel-Aviv. Gav Yam and Amot Investments Ltd. (“Amot”), jointly own the rights (in equal shares) in adjacent plots of land with an overall area of approximately 17 dunams on Totzeret Ha’Aretz, Yigal Alon and Derech Shalom Streets in Tel-Aviv, which include existing rights for the construction of a project with approximately 53,000 sqm of constructed floor space. During the second quarter of 2016, construction and marketing of the Phase A building with an above ground area of 53,000 sqm. started and the construction of the underground parking area, with an overall area of approximately 31,600 sqm, providing approximately 950 parking places, continued. At the same time, and according to an agreement that was signed with the Tel Aviv Municipality, Gav-Yam and Amot filed a building plan under district committee jurisdiction for the addition of rights for 130,000 square meters (gross) above-ground on 70 floors, the addition of 2,000 parking spaces and approval of the designation of offices, commercial space and hotel areass.
·  
Gav-Yam Negev Park – The third building. Gav-Yam is developing the third building in the park with an above ground area of 15,000 sqm. The two first buildings in the park, with an area of 33,000 sqm are completed and rented.
Second office tower at the Kiryat Ono Mall. In the first half of 2016, PBC and Amot (in joint venture) continued the construction of a second office tower above the Kiryat Ono Mall, with an area of approximately 7,400 sqm of office space and 1,500 sqm of commercial space. The construction is expected to be completed during the third quarter of 2016.
The following are the main overseas activities in which PBC is involved:
HSBC Tower in New York. The HSBC tower, with an area of 80,000 square meters, is located on Fifth Avenue in Manhattan, New York. The tower is leased to quality tenants, such as HSBC, the law firm Baker Mckenzie and various financial entities, for long periods. The tower is 100% leased.  HSBC Bank is considering alternative leasing possibilities, including extending its lease in the Tower.  At the end of 2015, we presented a proposal for the extension of HSBC Bank’s lease agreement, which is being reviewed by the parties.
GW project (“Tivoli”) in Las Vegas. A commercial and office project (we own a 50% interest through IDBG) that is divided into three stages – the first stage (Triad A) of the Tivoli project includes about 19,000 square meters of commercial areas and about 15,000 square meters of offices. As at June 30, 2016, the occupation rate was 84%. The second part of the project (Triad B) is under construction and marketing and it is planned to include 14,000 square meters of commercial areas and 14,000 square meters of offices. To date, lease agreements have been signed in Triad B with an anchor lessee and other lessees with respect to 11,000 square meters of available area. The opening of triad B is expected in November 2016. The construction of Triad B is currently financed by US$50 million credit facility granted at December 2015 by the company to IDBG, based on the approval in September 2015 at the General Meeting of the Shareholders of the Company.  As of the date of their annual report, US$38 million of the said facility has been disbursed.
India. PBC’s activity in India is conducted together with partners (PBC’s share is 45%). The activity presently focuses on a residential project in Chennai, being built in stages.  As of the date of their annual report, three buildings were offered for sale – two buildings including 390 units, of which 340 units were sold, are to be delivered in the second half of 2017 and the third building, which includes 160 units, of which 40 units were sold, is expected to be delivered during 2018. In the first half of 2016, 65 units had been sold in the project in Chennai compared with 50 units in the corresponding period in 2015. In January 2016, the remaining rights in the Hyderabad project were sold for a consideration of US$34 million.

The following are the main Investment Properties of PBC as of June 30, 2016:
  Initial costsSubsequent costs Costs at end of the year           
NameEncum-brancesPlot of land Buildings, facilities and improvementImprove-ments / Additions Plot of land Buildings, facilities and improvements Total Accumu-lated depreciation Net book amount Date of construction Date of acquisition Useful life as of 06.30.16
                      
TivoliMortgage171 1,241- 124 1,969 2,093 (46) 2,047 apr-2011 oct-2015 35
Kiryat Ono MallMortgage316 6968 502 1,115 1,617 (19) 1,598 nov-2007 oct-2015 72
Shopping Center Modi’in AMortgage223 289- 354 459 813 (8) 805 aug-2005 oct-2015 81
HSBCMortgage5,471 1,778- 8,337 2,962 11,299 (74) 11,225 1927-1984 oct-2015 35
Matam park - HaifaMortgage544 2,685480 910 4,842 5,752 (90) 5,662 1979-2015 oct-2015 63
Caesarea - Maichaley Carmel-142 230- 226 365 591 (8) 583 jun-1905 oct-2015 76
Herzeliya North-777 1,025856 1,498 2,662 4,160 (35) 4,125 1996-2015 oct-2015 89
Gav-Yam Center - HerzeliyaMortgage748 817- 1,187 1,297 2,484 (35) 2,449 1997-2006 oct-2015 64
Neyar Hadera Modi’in-186 248- 295 393 688 (8) 680 jun-1905 oct-2015 84
Gav yam park - Beer ShevaMortgage34 40216 54 658 712 (12) 700 jul-1905 oct-2015 97
Hazomet Kfar Saba-- 74- - 117 117 - 117 jun-1905 oct-2015 50
Bilu-- 54- - 86 86 - 86 jun-1905 oct-2015 35
Mazkeret Batia-- 69- - 109 109 - 109 jul-1905 oct-2015 50
Netania-- 52523 - 861 861 (12) 849 jun-1905 oct-2015 31
Rishon Le Zion-- 44- - 70 70 - 70 may-1905 oct-2015 35
Rehovot-- 6913 - 125 125 - 125 jun-1905 oct-2015 35
Mizpe Sapir-- 78- - 128 128 (4) 124 jun-1905 oct-2015 35
Holon-191 15- 303 24 327 - 327 jan-1969 oct-2015 25
Haifa-15 -- 24 - 24 - 24 jan-1970 oct-2015 25
Others-1,781 3,938195 3,018 5,830 8,848 (89) 8,759 N/A oct-2015 N/A
Total Rental properties 10,599 14,2771,591 16,832 24,072 40,904 (440) 40,464      
Undeveloped parcels of land                     
Tivoli-15 -- 24 - 24 - 24 apr-2011 oct-2015 -
Queensridge Towers-223 -- 266 - 266 - 266 apr-2011 oct-2015 -
Zarchini Raanana-- 49- - 78 78 - 78 - oct-2015 -
Kurdani-- -- - - - - - - oct-2015 -
Others-1,056 5- 1,785 - 1,785 (8) 1,777 N/A oct-2015 N/A
Total undeveloped parcels of land 1,294 54  2,075 78 2,153 (8) 2,145      
Tivoli-- 1,170103 - 1,981 1,981 - 1,981 in progress oct-2015 -
Ispro Planet – Beer Sheva – Phase 1-154 294296 245 817 1,062 - 1,062 in progress oct-2015 -
Others-149 245- 191 689 880 - 880 in progress oct-2015 N/A
Total properties under development 303 1,709399 436 3,487 3,923   3,923      
Supermarkets
This division includes the assets and operating income of Shufersal. Shufersal, established in 1958, is Israel’s largest retail chain and the owner of the largest supermarket chain in Israel in terms of sales volume, operating 270 supermarkets nationwide, within an approximate aggregate area of 503,000 square meters.  Shufersal employs approximately 12,300 employees. In recent years, Shufersal has introduced and continues developing strategic processes and structural changes seeking to optimize profitability, strengthen its market leading position, and address the challenges of the business and regulatory environment where it operates. Shufersal separated its real estate business from its retail business, and formed Shufersal Real Estate Ltd., a wholly-owned subsidiary whose assets include branches that are leased to Shufersal and real estate property leased to third parties.
Among its other branches, Shufersal owns the Mega chain, the largest supermarket chain in Israel. Our Supermarkets segment generated operating income of Ps. 424 million for the fiscal year ended June 30, 2016, representing 59% of our consolidated operating income for the Operations Center in Israel for such year.
Shufersal operates five different retail formats throughout Israel:
(i)  
Shufersal Sheli: a chain of 107 neighborhood stores providing customer shopping needs, while vigilantly maintaining convenience, availability, freshness and service;
(ii)  
Shufersal Deal: a chain of 74 discount stores that offers low-priced products throughout the year;
(iii)  
Yesh: a chain of 54 competitive discount stores addressing different populations by matching products to customers, and by offering special kashruth;
(iv)  
Shufersal Express: a chain of 13 convenience stores; and
(v)  
Shufersal Online (former Shufersal Yashir): a service that markets products directly to the customer’s home or office, with orders taken via the internet, phone or fax.
Shufersal puts great effort into producing its private label to provide customers with a brand that meets high quality standards, is competitively priced and is adapted to Israeli consumer tastes. The brand currently includes about 1,400 products. Shufersal’s Loyalty Club is the leading loyalty club in Israel with 1.4 million members. Club members enjoy cash coupons, accumulated bonuses, discounts and special offers.
As part of its strategic plan, Shufersal, together with Leumi card and Paz, launched the Shufersal credit card in October 2006. The card provides customers with a non-banking credit framework, as well as special offers and benefits. “Yesch” Credit Card for “Yesch” customers was launched in August 2009 and offers the same benefits.
Shufersal also owns a sophisticated 40,000 m2 logistics center in Rishon Lezion in addition to distribution centers in Kfar Vitkin, Ramle, and Kadima.

Shufersal engages in income-generating real estate, leasing commercial centers and other properties through several subsidiaries: Shufersal Bailsol Investments Ltd. (50% owned); Merkaz Hakirya (Ashdod 1995) Ltd. (50%); and Lev Hamifratz Ltd. (37%).
Although Shufersal’s main operations is retail, it also operates in two other sectors: real estate and credit card customer’s club management. In income-generating real estate activity, Shufersal engages in leasing commercial centers and other properties. As part of its strategic plan, Shufersal is also active in managing a customer credit club through which it offers credit cards to the public that provide a non-bank credit framework, as well as special offers and benefits to customers.
During 2016, Shufersal continued to carry out its business plan, which is intended to create a growth-oriented commercial and operational infrastructure for the years to come, to reinforce its competitiveness, to improve value offered to customers, and to improve service. As its main distribution center, Shufersal owns a sophisticated 40,000 m2 logistics center in Rishon Lezion in addition to distribution centers in Kfar Vitkin, Ramle, and Kadima.
In recent years, Shufersal has performed, and continues performing, strategic processes and structural changes, with the aim of optimizing its operations, strengthening its market leadership, and dealing with challenges it faces in its business and regulatory environment. As part of its strategies, Shufersal is focused in the development of its digital market platforms, of which the main one is Shufersal Online. During 2016, there was a significant increase in Shufersal’s sales through Shufersal Online.
During 2015, Shufersal continued to implement its business plan, as approved by its Board of Directors in July 2014, as follows:
·  
The developments in the Mega chain led, in addition to the sale of Mega stores that operated in the discount format to various third parties, the closing of its online platform and a one-off closing of all of its branches by Mega’s employees, led to the loss of consumers. Shufersal adapted its operations to these changes at the Mega chain, and the impact of the competitive landscape. Shufersal continues to monitor the effects on Mega’s results, and is preparing to address multiple scenarios, including increased competition in the discount market and a potential purchase of Mega’s stores in city centers by chains that operate in the discount market, which may lead to greater competition. In the first half of 2016, Shufersal continued to monitor and prepare various scenarios regarding the change in ownership of Mega city center stores.
·  
The continued expansion and strengthening of Shufersal’s private label brand as a part of its strategy, including the launch of new products in leading categories, such as the milk and meat. Sales of Shufersal’s own branded products in 2015 were approximately 15% of all retail sales, an increase of 11.5% compared with sales in 2014.
·  
The continued development of Shufersal’s digital platforms, of which the main one is “Shufersal Online” and the cellular application, and the streamlining of the operating processes with regard to the distribution system of “Shufersal Online.” There has been a significant increase in Shufersal’s sales through Shufersal Online, and they constituted approximately 6% of total sales in 2015 (compared with approximately 4% in 2014). During the first half of 2016, Shufersal continued to accelerate the development of its digital platform and to open special warehouses to support those sales. In the first half of 2016, Shufersal Online sales accounted for approximately 8.6% of Shufersal’s total sales.
·  
The continued streamlining of real estate in accordance with the business plan, which includes the closing and downsizing of retail stores.
·  
In 2015, Shufersal continued its efforts to complete the change in the supply chain system, and during the first quarter of 2016 it began the gradual operation of its new logistics center in Shoham, that began operating on February 2016.
·  
Various regulatory developments, such as an increase in the minimum wage, the first installment of which came into effect in April 2015.
·  
Shufersal performed a renewed evaluation of branches with operational and cash flow losses, and concluded that 15 stores out of all evaluated branches (which are mainly leased through operational leases) no longer contribute or make a viable contribution, either in operational and/or strategic terms, to the geographical region (the cash generating unit) with which they are associated.  Shufersal decided to close 14 stores, and to reduce the size of the store network it owns.
·  
For the purpose of the impairment test, Shufersal branches are combined into geographical regions which constitute separate cash generating units. Based on Shufersal’s strategy, the closure of stores may result in a reduction in profitability of other stores located in the same geographical area. In light of the foregoing, the impairment test for retail activity is performed on a regional level, and the recoverable amount is calculated for the cash generating unit.
Agrochemicals
Includes income from the associate of IDBD, Adama. Adama is a worldwide leader in active ingredients used in agricultural production. Adama became a private company owned by ChemChina (60%) and Koor (40%).
Adama is one of the leading generic brand crop protection companies in the world. Adama has a heritage dating back 70 years and strives to develop products to simplify and optimize agricultural production, offering farmers products and services that optimize crop yields. Adama has a comprehensive range of high-quality, innovative and effective crop protection products, including herbicides, insecticides, fungicides, plant growth regulators and seed treatments, designed to improve the quality and quantity of crop yields by preventing or controlling harmful, insects and disease. Adamas’ comprehensive product portfolio includes more than 270 active ingredients and more than 1,000 end-use products. Our Agrochemicals segment generated an income of Ps. 334 million from the investment in Adama for the fiscal year ended June 30, 2016.
Adama’s 4,900 employees reach farmers in more than 120 countries with its main customers in Europe, North America, Latin America, Asia-Pacific, India, the Middle East and Africa. As of the date of this annual report, Adama is ranked as the leading company in the world focusing on non-patent protected active materials used crop protection products. Adama has 19 production facilities for synthesis and formulation of its product and seven global products development centers.
Adamas’ range of products include crop protection solutions and other related products that leverage its core expertise, including dietary supplements and food additives, aromatic products and industrial products. Accordingly, Adama organizes and manages its business in two segments: crop protection and other operations. The crop protection business focuses on the research, development, production and marketing of products that enhance crop yields by protecting against the damaging and destructive effects of a variety of weeds, pests and disease. Adama markets (mostly directly and through third parties) the products it develops and produces, as well as other crop protection products it sources from third parties. Crop protection products in the global market are divided into (i) patent-protected and legacy, branded off-patent products, most of which were originally developed by leading companies in the field; and (ii) newly introduced, branded off-patent products, such as our products, which are similar to patent-expired products (in terms of composition) and are produced by off-patent focused companies.
Adama manufactures and sells a broad range of crop protection products that are divided into three main categories based on their uses: (i) herbicides, (ii) insecticides and (iii) fungicides. These solutions offer protection for all sorts of crops including corn, cotton, oil seed rape, soybean and cereal, and are developed and adapted for use in seed treatment as well as for non-crop uses such as protection against weeds, pests and disease in roadsides, forests, lawns, parks, institutions, the wood and paint industry, animal health and private facilities, homes and gardens. Adama has a unique positioning and access to the Chinese markets, principally through ChemChina.

On July 17, 2016, DIC reported that it had accepted ChemChina’s offer to acquire 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments”.
Telecommunications
This division includes the assets and operating income derived from Cellcom. Cellcom is Israel’s leading mobile communications operator. Cellcom has more than 2.8 million subscribers, with an estimated market share of 27%. Through its independent transmission network, Cellcom provides services to its customers with a broad range of value added services including cellular and landline telephony, roaming services for tourists in Israel and for its customers abroad, and additional services including music, video, mobile office etc. With a technologically advanced infrastructure, Cellcom provides internet connectivity services and international calling services, as well as landline telephone communication, cloud, hosting services and information security in Israel, in addition to data communication services. Our Telecommunications segment generated operating losses of Ps. 71 million for the fiscal year ended June 30, 2016, representing 10% of our consolidated operating income for the Operations Center in Israel for such year.
Cellcom has launched television services over the internet (“over-the-top” TV or OTT TV) which currently has 87,000 subscribers representing a 5.7% market share. IDBD believes that there is an opportunity for further penetration in television services over the internet and thus it plans to expand its activities in this business, as part of its strategies. Cellcom provides a “triple play package”, which combines television services, internet infrastructure and supplier services and home telephone services. Cellcom operates powerful generation networks (LTE 4 and HSPA 3.5) enabling advanced high speed broadband multimedia services, in addition to the regular networks (GSM/GPRS/EDGE).
On November 2015, Cellcom entered into an agreement with Golan Telecom Ltd. (“Golan”) to purchase all of the shares of Golan, one of the four cell phone carriers in Israel, in addition to Cellcom, for a consideration of NIS 1,170 million. If Golan’s acquisition is approved, Cellcom’s market share and revenues will increase and Cellcom will be able to offer additional bundled and separate services and products which will result in opportunities for leveraging cost-synergies.
The following table presents our number of cellular subscribers and revenues for each of the last five years:
  
Year Ended December 31,
(in thousands)
  2011 2012 2013 2014 2015
Cellular subscribers (end of period)(1) (in thousands)
  3,349   3,199   3,092   2,967   2,835 
(1)  
Subscriber data refers to active cellular subscribers. Cellcom uses a six-month method to calculate cellular subscriber base, which means that Cellcom deducts subscribers from its cellular subscriber base after six months of no revenue generation and activity on its network by or in relation to the post-paid subscriber, no revenue generating calls or SMS for pre-paid subscriber and no data usage or less than NIS 1 of accumulated revenues for M2M (machine to machine) subscribers. The six-month method is, to the best of our knowledge, consistent with the methodology used by other cellular providers in Israel. During the fourth quarter of 2011, Cellcom removed approximately 52,000 subscribers from our subscribers base, which included its subscribers using its TDMA network who had not requested a transfer to its other networks following the shutdown of its TDMA network as of December 31, 2011, and subscribers who ceased using services following a change to Cellcom’s policy which previously allowed subscribers to change from post to prepaid subscription as a result of the reduction of Early Termination Fees in the cellular market in early 2011. These changes affected other key performance indicators. In the fourth quarter of 2012, Cellcom removed approximately 138,000 M2M subscribers from its subscriber base, following the addition of the above revenue generation criterion for M2M subscribers. This change had an immaterial effect on Cellcom’s ARPU for 2012. In the fourth quarter of 2013 we removed approximately 64,000 subscribers from our subscribers base, following a change to our prepaid subscribers counting mechanism. As a result of such change, we add a prepaid subscriber to our subscribers base only upon charging a prepaid card and remove them from our subscribers base after six months of no revenue generating calls or SMS. Following each of these changes, we have not restated prior subscriber data to conform to such changes.  
We present bellow a detailed desciption about each of the segments in telecommunications operated by IDBD’s subsidiary Cellcom:
Television Market
 
Our interestoffer to the Israeli Market includes:
·  
Linear channels including the Israeli Digital terrestrial broadcasting
·  
Video on Demand library
·  
Live and catch up sports channels
·  
Access to internet video content from selected internet sites
·  
Music streaming service
·  
An improved and advanced user experience
·  
Highly competitive pricing
Cellular Services and Products
Cellcom offers its cellular subscribers a variety of usage and sector pricing plans and bundles combining cellular services with other communications services that the group offers, such as Internet infrastructure and ISP, landline, ILD and OTT TV services for home and IP switchboard, Internet infrastructure and ISP landline and ILD services for the office. Cellcom offers two methods of payment: pre-paid and post-paid. Pre-paid services are offered to subscribers who pay for its services prior to obtaining them, usually by purchasing their “Talkman” pre-paid cards or “virtual” Talkman cards. Post-paid services are offered to subscribers willing to pay for their services through banking and credit arrangements, such as credit cards and direct debits. Price erosion and the marketing of unlimited packages, have resulted to a decline in Banco Hipotecario S.A.our pre-paid subscriber base. In line with regulation, our pricing plans do not include a commitment to purchase their services for a predefined period, other than in large business agreements.
Basic cellular services
Its principal cellular service is basic cellular telephony and data transfer, upload and download (in supporting handsets). Both are included in the “unlimited packages”. In addition, Cellcom offers many other services with enhancements and additional features to their basic cellular telephony service, including voice mail, cellular fax, call waiting, call forwarding, caller identification and conference calling. Data services can be used with handsets (in supporting models), cellular modems, laptops and tablets. Cellcom provides their customers with a variety of “internet surfing packages” for that purpose. Cellcom also offers both an outbound roaming service to subscribers traveling outside of Israel and an inbound roaming service to visitors to Israel who can “roam” into their network.
Value-added services
In addition to basic cellular telephony and data services, Cellcom offers many value-added services, such as SMS and MMS, cloud backup content services such as music downloads and “Cellcom TV” application. SMS is included in the “unlimited packages”. Cellcom offers services that are likely to be popular with subscribers and complement Cellcom’s business. Some of these value-added services are available only to subscribers who have supporting handset models and some are offered only to business subscribers.

Business subscribers, also may receive multi SMS, M2M, “Double Net” services allowing combined usage of cellular and landline networks in order to ensure uninterrupted service, work force management and vehicles management applications.
Handsets
Cellcom sells a wide selection of handsets (which for purposes of this report may include other types of communications end-user equipment, such as tablets) designed to meet individual preferences. Prices of handsets vary based on handset features and special promotions. Cellcom offers a variety of installment plans for handsets and discounts for short term installment plans.  In most cases, handsets are to be paid in 36 monthly installments. Cellcom offers a variety of handsets from world-leading brands such as Apple, LG, Nokia, Samsung, Sony, HTC, ZTE and Alcatel. The vast majority of handset sales in 2015 have been of Apple and Samsung models. The handset models Cellcom sells offer Hebrew language displays in addition to English, Arabic and Russian (in most of the models). Cellcom is also required to provide cellular services to subscribers who did not purchase their handsets from us, provided that the handset model complies with the standards set by the Ministry of Communications. Cellcom offers subscribers repair services for most handsets, in approximately 28 locations, including through their wholly owned dealer, as well as by dispatch service. See also “Customer Care” below.
Cellcom also sells modems, tablets and smart watches to promote data services. In addition,  it sells added value products to its customers, such as smart watches. Samsung International Co. Ltd. provides us Samsung products and spare parts for such products, under terms, including price of products, agreed between us and Samsung from time to time.
In 2013, Cellcom entered into an agreement with Apple Sales International for the purchase and distribution of iPhone products in Israel. Under the terms of the agreement, Cellcom has committed to purchase a minimum quantity of  iPhone products over a period of three years, which have represented a significant portion of total cellular handset sales over that period.
Landline services
In addition to cellular services, Cellcom provides landline telephony, transmission and data services, using approximately 1,780 kilometers of inland fiber-optic infrastructure and complementary microwave links. Cellcom has offered transmission and data services since 2001, landline telephone service since July 2006, and advanced, voice and data landline services since 2008, both to selected business customers. Since May 2015 Cellcom (and Netvision) have offered internet infrastructure services through the landline wholesale market, using Bezeq’s VDSL infrastructure. Netvision also offers landline services to both private and business customers, focusing on the private sector.
 
As of June 30, 2015, IRSA heldDecember 2014, Cellcom offers OTT-TV services, branded “Cellcom tv” to private customers using Netvision’s systems. Cellcom tv is a 29.99% interest in Banco Hipotecario, which represented 14.08% of IRSA's consolidated assetshybrid OTT-DTT TV service provided to the Israeli market. The service includes a set-top box that enables linear channels, including channels based on the Israeli Digital terrestrial television (DTT) broadcasting, Video on Demand library subscription (SVoD) that can be accessed from smartphones and tablets (TV anywhere), access to internet video content from selected internet sites, music streaming service and additional advanced features such as of such date. Established in 1886 by the Argentine governmentpersonal video recorder, VoD playlist channels and privatized in 1999, Banco Hipotecario has historically been Argentina’s leading mortgage lender, provider of mortgage-related insuranceconnection to social networks, at highly competitive prices. Cellcom’s VoD catalogue and mortgage loan services. All of its operations are located in Argentina where it operates a nationwide network of 60 branches in the 23 Argentine provinceslinear channels offer international and the City of Buenos Aires, and 15 additional sales offices. Additionally, its subsidiary Tarshop S.A. has 27 sales offices.local content from top content suppliers.
 
Banco HipotecarioNetwork and Technology
Cellcom’s cellular network has developed over the years since it commenced operations in 1994, and we now have dual cellular and wireline capabilities.
The “fourth generation” LTE, or Long Term Evolution technology, was launched in August 2014 and offers data throughput of up to 112 Mbps on the downlink path and up to 37 Mbps on the uplink path (voice services are provided through our 3G network). The LTE network covers most of the population of Israel and in 2016 it continued to deploy this network and allocate additional spectrum in the 1800 band (where possible) in order to enable higher data throughput rate.
The “third generation” UMTS/HSPA+, or high-speed packet data access, technology, offers full interactive multimedia capabilities with current data rates of up to 42 Mbps on the downlink path and up to 5 Mbps on the uplink path. In 2016, Cellcom intends to continue to support the increasing demand for data traffic, while maintaining its quality of services. This network, considered to be a “3.9” technology, uses the same core as Cellcom’s GSM/GPRS/EDGE network and covers substantially all of the populated territory in Israel. Moreover, Cellcom’s UMTS/HSPA+ network supports types of services that require higher throughput and lower delay, such as video conferencing and provides an adequate fallback for our LTE network by means of smart features and network load sharing.
Cellcom’s “second generation” GSM/GPRS/EDGE 1800MHz network allows for voice calls, data transmission and multimedia services, although at slower speeds than the LTE and UMTS/HSPA+ networks. Cellcom’s GSM/GPRS/EDGE technology is an inclusive commercial bankadvanced second-generation technology considered to be a “2.75G” technology. It enables Cellcom to deliver multimedia and services at speeds that are higher than the rates offered through regular “second generation” digital cellular technology. Packet data rates vary from 50 Kbps to 200 Kbps, depending mainly on handset capabilities. In addition, in the case of coverage gaps and for voice services supported by their GSM/GPRS/EDGE technology, the network provides universal bankingan adequate voice fallback for their LTE and UMTS networks. Most of Cellcom’s traffic uses the UMTS/HSPA+ network with a continuous growth of data using Cellcom’s LTE network.
Cellcom’s transmission network is comprised of approximately 1,780 kilometers of inland advanced fiber-optic cables that, together with Cellcom’s microwave infrastructure, enable them to provide their customers with telephony and high speed and high quality transmission and data services. Cellcom’s transmission network is strategically deployed in order to cover the major portion of Israel’s business parks and permits them to provide their own backhaul services offeringwhile reducing their need to lease capacity from Bezeq, the incumbent landline operator in Israel.
Cellcom’s system for the provision of advanced centrex services based on cloud solutions to our business landline customers, is by Broadsoft Ltd.
Netvision’s platform by LM Ericsson, allows the provision of our OTT TV services, together with the Israeli DTT infrastructure.
Infrastructure
Cellcom has built an extensive, durable and advanced cellular network system, enabling them to offer high-quality services to substantially the entire Israeli populated territory. They seek to satisfy quality standards that are important to their subscribers, such as high voice quality, high data rate packet sessions, low “blocked call” rate (average rate of call attempts that fail due to insufficient network resources), low “dropped call” rate (average rate of calls that are terminated not in the ordinary course) and deep indoor coverage. Therefore, they have made substantial capital expenditures and expect to continue to make substantial capital expenditures on their network system.
Cellcom’s LTE network is covering most of the population of Israel and they cover substantially all of the populated areas of Israel with both our UMTS/HSPA+ network and our GSM/GPRS/EDGE network. Our LTE and UMTS/HSPA+ networks are mostly co-located with our GSM/GPRS/EDGE network.
Cellular Network design
Cellcom has designed the GSM/GPRS/EDGE, UMTS/HSPA+ and LTE networks in order to provide high quality and reliability in-line with the requirements set forth in their license while using a widecost-effective design, utilizing shared components for the networks, where applicable.
Cellcom has a DRP for its engineering systems, aimed at increasing its network’s survivability in case of damage to any of its component systems. The DRP also provides the network with additional advantages, including increased capacity and advanced qualities in line with our license requirements.
Cellcom’s primary goal is to continue deploying its LTE network while allocating a smaller amount of our 1800MGz frequencies to our 2G network, where possible, through advanced and modern equipment and software features, and to continue to support the increasing demand for data traffic of their high speed UMTS/HSPA+ network. At the same time they intend to continue to perform extensive optimization work to provide their subscribers with maximum capability to support video and other broad-bandwidth content.

Cellular Network performance
Cellcom continually seeks to optimize its entire network in order to meet the key performance indicators for its services, including dropped calls, voice quality, accessibility, availability and packet success rate. Cellcom uses advanced planning, monitoring and analyzing tools and introduced advanced and modern equipment and software features in order to achieve performance goals efficiently and with minimal faults.
The main indicators use to measure network performance for voice and packet data are the “blocked call” rate, the “dropped call” rate and average throughput. The average rates of blocked and dropped calls meet those required by Cellcom’s operating license. The average throughput indicator is not a license requirement.
Spectrum allocation
Spectrum availability in Israel is limited and is allocated by the Ministry of Communications through a licensing process. Cellcom has been allocated 2x10 MHz in the 850 MHz frequency band previously used by their TDMA network and currently by their UMTS/HSPA base stations, 2x20 MHz in the 1800 MHz frequency band, 5 - 15 MHz (varying dependent on usage required in different areas) of which are used by our LTE network and the remaining is used by their GSM/GPRS/EDGE network (again varying dependent on usage required in different areas) and 2 x 10 MHz 2100 MHz frequency band used by their UMTS/HSPA network. Cellcom believes that its available spectrum is sufficient for its current needs.
Of the 20 1800 MHz spectra, three were allocated to Cellcom in August 2015 by the Israeli Ministry of Communications, for 4G technologies (such as LTE, LTE Advanced) . Unlike Cellcom’s other frequencies, these frequencies were awarded for a period of just ten years.
Cell site construction and licensing
Cellcom develops cell sites based on a strategy to expand the geographical coverage and improve the quality of its network and as necessary to replace cell sites as needed. Cellcom’s acquisition teams survey the area in order to identify optimal locations for a cell site. In urban areas, this would normally be building rooftops. In rural areas, masts are usually constructed. The transmission teams also identify the best means of connecting the base station to our network, based on Cellcom’s independent transmission network, either by physical optical fiber, microwave link or Bezeq landlines. Once a preferred site has been identified and the exact equipment configuration for that site decided, Cellcom begins the process of obtaining all necessary consents and permits. The construction of cell sites requires building permits from local or regional authorities, or an applicable exemption, as well as a number of additional permits from governmental and regulatory authorities, such as construction and operating permits from the Ministry of Environmental Protection in all cases, permits from the Civil Aviation Authority in most cases and permits from the Israeli Defense Forces in some cases. In special circumstances, additional licenses are required.
Transmission network
Cellcom’s transmission network provides them with wireline connectivity for their cellular and landline network in substantially all of the populated territory of Israel. It is based on their fiber-optic network and complementary microwave infrastructure. Cellcom’s transmission network includes links to their internal cellular network and to their landline and transmission subscribers.
Cellcom’s optical transmission network is deployed from Nahariya in the north to Beer Sheva in the south and Afula and Jerusalem in the east, consisting of approximately 1,780 kilometers. The fiber-optic network reaches most of the business parks in the country and is monitored by a fault-management system that performs real-time monitoring in order to enable them to provide our subscribers with high quality service. In order to efficiently complete their transmission network’s coverage to substantially the entire country, they use a microwave network as a complementary solution in those areas that are not served by their fiber-optic network.
Information technology
Cellcom maintains a variety of bankinginformation systems that enable it to deliver superior customer service while enhancing our internal processes.
Sales
As part of Cellcom’s strategy to fully penetrate every part of the Israeli market, it seeks to make the purchase of its services and products as easy and accessible as possible, while seeks to optimize costs. These efforts to adapt sales operations to market conditions include optimizing points of sale and transferring operations more cost effective channels. Cellcom offer pricing plans, value-added services, handsets, accessories and related services through a broad network of direct and indirect sales personnel. Cellcom designs pricing plans and promotional campaigns aimed at attracting new subscribers and enhancing customer retention strategies. Cellcom pays independent dealers commissions on sales, while employee sales personnel receive base salaries plus performance-based incentives. All sales and other customer-facing staff go through extensive training prior to commencing their work. Cellcom’s distribution and sales efforts for subscribers are conducted primarily through four channels:
Points of sale. Cellcom distribute products and activities,services through a broad network of physical points of sale providing them with nationwide coverage of their existing and potential subscriber base. Cellcom operate directly approximately 28 physical points of sale and service located in central and other frequently visited locations. In 2015, Cellcom reduced the space of several additional points of sale, in line with its operating strategy, which continued in 2016 on a selective basis.
Cellcom also distributes products and services indirectly through a chain of dozens of dealers (including its wholly-owned dealer, Dynamica) which operates at approximately 150 points of sale throughout Israel. These dealers are compensated for each sale based on qualitative and quantitative measures. Cellcom closely monitors the quality of service provided to their subscribers by Cellcom’s dealers. In Cellcom’s efforts to penetrate certain sectors of their potential subscriber base, Cellcom selects dealers with proven expertise in marketing to such sectors.
Telephonic sales. Telephonic sales efforts target existing and potential subscribers who are interested in buying or upgrading handsets and services. Cellcom’s sales representatives (both in-house and outsourced) offer customers a variety of products and services, tailored to their needs.
Account managers. Cellcom’s direct sales force for business customers maintains regular contact with mid-sized and large accounts, focusing on sales of cellular and wireline services, customer retention and tailor-made solutions for the specific needs of such customers. Cellcom provides small- and mid-sized business customers one point for both sales and services by phone. Cellcom’s account managers are aided by various back office experts in determining customers’ needs and making suitable offers. Sales to larger business customers or governmental and local authorities sometimes involves participation in requests for proposals.
Online sales. Cellcom offers customers the ability to purchase products and services through Cellcom’s internet site and Cellcom’s smartphone application and invest efforts in directing customers toward self-service channels. Cellcom has established a dedicated internet site for the marketing and sales their OTT TV service.

Cellcom Fixed Line Opportunities
Key advantages of Cellcom which are expected to facilitate expansion in the landline business:
·  
Triple play package – the first of its kind in Israel providing Cellcom television, Internet access and infrastructure and telephony at a highly competitive pricing
·  
Large subscriber base: approximately. 2.8 million cellular subscribers, representing a 27% market share in the ISP market and approximately 138,000 VOB subscribers
·  
Leveraging the fiber network infrastructure (approximately 1,780 KM of fiber optic infrastructure) together with the wholesale market aiming to increase market share in the business sector
Insurance
This division includes the assets from Clal Insurance Business Holdings. Clal is one of the largest insurance groups in Israel, whose businesses mainly comprise pension and social security insurance and other insurance lines. Clal, through its subsidiaries, primarily issues insurance policies, provides pension fund management services, including provident funds, and holds assets and other businesses (including holdings in insurance agencies). In 2015, Clal was one of the largest insurance groups operating in Israel. Clal Insurance Enterprises’ offers (1) long-term savings plans; (2) non-life insurance products; and (3) health insurance. Clal Insurance Enterprises’ other operations are carried out principally through holdings of its Clal Insurance Company Ltd. subsidiary (“Clal Insurance”). We refer to Clal Credit Insurance Ltd. (“Clal Credit Insurance”) and the management companies that manage the pension funds and insurance agencies (Clal Insurance Business Holdings Ltd., and the companies held by it), as “Clal Insurance Business Holdings Group”). 51% of Clal’s controlling shares are held in trust be managed by a trustee in compliance with the order issued by the Capital Markets Commission of Israel requiring that Clal’s controlling stake; therefore, Clal’s results are not fully consolidated on a line-by-line basis in IDBD’s financial statements, but under a single line as a financial instrument at fair value, as required under IFRS when no control is exercised.
Diagram of holdings
Presented below is a diagram illustrating the structure of the company’s primary holdings, as of March 6, 2016:
Clal Holdings Insurance Enterprises is one of the leading insurance and pension companies in Israel. As of June 30, 2016, Clal held a 20% market share in the insurance market and managed over US$43 billion in assets. Clal offers a wide range of individualservices and products to private and corporate loans, deposits, creditcustomers, such as non-life insurance, health insurance, travel insurance, education funds, provident funds, pension funds, among others. Clal employs over 4,000 people and debit cardsmarkets its products through 2,000 insurance agents, to provide service and related financial servicesprofessional support to individuals, small-and medium-sized companies and large corporations. Astheir customers. Our Ins urance segment had assets of June 30, 2015, Banco Hipotecario ranked thirteenth in the Argentine financial system in terms of shareholders’ equity and thirteenth in terms of total assetsAs of June 30, 2015, Banco Hipotecario’s shareholders’ equity was Ps. 4,700.7 million, its consolidated assets were Ps. 33,321.4 million, and its net income for the twelve-month period ended June 30, 2015 was Ps. 537.2 million. Since 1999, Banco Hipotecario’s shares have been listed on the Buenos Aires Stock Exchange in Argentina, and since 2006 it has had a Level I ADR program.
Banco Hipotecario continues its business strategy of diversifying its loan portfolio. As a result, non-mortgage loans to the non-financial private sector increased from Ps. 7,676.1 million as of December 31, 2012 to Ps. 10,708.0 million as of December 31, 2013, Ps. 14,845.9 million as of December 31, 2014 and Ps. 16,551.94,602 million as of June 30, 2015, increasing2016, representing 3% of our operating assets for the interestOperations Center in Israel at such date.
Clal’s operations consist of three main insurance divisions:
(i) non-life insurance: the general insurance domain in Clal is among the largest in Israel. The division holds a 15% market share in this segment and offers coverage to private and corporate customers. The non-life insurance division offers a wide range of insurance plans: automotive, property, liability, marine insurance, personal accidents, guarantees and additional services. The division’s strategy is to grow their private customer base - automotive, private residences and small businesses, while professionally understanding the unique needs of its diverse customers. Its vision is to provide professional and high-level service to company’s agents and customers, through constant improvements and new product development;
(ii) life insurance and long-term savings: this division holds a 15% market share of the long-term savings market, as defined by the Commissioner of Insurance. The division manages long-term assets, including life insurance, pension and provident funds. The division also provides comprehensive solutions to private and corporate customers in all sectors of the Israeli economy. Among the division’s customers are large corporations and many residents of the State of Israel. Its objectives are to support the company’s distribution channels and become a professional benchmark, helping to improve company business results, profitability and value, while emphasizing  quality of service. The division offers a variety of savings options, enabling its customers to maintain a strong, solid economic foundation in the aggregate loan portfolioevent of death, accident or loss of earning capacity. It also offers a variety of pension funds designed to guarantee a monthly income for life in the event of retirement, disability, or death, enabling economic stability for the future even in difficult times. Clal takes full responsibility for managing its member’s. Members enjoy high returns, among the highest in the Israeli market, as well as peace of mind, knowing a large, professional, industry-leading corporation manages their money; and
(iii) health insurance: The health insurance division offers a wide range of products for individuals, families and groups, specializing in comprehensive solutions for specific market segments such as women and children. Clal holds a 21% market share of the health insurance market in Israel and offers health insurance products such as surgeries in Israel and overseas, transplants, medications, critical illness, long-term care, personal accidents, travel and more. Health insurance division vision is to establish Clal as a leading, innovative and professional company in the field of health and nursing care insurance, while providing a professional and timely service to its agents and customers. The division focuses on technological innovation as well as on developing a range of innovative health insurance products, enabling flexibility in creating health insurance packages tailored for each client, based on his needs and financial status. Each package is either derived from existing packages, or custom-built for each customer. The division is constantly growing, and is proud to provide quality service to 400,000 members insured under private insurance plans as well as an additional 2,000,000 members insured under group insurance plans.

In addition, Clal operates in the investments business through its wholly owned subsidiary Canaf, which manages assets worth more than US$ 44,256 million, including members’ pension funds, provident funds, insurance executives and also Clal’s balance sheet assets and insurance reserves. The size of assets managed by Canaf provides a significant competitive advantage. This is reflected in its accessibility to companies and their executives, information on special transactions, cooperation with relevant independent bodies inside and outside of Israel and the development of mutual strategic relationships with international bodies that specialize in long-term financial management. Canaf has a staff of approximately 80 employees, of whom about 30 are professional investment managers specializing in various aspects of asset and investment management.
The following is a description of the Products and Services offered by Clal:
Description of the Areas of Activity and Insurance Coverages
Products in this sector mainly consist of retirement solutions for salaried and self-employed individuals, private investment solutions and life insurance, and disability insurance.
·Life insurance products. Consist of contractual obligations between insurer and policyholder, and include insurance plans that allow accumulation of savings and insurance plans and/or combinations in insurance plans that include coverage for death, work disability and disability. A policyholder who reaches the end of the insurance period is entitled to insurance benefits (the amounts accrued in the savings component of the policy) in accordance with the policy terms. The policyholder may receive these amounts as a one-time amount (“Capital Payment”), in lifetime installments (“Annuity”) or a combination of the two, according to the non-financial private sectorterms of the policy; in some of the annuity products the policyholder benefits from 80.4%an annuity coefficient protected against extended life expectancy, which is established on the purchasing date of the policy or on the commencement date of the annuity payment to the policyholder, or which can be purchased once the policyholder reaches the age of at least 60.
·Pension funds. Constitute mutual insurance funds, and operate according to regulations which may change from time to time. From the date of retirement, a pension fund member is entitled to receive lifetime annuity payments based on annuity coefficients that do not guarantee life expectancy, and the annuity is likely to change from time to time according to the actuarial balance of the fund.
·Comprehensive pension funds. Allow pension savings for an annuity and death and disability insurance coverage; benefit from designated bonds; and deposits can be made into them up to the maximum set out in law; general (supplementary) pension funds do not benefit from designated bonds, but allow pension savings for an annuity, and deposits may be made into them beyond the maximum stipulated by law. In some general funds, there is no insurance coverage beyond an old age annuity; provident funds provide savings solutions for the long term (such as provident funds for severance pay and compensation to salaried employees) and medium term (study funds), without insurance coverage. A provident fund member is entitled to withdraw the amounts accumulated in his favor in the capital based provident funds, with respect to deposits made until December 31, 2007, in a one-time amount, whereas the amounts accumulated in his favor which were deposited as from January 1, 2008 may be withdrawn by means of an annuity or annuity capitalization. Until the Control of Financial Services (Provident Funds) (Amendment No. 13) Law, 2015 (“Amendment 13 to the Provident Fund Law”) entered into effect, withdrawal by means of an annuity could have been made from an annuity paying provident fund only (currently known as “a provident fund for annuities”), subject to determined exceptions. In this amendment, the option is given to withdraw directly from a provident fund for savings (that was a non-annuity paying provident fund).
How Savings Funds are Invested. Pension savings products differ from each other in the way in which the savings funds are invested. Some of the savings funds are invested in market securities, while others are backed by designated bonds, according to legislation, as set out below:
(a) Life insurance: Life policies issued through the end of 1990 offered policyholders a guaranteed savings component (“Guaranteed Return Policies”). The rate varied according to the type of policy and date of issue. The obligation to pay the guaranteed return was generally backed by designated bonds, whereas the balance of assets was invested according to the restrictions imposed by the Control of Financial Services Regulations (Provident Funds) (Investment Regulations Applicable for Management Companies and Insurers), 2012 (the “Investment Regulations”). As of December 31, 20122015, the holding of designated bonds by Clal Insurance constituted 76% of the total assets held against liabilities for Guaranteed Return Policies. Over the years, Clal Insurance Enterprises Holdings Group has redeemed designated bonds, upon approval of the Ministry of Finance, as a means of achieving excess returns. The proceeds were invested in other investments. Clal Insurance Enterprises Holdings Group could not buy back designated bonds for some of the reserves that it redeemed and as a result its exposure to 87.0%free investments increased. According to the accounting mechanism established with the Ministry of Finance, the designated bonds held will be reduced gradually to a rate of 50% of total revenue held against liabilities for guaranteed return policies.
Policies issued since the early 1990s include mainly investment-linked policies in which savings are invested by the insurance companies in free investments, mainly in capital market instruments, while the return less applicable expenses are applied for the benefit of the policyholder based on the returns achieved by the investment portfolio, less management fees;
(b) pension funds: As of the date of this Annual Report, legacy and new comprehensive pension funds benefit from guaranteed returns on the fund’s assets that are backed by designated bonds, up to a maximum rate of 30% of total assets. However, the rate of designated bonds relative to members in the new comprehensive pension funds who, prior to January 1, 2004 were eligible to receive a pension, must represent 70% of the total assets. Also, the government provides “compensation” to the old balanced pension funds in order to reduce the issuance of designated bonds, which was carried out over the years;
(c) provident funds: Since the mid-1980s, designated bonds have not been issued for provident funds (other than a small number of guaranteed return provident funds) and the assets were invested in accordance with the restrictions set out in the Investment Regulations;
(d) Task force to increase certainty in pension savings: In December 2015, the task force to increase certainty in pension savings published a report that, among other things, recommended an increase in the allocation of designated bonds to pensioners and to senior savers approaching retirement age. At the same time, it proposes gradually decreasing the allocation of designated bonds intended for young savers, due to their longer investment horizon. The recommendations of the task force did include an increase in the proportion of designated bonds to total funds under management.
Regulation - the provisions of the Insurance Law, the Supervision of Financial Services (Provident Funds) Law, 5765-2005 (the “Provident Fund Law”), the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 (the “Provident Fund Regulations”), the Supervision of Financial Services Law (Financial, Consultation, Marketing and Clearing Systems), 5765-2005 (“The Financial Consultation Law”) and the pronouncements and interpretations issued by the Commissioner from time to time, apply to pension fund activities. The Insurance Law and the Provident Fund Law require appropriate licensing for any insurer or pension fund and provident fund management company, including those in the Clal Holdings Group, and each is supervised by the Capital Markets Department.
In January 2016, rules were issued setting for the protocol for the issuance of an additional control permit to a company that manages pension funds or provident funds (“Managing Company”) for any entity that controls other pension or provident funds. In accordance with applicable regulation, an entity may control multiple Managing Companies without needing to merge the two companies, where one of the Managing Companies. Accordingly, Clal Insurance is not required to merge the managing companies which it currently controls.

Others
Includes the assets and income from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities. Our Others segment had operating assets of Ps. 25,405 million as of June 30, 2015. Non-performing loans represented 2.3%2016, representing 17% of its total portfolio asour operating assets for the Operations Center in Israel at such date. Our Others segment generated operating losses of Ps. 250 million for the fiscal year ended June 30, 2015.2016, representing 35%, of our consolidated operating income for the Operations Center in Israel for such year.
 
Furthermore, Banco Hipotecario has diversified its funding sources; it has reduced its international financing and has become oneSeasonality
In Israel retail segment business results are subject to seasonal fluctuations as a result of the most frequent issuersconsumption behavior of debt in Argentinathe population proximate to the Pesach holidays (March and/or April) and Rosh Hashanah and Sukkoth holidays (September and/or October). This also affects the balance sheet values of inventory, customers and suppliers. Our revenues from cellular services are usually affected by developing its presenceseasonality with the third quarter of the year characterized by higher roaming revenues due to increased incoming and outgoing tourism.
In 2016, the Passover holiday fell at the end of April, compared to 2015 when it was at the beginning of April. The timing of the holiday affects Shufersal’s sales and special offers in the local capital market and increasing its deposit base. Its financial debt represented 21.8%second quarter of the total financing as of June 30, 2015.
Its subsidiaries include BACS Banco de Crédito y Securitización S.A., a bank specialized in investment banking and securitization which consolidates with BACS Administradora de Activos S.A. S.G.F.C.I. a company specialized in asset management; BHN Inversión S.A. which consolidates with: BHN Vida S.A., a life insurance company, BHN Seguros Generales S.A., a fire insurance company for home owners; and Tarshop S.A., a company specialized in the sale of consumer financing products and cash advances2016, compared to non-banking customers.
On October 10, 2012, Banco Hipotecario paid dividends for Ps.100 million, as approved in April 2011 by the Shareholders’ Meeting. Furthermore, on August 23, 2013, the General Shareholders’ Meeting resolved upon the distribution of Ps. 30 million on account of cash dividends on common shares, which were paid on September 20, 2013. In addition, the General Shareholders’ Meeting held on April 24, 2014 approved the distribution of cash dividends on common shares for Ps. 42 million that were made available to the shareholders in January 2015.last year.
 
The following table shows Banco Hipotecario’s financing sources(1) as fromPassover holiday in the dates indicated:second quarter of 2016 had a greater effect on Shufersal’s results than in the corresponding quarter in 2015, therefore analysis of the results for the first half of the year compared to the corresponding period in 2015 better represents the changes between the periods.
 
 At June 30,  % Change 
 2015 2014  2015 vs.2014 
 (in millions of Pesos, except for percentages) 
          
Bonds  Ps.4,926.7   Ps.3,501.7   40.7%
Subordinated Bonds  100.0   -  NM 
Borrowings from Central Bank.  0.1   0.1   42.0%
Borrowings from banks and international entities  297.4   558.4   -46.8%
Deposits  18,191.2   13,691.3   32.9%
Total  Ps.23,515.4   Ps.17,751.5   32.5%
(1)  Excludes accrued interest.
IRSA’s Regulation and Government Supervision of its Real Estate Business
 
Legal Framework
Operations Center in Argentina
 
Regulation and Governmental Supervision
 
The laws and regulations governing the acquisition and transfer of real estate, as well as municipal zoning ordinances are applicable to the development and operation of our properties.
Currently, Argentine law does not specifically regulate shopping center lease agreements. Since our shopping center leases generally differ from ordinary commercial leases, we have created provisions which govern the relationship with our shopping center tenants.
 
Leases
 
Argentine law imposes certain restrictions on property owners, including:
 
·  a prohibition to include automatic price adjustment clauses based on inflation increases in lease agreements; and
·  
a prohibition to include automatic price adjustment clauses based on inflation increases in lease agreements; and
 
·  the imposition of a two-year minimum lease term for all purposes, except in particular cases such as embassy, consulate or international organization venues, room with furniture for touristic purposes for less than three months, custody and bailment of goods, exhibition or offering of goods in fairs or in cases where due to the circumstances, the subject matter of the lease agreement requires a shorter term.
·  
the imposition of a two-year minimum lease term for all purposes, except in particular cases such as embassy, consulate or international organization venues, room with furniture for touristic purposes for less than three months, custody and bailment of goods, exhibition or offering of goods in fairs or in cases where the subject matter of the lease agreement is the fulfillment of a purpose specified in the agreement and which requires a shorter term.
 

88

Rent IncreaseIncreases
 
In addition, there are contradictory court rulings with respect toregarding whether the rent price can or cannotmay be increased during the term of the lease agreement. For example, Section 10 of the Public Emergency Law prohibits the adjustment of rent under lease agreementsleases subject to official inflation rates, such as the consumer price index or the wholesale price index. Most of our lease agreements haveleases provide for incremental rent increase clausesincreases that are not based on any official index. As of the date of this documentannual report no tenant has filed any legal action against us challenging incremental rent increases, but we cannot assureensure that such actions will not be filed in the future and, if any such actions were successful, that they will not have an adverse effect on our company.us.
 
Lease Terms Limits on lease terms
 
Under the Argentine Civil and Commercial Code lease terms may not exceed fifty years, exceptyears. Generally, our leases are for leases regulated by Law No. 25,248 (which provides that real estate leases containing purchase options–leasing inmobiliario- are not subjectterms of three to term limitations). Generally, terms in our lease agreements go from 3 to 10ten years.
 
Right to TerminationRescission Rights
 
The Argentine Civil and Commercial Code provides that tenants of properties may rescind lease agreementsterminate leases earlier after the first six months of the effective date. Such rescissiontermination is subject to penalties which range from one to one and a half months of rent.rent payable. If the tenant rescindsterminates the lease during the first year of the lease the penalty is one and a half month’s rent and if the rescissiontermination occurs after the first year of lease the penalty is one month’s rent.
 
It should be noted that theOther
The Argentine Civil and Commercial Code became effective on August 1, 2015 and that, among other rules, it repealed the Urban Lease Law (No. 23,091), which provided forrequires a rule similar to the one described above, but established the obligationtenant to give at least 60 days’ prior notice of exercise of the unilateral right to termination by the tenant.termination. There are no court rulings yet with respect to the new regulations related to: (i) the tenants’ unilateral right to termination by tenant; i.e. whether the parties may waive the tenant’s right to terminate the agreement unilaterally;terminate; or in relation to (ii) the possibility of establishing a penalty different from the penalty described above in the event of termination.
Otherthat prescribed by law.
 
While current Argentine government policy discourages government regulation of lease agreements,leases, there can be no assurance that additional regulations will not be imposed in the future, by the Argentine Congress, including regulations similar to those previously in place. Furthermore, most of our leases provide that the tenants pay all costs and taxes related to the property in proportion to their respective leasableleaseable areas. In the event ofIf a significant increase in the amount of such costs and taxes occurs, the Argentine government may respond to political pressure to intervene by regulating this practice, thereby adversely affectingincreasing our rental income. The costs.
Argentine  Civil and Commercial Procedure Codelaw enables the lessorlessors to pursue what is known as an “executory proceeding” uponif lessees’ failurefail to pay rent.rent when due. In executory proceedings, debtors have fewer defenses available to prevent foreclosure, making these proceedings substantially shorter than ordinary ones.in normal proceedings. In executory proceedings the origin of the debt is not under discussion; the trial focuses on the formalities of debt instrument itself. The aforementioned code also permits special eviction proceedings, which are carried out in the same way as ordinary proceedings. The Argentine Civil and Commercial Code requires that a notice be given to thea tenant demanding payment of the amounts due in the event of breach prior to eviction, of no less than ten days for leases for residential purposes,leases, and establishes no limitation or minimum notice for leases for other purposes.leases. However, historically, largebacklogs in court dockets and numerous procedural hurdles have resulted in significant delays to eviction proceedings, which generally last from six months to two years from the date of filing of the suit to the time of actual eviction.suit.
 
Development and Use of the Land
 
Buenos Aires Urban Planning CodeCode.. Our real estate activities are subject to several municipal zoning, building, occupation and environmental regulations. In the city of Buenos Aires, where the vast majority of our real estate properties are located, the Buenos Aires Urban Planning Code (Código de Planeamiento Urbano de la Ciudad de Buenos Aires) generally restricts the density and use of property and controls physical features of improvements on property, such as height, design, set-back and overhang, consistent with the city’s urban landscape policy. The administrative agency in charge of the Urban Planning Code is the Secretary of Urban Planning of the City of Buenos Aires.
 
Buenos Aires Building CodeCode.. The Buenos Aires Building Code (Código de Edificación de la Ciudad de Buenos Aires) complements the Buenos Aires Urban Planning Code and regulates the structural use and development of property in the city of Buenos Aires. The Buenos Aires Building Code requires builders and developers to file applications for building permits, including the submission to the Secretary of Work and Public Services (Secretaría de Obras y Servicios Públicos) of architectural plans for review, to assure compliance therewith.

 
We believe that all of our real estate properties are in material compliance with all relevant laws, ordinances and regulations.
 
Sales and Ownership
 
Buildings Law. Buildings Law No. 19,724 (Ley de Pre horizontalidad) was repealedsuperceded by the new Argentine Civil and Commercial Code which became effective on August 1, 2015. The new regulations provide that for purposes of execution of agreements with respect to builtbuild units or condo units to be built,under construction, the owner is required toor developer must purchase insurance in favor of prospective purchasers against the risk of frustration of the operation pursuant to the agreement for any reason.contract. A breach of this obligation prevents the owner from exercising any right against the purchaser–such as demanding payment of any outstanding installments due – unless he/shethe owner fully complies with theirits obligations, but does not prevent the purchaser from exercising its rights against seller.
 
Protection for the Disabled LawLaw.. The Protection for the Disabled Law No. 22,431, enacted on March 20, 1981, as amended, provides that in connection with the construction and renovation of buildings, obstructions to access must be eliminated in order to enable access by handicapped individuals. In the construction of public buildings, entrances, transit pathways and adequate facilities for mobility impaired individuals must be provided for.
Buildings constructeddeveloped before the enforcement of the Protection for the Disabled Law came into effect must be adaptedretrofitted to provide accesses,access, transit pathways and adequate facilities for mobility-impaired individuals.
Those pre-existing buildings, which due to their architectural design may not be adapted to the use by mobility-impaired individuals,so retrofitted, are exempted from the fulfillment of these requirements.
compliance. The Protection for the Disabled Law provides that residential buildings must ensure access by mobility impaired individuals to elevators and aisles. Architectural requirements refer to pathways, stairs, ramps and parking.
 
Real Estate Installment Sales Law. The Real Estate Installment Sales Law No. 14,005,, as amended by Law No. 23,266 and Decree No. 2015/85, imposes a series of requirements on contracts for the sale of subdivided real estate property regarding, for example, the sale price which is paid in installments and the deed, which is not conveyed until final payment of such price. The provisions of this law require, among other things:
 
·  
·  
The registration of the intention to sell the property in subdivided plots with the Real Estate Registry (Registro de la Propiedad Inmueble) corresponding to the jurisdiction of the property. Registration will only be possible with regard to unencumbered property. Mortgaged property may only be registered where creditors agree to divide the debt in accordance with the subdivided plots. However, creditors may be judicially compelled to agree to the division.
 
·  The preliminary registration with the Real Estate Registry of the purchase instrument within 30 days of execution of the agreements.
·  
Preliminary registration with the Real Estate Registry of the deed of transfer within 30 days of execution of the sales contract.
 
Once the property is registered, the installment sale may not occur in a manner inconsistentmust be consistent with the requirements of the Real Estate Installment Sales Act, unless seller registers its decision to desist fromaffirms that it will not provide for the sale in installments with the Real Estate Registry. In the event ofinstallments. If a title dispute over the title between the purchaser and third-party creditors of the seller,arises, the installment purchaser who has duly registered the purchase instrument with the Real Estate Registry will obtain the deedbe entitled to the plot.deed. Further, the purchaser can demand conveyance of title after at least 25% of the purchase price has been paid, although the seller may demand a mortgage to secure payment of the balance of the purchase price.
 
After payment of 25% of the purchase price or the construction of improvements on the property equal to at least 50% of the value of the property, value, the Real Estate Installment Sales Act prohibits the rescissiontermination of the sales contract for failure by the purchaser to pay the balance of the purchase price. However, in such event the seller may take action under any mortgage on the property.
 

89

Other Regulations
 
Consumer Relationship. Consumer or End User Protection.The Argentine Constitution expressly establishes in Article 42 that consumers and users of goods and services have a right to protection of health, safety and economic interests in a consumer relationship. Consumer Protection Law No. 24,240, as amended, regulates several issues concerning theprovides protection of consumers and end users in a consumer relationship, in the arrangement and execution of contracts.
 
The Consumer Protection Law, and the applicable sectionsprovisions of the Argentine Civil and Commercial Code are intended to regulate the constitutional rightrights conferred under the Constitution focused on the weakest party ofin the consumer relationship andas a means to prevent potential abuses deriving from the stronger bargaining position ofby vendors of goods and services in a mass-market economy where standard form contracts are widespread.the norm.
 
As a result, the Consumer Protection Law and the Argentine Civil and Commercial Code deem void and unenforceable certain contractual provisions included in consumer contracts entered into with consumers or end users, including those which:are voided and unenforceable if they:
 
·  deprive obligations of their nature or limit liability for damages;
·  
Are inconsistent with the essence of the service to be provided or limit liability for damages;
 
·  imply a waiver or restriction of consumer rights and an extension of seller rights; and
·  
imply a waiver or restriction of consumer rights and an extension of seller rights; or
 
·  
impose the shifting of the burden of proof from the consumer to the seller in order to protect the consumers.
·  
shift the burden of proof to consumers.
 
In addition, the Consumer Protection Law imposes penalties ranging from warnings to the forfeiture of concession rights, privileges, tax regimes or special credits to which the sanctioned party wasmay be entitled, including closing down of establishments for a term of up to 30 days.
 
The Consumer Protection Law and the Argentine Civil and Commercial Code define consumers or end users as the individuals or legal entities that acquire or use goods or services free of charge or for a price for their own final use or benefit or that of their family or social group. In addition, both laws provide that those who though not being parties to a consumer relationship as a result thereof acquire or use goods or services, for consideration or for non-consideration, for their own final use or that of their family or social group are entitled to such protection rights in a manner comparable to those engaged in a consumer relationship.
In addition, the Consumer Protection Law defines the suppliers of goods and services as the individuals or legal entities, either public or private that in a professional way, even occasionally, produce, import, distribute or commercialize goods or supply services to consumers or users.
The Argentine Civil and Commercial Code defines a consumer agreement as such agreement that isare entered into between a consumer or end user and an individual or legal entity that acts professionallyprovides professional services or occasionally either with a private or public company that manufactures goods or providesoffers services for the purpose of acquisition, use or enjoyment of goods or services by consumers or users for private, family or social use.
The protection under the laws afforded to consumers and end users encompassesin the entire consumer relationship process (from the offeringstream of the product or service) and it is not only based on a contract, including the consequences thereof.commerce.
 
In addition, the Consumer Protection Law establishes a joint and several liability system under which for any damages caused to consumers, if resulting from a defect or risk inherent in the thing or the provision of a service, the producer, manufacturer, importer, distributor, supplier, seller and anyone who has placed its trademark on the thinggood or service shall beis liable.
The Consumer Protection Law excludes theprofessional services supplied by professionals that require a college degree and registration in officially recognizedthat are provided by members of professional organizations or those provided by a governmental authority. However, this law regulates the advertisements that promote the services of such professionals.professional advertisements.
 
The Consumer Protection Law determines that the information contained in the offer addressed to undetermined prospective consumers, binds the offeror during the period in which the offer takes place and until its public revocation. Further, it determines that specifications included in advertisements, announcements, prospectuses, circulars or other media bind the offeror and are considered part of the contract entered into by the consumer.
 
Pursuant to Resolution No. 104/05 issued by the Secretariat of Technical Coordination reporting to the Argentine Ministry of Economy, the Consumer Protection Law adopted Resolution No. 21/2004 issued by the Mercorsur'sMercorsur’s Common Market Group which requires that those who engage in commerce over the Internet (E-Business) shall disclose in a precise and clear manner the characteristics of the products and/or services offered and the sale terms. Failure to comply with the terms of the offer is deemed an unjustified denial to sell and gives rise to sanctions.
 
On September 17, 2014, a new Consumer Protection Law was enacted by the Argentine Congress –Law No. 26,993. This law, known as “System for Conflict Resolution in Consumer Relationships,” provided for the creation of new administrative and judicial procedures for this field of Law.procedures. It created a two-instancetwo-tiered administrative system: the Preliminary Conciliation ServiceReconciliation Agency for Consumer Relationships (Servicio de Conciliación Previa en las Relaciones de Consumo, COPREC COPREC)) and the Consumer Relationship Audit, and a number of courts assigned to resolution of conflicts between consumers and producers of goods and services (Fuero Judicial Nacional de Consumo). In order to file aA claim the amount so claimed shouldmay not exceed a fixed amount equivalent to 55 adjustable minimum living wages, which areas determined by the Ministry of Labor, Employment and Social Security. The claim is required tomust be filed with the administrative agency. If an agreement is not reached between the parties, the claimant may file the claim in court. The administrative system known as Preliminary Conciliation Service for Consumer Relationships (COPREC)COPREC is currently in full force and effect. However, the court system (fuero judicial nacional de consumo) is not in force yet, therefore, any court claims should be currently must filed with the existing applicable courts. A considerable volume of claims filed against us are expected to be settled pursuant to the system referred to above, without disregarding the full force and effect of different instances for administrative claims existing in the provincial sphere and the City of Buenos Aires, which remain in full force and effect, where potential claims related to this matter could also be filed.system.
 
Antitrust Law. Law No. 25,156, as amended, prevents monopolistic practices and requires administrative authorization for transactions that according to the Antitrust Law constitute an economic concentration. According to this law, mergers, transfers of goodwill, acquisitions of property or rights over shares, capital or other convertible securities, or similar operations by which the acquirer controls or substantially influences a company, are considered as an economic concentration. Whenever an economic concentration involves a company or companies and the aggregate volume of business of the companies concerned exceeds in Argentina the amount of Ps. 200.0200 million, in such case the respective concentration should be submitted for approval to the Argentine Antitrust Authority (“(Comisión Nacional de Defensa de la Competencia”,Competencia, “ “CNDC”CNDC). The request for approval may be filed either prior to the transaction or within a week after its completion.

 
When a request for approval is filed, the CNDC may (i) authorize the transaction, (ii) subordinatecondition the transaction to the accomplishmentsatisfaction of certain conditions, or (iii) reject the authorization. 

90

application.
 
The Antitrust Law provides that economic concentrations in which the transaction amount and the value of the assets absorbed, acquired, transferred or controlled in Argentina, do not exceed Ps. 20.020 million each are exempted from the administrative authorization.law. Notwithstanding the foregoing, when the transactions effectedconsummated by the companies concerned duringinvolved in the prior 12-month period exceed in the aggregate Ps. 20.020 million or Ps. 60.060 million in the last 36 months, these transactions must be notified to the CNDC.
 
As our consolidated annual sales volume and our parent’s consolidated annual sales volume exceed Ps. 200.0200 million, we should give notice to the CNDC of any concentration provided for by the Antitrust Law.
 
Credit Card Law. Law No. 25,065, as amended by Law No. 26,010 and Law No. 26,361, governs certain aspects of the business activity known as “credit card system.” Regulations impose minimum contract contents and approval thereof by the Argentine Ministry of Industry, as well as limitations on chargeable interest by users and commissions charged by the retail stores that adhere to the system. The Credit Card Law applies both to banking and non-banking cards, such as Tarjeta“Tarjeta Shopping,,” issued by Tarshop.Tarshop S.A. Pursuant to Communication “A” 5477 issued by the Argentine Central Bank, loans granted under credit cards by non-financial entities cannot exceed 25% of the monthly interest rate published by the Argentine Central Bank for loans to individuals without security interests.
 
EnvironmentEnvironmental Law.. Our activities are subject to a number of national, provincial and municipal environmental provisions.
 
Article 41 of the Argentine Constitution, as amended in 1994, provides that all Argentine inhabitants have the right to a healthy and balanced environment fit for human development and have the duty to preserve it. Environmental damage shall bring about primarily the obligation to restore it as provided by applicable law. The authorities shall control the protection of this right, the rational use of natural resources, the preservation of the natural and cultural heritage and of biodiversity, and shall also provide for environmental information and education. The National Government shall establish minimum standards for environmental protection whereas Provincial and Municipal Governments shall fix specific standards and regulatory provisions.
 
On November 6, 2009, the Argentine Congress passed Law No. 25,675. Such law regulates the minimum standards for the achievement of a sustainable environment and the preservation and protection of biodiversity and fixes environmental policy goals.
 
Law No. 25,675 establishes the activities that will be subject to an environmental impact assessment procedure and certain requirements applicable thereto. In addition, such Law sets forth the duties and obligations that will be triggered by any damage to the environment and mainly provides for restoration of the environment to its former condition or, if that is not technically feasible, for payment of compensation in lieu thereof. Such Law also fosters environmental education and provides for certain minimum reporting obligations to be fulfilled by natural and legal entities.
 
In addition, the CNV Rules require the obligation to report to the CNVCommission any events of any nature and fortuitous acts that seriously hinder or could potentially hinder performance of our activities, including any events that generate or may generate significant impacts on the environment, providing details on the consequences thereof.
 
The new Argentine Civil and Commercial Code has introduced as a novel feature the acknowledgement of collective rights, including the right to a healthy and balanced environment. Accordingly, the Codeenvironment expressly sets forth that the law does not protect an abusive exercise of individual rights if such exercise could have an adverse impact on the environment and thecollective rights with a collective impact in general. For additional information see “Item 3 (d). Risk Factors - Risk relating to our Business - Our business is subject to extensive regulation and additional regulations may be imposed in the future.”
Control Systems
IRSA Commercial Properties owns computer systems to monitor tenants’ sales (except stands) in all of its shopping centers. IRSA CP also conducts regular manual audits of its tenants accounting sales records in all of its shopping centers. Almost every store in those shopping centers has a point of sale that is linked to a main computer server in the administrative office of such shopping center. IRSA CP  uses the information generated from the computer monitoring system for statistics regarding total sales, average sales, peak sale hours, etc., for marketing purposes and as a reference for the processes of internal audit. The lease contracts for tenants in Alto Avellaneda, Alto Palermo, Alcorta Shopping, Patio Bullrich, Buenos Aires Design, Abasto, Alto Rosario, Alto NOA, Dot Baires Shopping, Córdoba Shopping, Soleil Premium Outlet, La Ribera Shopping, Mendoza Plaza, Distrito Arcos and Alto Comahue contain a clause requiring tenants to be linked to the computer monitoring system, there being certain exceptions to this requirement.
Insurance
We carry all-risk insurance for the shopping centers and other buildings covering property damage caused by fire, explosion, gas leak, hail, storms and wind, earthquakes, vandalism, theft and business interruption. In addition, we carry liability insurance covering any potential damage to third parties or property caused by the conduct of our business throughout Argentina. We are in compliance with all legal requirements related to mandatory insurance, including insurance required by the Occupational Risk Law (Ley de Riesgos del Trabajo), life insurance required under collective bargaining agreements and other insurance required by laws and executive orders. Our history of damages is limited to one single claim resulting from a fire in Alto Avellaneda Shopping in March 2006, a loss which was substantially recovered from our insurers. These insurance policies contain specifications, limits and deductibles which we believe are adequate to the risks to which we are exposed in our daily operations. We further maintain liability insurance covering our directors’ and corporate officers’ liability.
Operations Center in Israel
IDBD is a holding company that invests, either directly or through its subsidiaries, associates and joint ventures in companies that operate in various sectors of the economy in Israel. IDBD is directly affected by the political, economic, military and regulatory conditions of Israel. The main regulations applicable to IDBD’s business are described below. For more information, see “Risk Factors– Risks related to IDBD and IDBD’s subsidiaries.”
General regulations applicable to our business in Israel
Proper Conduct of Banking Business
IDBD and certain of its affiliates are subject to supervision by the Israeli Supervisor of Banks relating to “Proper Conduct of Banking Business” which impose, among others limits on the aggregate principal amount of loans a financial institution can have outstanding to a single borrower, a group of related borrowers, and to the largest borrowers and groups of related borrowers of a banking entity (as these terms are defined in the aforesaid directives). IDBD, its controlling shareholders and its affiliates are considered a single group of borrowers for purposes of this regulation. These restrictions limit the ability of IDBD and its affiliates to borrow from a single bank in Israel, their ability to make investments where they require bank lines of credit, to invest in companies that have loans outstanding from banks in Israel, and to make business transactions together with groups that have such credit outstanding. In the period from 2013 and until the date of publication of the report, the concentration of credit risk of IDBD and its affiliates decreased as a result of a reduction in the amount of utilized credit for the group that includes IDBD, including as a result of a change of control that resulted in a re-characterization of the group for purposes of applicable regulation.
 

 

Reduced Centralization Act
In December 2013, the official “Reshumot” published in Israel the Promotion of Competition and Reduction of Centralization Law, N° 5774-2013 (the “Reduced Centralization Act ”) pursuant to which a pyramidal structure (or multiholding companies) of control in “reporting entities” (principally entities whose securities are held by public shareholders) is limited to two layers of reporting entities (with the holding company in the first layer not including a reporting entity that has no controlling shareholder). For this purpose, on the date of publication of the law in Reshumot, IDBD was considered a second-tier company and Discount Investments was considered a third-tier company, and as such, Discount Investments would not have been permitted to continue to control the operating companies after December 2019. As a result of the change in control of IDBD, IDBD and Discount Investments are no longer considered as second and third-tier companies, respectively, for the purpose of the Law. If Discount Investments is considered a second-tier company, it would be required by December 2019 at the latest, to cease controlling entities with publicly held securities.
In connection with evaluating the application of the Law, in August 2014, IDBD’s Board of Directors appointed an advisory committee to examine various alternatives to address the implications of the Law to comply with the provisions that apply to control in a pyramid structure (or multiholding companies) in order to enable continued control of IDBD and/or Discount Investments in “other tier companies” (currently held directly by Discount Investments) as of December 2019. The advisory committee has recommended the following alternatives:
(a)  
Taking either IDBD or Discount Investments private thereby removing the requirement that they be reporting entities (and as a result not a “tier company”); and
 
(b)  
91Merge IDBD and Discount Investments.

The Board of Directors of Discount Investments has appointed an advisory committee with a similar function. As of the date of this Annual Report, no specific alternatives have been identified. The implementation of an alternative that would be adopted is likely to take several years.
 
Based on these analyses, IDBD considers it more likely that the completion of one of the specified alternatives will be adopted to comply with the restrictions of the Law regarding pyramidal holdings, while allowing IDBD to continue to control Discount Investments, and Discount Investments to continue to control Cellcom after December 2019. PBC, which currently is a third-tier company that controls each of Gav-Yam, Ispro and Mehadrin, has preliminarily evaluated application of the Law on its holding structure and determined that it will be able to maintain said control, as it has concluded that the Law has no effect over its financial statements.
IDBD, as a first-tier company, and Discount Investments, as a second-tier company, are not required to designate independent directors to their respective boards of directors or to appoint outside directors as required by the Law.
Pursuant to the provisions of the Law, the boards of directors of Cellcom, PBC, Elron, Gav-Yam, Ispro and Mehadrin, include a majority of independent outside directors. In June 2014, the Promotion of Competition and Reduction of Centralization (Classification of a Company as a Tier Company) Regulations, N° 5774-2014, came into effect, as part of which exemptions were provided for certain “third-tier” entities from changing the composition of their boards of directors to comply with the Reduced Centralization Act. Pursuant to this law and the Promotion of Competition and Reduction of Centralization (Concessions Regarding the Number of Outside directors) Regulations, N° 5774-2014, and in view of the number of directors who may be appointed with the consent of the Bronfman-Fisher Group (per the terms of the shareholders’ agreement between it and Discount Investments), the Board of Directors of Shufersal includes a majority of independent outside directors. In this context, in August 2014, Discount Investments entered into an agreement with an affiliate of the Bronfman-Fisher (which at the time held approximately 19% of the share capital of Shufersal), pursuant to which Discount Investments will vote in favor of the four directors designated by Bronfman-Fisher at the meeting of shareholders of Shufersal (out of a board of fifteen members), for so long as it holds the minimum defined percentage of the share capital of Shufersal, although Discount Investments reserves the right to object to any candidate on reasonable grounds.
These arrangements will be in effect so long as the restrictions of section 25(d) to the Reduced Centralization Act apply to Shufersal. Accordingly, Discount Investments, which as of December 31, 2015, owned approximately 53% of Shufersal’s share capital, is effectively able to appoint the majority of the members of Shufersal’s Board of Directors.
The Reduced Centralization Act includes provisions relating to a separation between significant affiliates and significant financial institutions. Consequently, so long as IDBD will be a significant operating entity, after December 11, 2019, IDBD will not be able to control Clal Insurance and additional financial affiliates within the Clal Holdings Insurance Enterprise Group or to hold more than 10% of the equity of any such entity (or more than a 5% stake in such an entity if it is regarded as an insurer without a controlling shareholder).
In May 2015, updated lists were published on the website of the Ministry of Finance and the official gazette in connection with the Reduced Centralization Act, which includes a list of the centralization factors, the list of the significant corporations and a list of the significant financial institutions. In accordance with the provisions of the Reduced Centralization Act, a substantial financial institution or a significant real corporation will be deemed as a centralization factor that subjects these entities to the provisions of the Reduced Centralization Act, as well as any entity that is part of a business group that includes a significant financial entity or a significant real corporation. IDBD and its controlling shareholders (Eduardo Elsztain and entities through which he holds his interest in IDBD) and the companies of IDBD (including Discount Investments, Cellcom, PBC, Shufersal, Adama, Clal Holdings Insurance Enterprises, IDB Tourism, Noya Oil and Gas Explorations Ltd. and companies under the control of these companies) were included in the list of centralization factors, and these entities, except for Adama (excluding Eduardo Elsztain himself), were also included in the list of significant corporations. In addition, companies of Clal Holdings Insurance Enterprises, including Clal Insurance (except Clal Holdings Insurance Enterprises) and Epsilon Investment House Ltd. (held by Discount Investments) were also included in the list of the significant financial institutions.
Insofar as Clal Holdings Insurance Enterprises will continue to be considered a significant real entity, this may affect its ability to retain control of Clal Insurance, directly or indirectly after December 2019, which may adversely affect its ability to appoint joint directors in both of the companies (Clal Holdings Insurance Enterprises and Clal Insurance).
In light of the directives issued by the Commissioner in connection with the appointment of a trustee for holding control in Clal Holdings Insurance Enterprises, which currently are held by IDBD and considering the letter issued by the Commissioner on December 30, 2014 pursuant to which IDBD is required to sell its control shares in Clal Holdings Insurance Enterprises, Clal Holdings Insurance Enterprises has appealed to the Concentration Committee in connection with its classification as a significant real entity.
In November 2014, IDBD’s Board of Directors resolved, subject to requisite corporate approvals, to promote a consolidation of management functions at IDBD and Discount Investments, in order to achieving costs savings. In this regard, on March 29, 2016, IDBD’s Board of Directors approved the terms of office and of employment of Mr. Shalom Lapidot to be chief executive officer of both IDBD and Discount Investments, which was subsequently approved by the compensation committee of Discount Investments. The term of office of Mr. Lapidot is subject to approval of a general meeting of shareholders of Discount Investments.
Regulations applicable to each of the businesses in Israel
Real Estate
In recent years, there has been continued shortage in manpower in the construction and agricultural industries which typically are labor intensive and depend on foreign workers, including in the areas of Judea and Samaria. The security situation in Israel, as well as the shutdown of Judea and Samaria during certain periods of the year, have resulted in continued shortage in the workforce, driven by lower numbers of foreign workers from Judea and Samaria. In July 2015, the Minister of Finance increased the quota of foreign work permits to approximately 20,000 through the end of 2016, as a means to achieving the goal of increasing new construction projects by 70,000 during the year and to promote new housing starts to alleviate the housing crisis. Given the shortage of skilled workers, wages increased in general and in particular those of foreign construction workers. The shortage and unavailability of a skilled workforce, increased construction costs and resulted in longer timetables for the execution of new projects.

Supermarkets
Labor Law
The retail sector activities of Shufersal are subject to labor laws including the Employment of Workers by Human Resources Subcontractors Law, 5756-1996, the Extension Order in the Matter of Contract Workers in the Cleaning Branch in the Private Sector, the Minimum Wage Law, 5747-1987 and the Increased Enforcement of Labor Laws Law, 5772-2011. As of December 31, 2015, Shufersal employed approximately 1,000 workers, all of which are subject to minimum wage requirements. The majority of Shufersal’s employees are parties to a collective bargaining agreement.
The provisions of the Minimum Wage Law (Increase of Minimum Wage - Emergency Provision), 5772 - 2015 and the amendment of the Minimum Wage Law, 5747 – 1987, resulted in an increase in the minimum wage effective as of April 2015 and led to an increase of NIS 43 million in Shufersal’s wage expense in 2015 (compared with 2014). In Shufersal’s evaluation the increase of the minimum wage in Israel, changes to labor laws in Israel and the increased possibility of organized workers may detrimentally affect the business results of Shufersal and result in higher wage expenses of Shufersal.
Retail and Production
The activities of Shufersal are also subject to consumer protection laws, including the Food Law, the Defective Products Liability Law, 5740-1980, the Consumer Protection Law, 5741-1981, and the Consumer Product and Service Price Supervision Law, 5756-1996 that allows a consumer to institute a class action suit for damages caused to consumers as a whole based on the causes of action set out in that law.
The Public Health Protection (Food) Law, 5776-2015, sets forth quality standards and food safety measures and provides the relevant regulator supervisory and criminal and administrative enforcement powers. The provisions of the Food Protection Law affect production activities of Shufersal, including importation and food marketing activities. Shufersal is continuing the process of implementing procedures to comply with the provisions of the Food Protection Law that apply to its activities. Shufersal also operates pharmacies in certain of its stores, and is therefore subject to the provisions of the Pharmacists Ordinance (New Version), 5741-1981.
Shufersal is involved in manufacturing activities at three owned facilities where it produces principally private-branded baked goods which are subject to compliance with applicable production and quality assurance standards. Shufersal is continuously evaluating compliance of these facilities with the provisions of the Food Protection Law and as of the date of this Annual Report, Shufersal believes its operations comply in all material respects with the applicable provisions of this law.
The retail activities of each Shufersal store requires compliance with the Business License Order (Businesses Requiring a License), 5773-2013, principally providing that they obtain a business operating license for each unit. As of the date of this Annual Report, there are two units that are subject to legal proceedings regarding business licenses that are pending against Shufersal and its directors. Shufersal’s operating units are also subject to land development approvals and licensing, substantially all of which are in compliance.
The Food Law and the Anti Trusts Law
The Antitrust Law affects the activities of Shufersal, especially with respect of the possibility of carrying out future acquisitions for which approval is required from the Antitrust Commissioner (the “Commissioner”) and the influence on the trade arrangements of Shufersal with its suppliers. The Food Law regulates Shufersal’s trade arrangements with its suppliers which are regulated in detail which are designed to promote competition in the food supply industry. As of the date of this Annual Report, Shufersal believes that growth through acquisitions of a significant entity in the retail market would be limited. Moreover, provisions of the Food Law relating to geographical competition of retailers may influence the ability of Shufersal to expand organically through opening new stores in certain areas and under certain circumstances Shufersal may be required to close active branches under certain circumstances.
The Food Law includes the following three systems:
(a) with respect to activities of suppliers and retail trade, the Food Law prohibits:
i. a supplier interfering with the retail price of the products of another supplier;
ii. a retailer interfering with a supplier in the matter of the consumer price imposed by another retailer;
iii. a large supplier imposing its market position to influence the ordering or presentation of retail products within stores of a large retailer (Shufersal is included in the list of large retailers);
iv. a large supplier interfering with the price a retailer charges consumers for the products of that supplier, in the allocation of sales areas at any rate for the products of the supplier, for the acquisition of a product from the supplier in any scope from the total retail purchases of the product and of competing products, and for the purchase or sale of products which another supplier supplies to the retailer, including purchase quantities and goals, the sale area allocated to them in a store and any other commercial condition sought to be imposed;
v. a large retailer and a large supplier agreeing to set the pricing of a basket of products at a price that is lower than the marginal cost of production of the related product or that would require a consumer to purchase a minimum amount of the related product to achieve the reduces price;
vi. a large supplier conditioning the sale of its product to a retailer on the purchase of another product of that large supplier; and
vii.  a supplier forwarding payments to the large retailer, unless by way of a price reduction of the product units.
(b) Restrictions on geographical competition of retailers have adversely affected Shufersal’s expansion through organic growth and acquisitions. On September 28, 2014 Shufersal received a notification from the Antitrust Authority regarding demand areas of Shufersal’s large stores (“Notice of Demand Areas”). The stores that were the subject of the Commissioner’s request under the Law are 14 stores located in Haifa, 3 stores in Carmiel, 4 stores in Hadera, and 3 stores in Safed. As of the date of this Annual Report, Shufersal has not been required to close or dispose of any of its stores.
(c) Provisions designed to increase transparency of consumer prices, inter alia, by requiring a large retailer to publish on the internet and without cost to consumers, various data on prices of consumer goods it sells in its stores to allow consumers to compare prices with those of other retailers.
(d) Provisions regarding the contemporaneous application of the Food Law and the Antitrust law - In December 2015, the Commissioner published a statement on the parallel application of the Antitrust Law and the Food Law listing cases in which only the provisions of the Food Law will apply and no additional regulation will be required under the Antitrust Law. As of the date of the notice Shufersal’s operations comply with the Food Law. As of December 31, 2015 the implementation of the Food Law has had no significant impact on Shufersal’s business.
Shufersal’s acquisition of Clubmarket was approved by the Commissioner in 2005, and within this framework the Commissioner imposed a number of limitations on Shufersal’s activities including: prohibiting Shufersal from pricing products that result in a loss that is not proportionate to its business activities and are aimed to affect the operations of competitors from the market; prohibiting Shufersal from entering into agreements with suppliers that impose restrictions on those suppliers from doing business with competitors of Shufersal; and prohibiting Shufersal from attempting to influence commercial conditions between its suppliers and competitors.
Shufersal obtained an exemption from the Commissioner, available until October 14, 2018, regarding the operation of the Fourth Chain, which is a label company owned by a number of supermarket chains that was established to develop consumer goods. The Commissioner’s decision took into account the fact that Fourth Chain contracted with a third party that develops products for it under a private brand and the stipulated exemption exclusively permits these joint activities for the development of the private brand. Shufersal believes the Fourth Chain private label increases competition by establishing a cost-effective alternative to dominant branded consumer products.
The findings of the Commissioner in the matter of the rules of conduct among the largest store chains and the dominant suppliers in the food supply market, including under the provisions of the Food Law, and in the matter of the merger of Shufersal with Clubmarket, may have a detrimental effect on Shufersal’s business, its financial condition and operating results.

Agriculture
a.Operations Development and Licensing. ADAMA manufactures generic crop protection products which require production processes and licensing of existing molecules or processes. The primary development and licensing operation focuses on chemical-engineering development of production processes for new active ingredients and generic products, biological and agricultural testing intended for obtaining licenses, development of licensing information for the active ingredients and solutions that form licensing portfolios for the various regions, development of compounds, streamlining of production processes and development of new and specialized formulations of existing products. Moreover, ADAMA also engages in scientific-technological backup of existing production processes with emphasis on improving quality, efficiency, safety, environmental protection and reducing production costs. Furthermore, ADAMA develops several innovative substances, based on molecules acquired after a screening process, in which their effectiveness is proven. As of the date of this annual report, ADAMA operates research and development (R&D) facilities in Israel, India and Brazil and has started operating on R&D facility in China. In addition to chemical development, ADAMA develops licensed products through third party producers. At times, such development incorporates proprietary know-how and processes owned by ADAMA, as well as those developed jointly with subcontractors, in addition to processes and know-how of Adama’s suppliers.
Licensing - at various stages of manufacture and marketing, the substances and products marketed by ADAMA require licensing in each country in which it operates (ADAMA products that are manufactured and sold in Israel require licensing under the Crop Protection Law, 956). ADAMA has seven development and licensing centers in Europe, Israel, Latin America (Brazil), the United States and Asia, and licensing expertise in more than 100 countries. For its foregoing operations, ADAMA employs 170 employees around the world and also works with external contractors. Crop protection products are sold under the control of government authorities in each country (usually ministries of agriculture, health and the environment). The licensing requirements vary from time to time and in general have become more stringent over the years throughout the world, resulting in increased licensing costs and time commitments. The most demanding licensing standards are in the United States, Brazil, Japan and the EU. The rest of the world generally is adapting their requirements to the standards of the more advanced countries. In some countries, the license is not limited in time, but further development of licensing information is required every few years. Some of the countries grant licenses for 7-15 years and renew them at the end of that period subject additional testing Licensing costs and procedures differ from one state to another and may take several years. ADAMA is also required to make modifications to fully adapt any product in a certain country to the specific licensing requirements of that country. ADAMA regularly reviews the compliance of its products with the licensing requirements in the various countries in which they are sold, and adjusts them as needed. Licensing costs usually amount to hundreds of thousands of dollars per product and in some countries, such as the United States, the European Union and Japan, the costs can reach millions of dollars per product. In 2015, ADAMA received 276 new licenses for marketing its products (excluding expansion of labels of permitted products for new crops).
In 2015, ADAMA’s licensing expenses amounted to US$93.1 million, with the addition of depreciation the gross amount constitutes 3% of ADAMA’s revenue for 2015.
b.Labor Laws. Labor Relations in Israel. Labor relations of most of the employees of ADAMA’s subsidiaries are regulated under special collective agreements for limited periods. In addition, some of the employees of ADAMA’s subsidiaries in Israel are employed under personal agreements. As part of an agreement executed in 2011 between ADAMA and the Histadrut regarding employees in Israel, ADAMA undertook to carry on production, at the scope and on certain production lines, at the plants of the subsidiaries in Israel through June 1, 2017. In 2015, in addition to the provisions set aside by ADAMA in preceding years with regard to these understandings, ADAMA set aside a provision of US$12 million which is recorded in its financial statements under other expenses.
Labor Relations in Brazil. At two of ADAMA’s plants in Brazil, labor relations are subject to a collective bargaining agreement that is renewed every two years, and to the best of ADAMA’s knowledge, there has been no major labor unrest in recent years.
As of the date of this annual report, ADAMA believes that it is not dependent upon any of its employees.
c.Environmental Risks and Environmental Regulation
General. ADAMA is exposed to various environmental risks and its operations are subject to extensive environmental regulation, that varies by country where ADAMA operates. In recent years environmental legislation (or in stages of legislation) applicable to ADAMA’s operations have become much stricter as supervision and enforcement of these environmental requirements has tightened. ADAMA believes that this trend is expected to continue in the future.
ADAMA holds, as required by law, various permits and licenses such as business licenses, toxins permits and permits for pumping effluents into the sea. To the best of ADAMA’s knowledge, of the date of this annual report the permits and licenses applicable to ADAMA with regard to environmental issues are valid.
ADAMA’s environmental risk management policy: ADAMA attaches great importance to protecting the environment by accepting social and environmental responsibility and takes necessary measures to comply with the requirements of the law, and seeks to exceed compliance, through continuous dialogue with affected parties, including the authorities and the community.
Environmental Regulation. The key environmental law applicable to ADAMA’s operations are, inter alia, the Law for the Prevention of Nuisances, 1961; the Job Safety Ordinance (New Version), 1970; Business Licensing Law, 1968; Water Law, 1959; Law for the Prevention of Sea Pollution from Land-Based Sources, 1988 “Prevention of Sea Pollution”); Hazardous Materials Law, 1993 “Hazardous Materials Law”); Israel Clean Air Law, 2008 (“Clean Air Law”) and their regulations.
ADAMA continuously reviews the impact of environmental regulation on its business, acts to prevent or minimize environmental risks and to reduce environmental impacts that could be caused by its operations and invests considerable resources in ensuring compliance with the provisions of the environmental laws and those that may apply to it.
In September 2015, the Ministry of Environmental Protection issued for public comment a memorandum of the Integrated Environmental Licensing Law, 2015. The Memorandum of Law sets out one licensing procedure for businesses that have a substantial impact on the environment, at the end of which the business is granted an integrated environmental license in substitution of various environmental permits and licenses. The Memorandum of Law seeks to update and strengthen legal requirements applicable to, among other things, the use of hazardous substances, treatment of waste, compliance with building and construction laws, sanctions for license violation, etc. In view of the early stage of this legislation, ADAMA is unable to assess whether these obligations will apply to it or as to the scope thereof.
Air Quality. ADAMA’s plants are subject to regulation relating to air emissions under the Clean Air Law. ADAMA’s plants have duly filed applications for emission permits and some plants have already received valid emission permits or draft emission permits.

In May 2012, ADAMA signed an arbitration agreement with a group of Nir-Galim residents pursuant to which ADAMA agreed to comply with the recommendations of a certified expert to prevent future potential air and odor nuisances and to invest in facilities such as those mentioned above. In September 2015, the expert appointed pursuant to the mediation agreement announced that the mediation outline will be implemented in full by ADAMA and thereby the mediation proceedings came to an end. ADAMA makes substantial investments to minimize and prevent environmental consequences of its operations on air quality.
Effluents and Pumping into the Sea. The Prevention of Sea Pollution Law requires that the Ministry of Environmental Protection issue a permit for pumping wastewater or effluents into the sea. The ADAMA plant in Ashdod has such permit the terms of which have been made more stringent throughout the permit period as part of the general trend adopted by the Ministry.
Land. There are hazardous materials that are stored and located at Adama’s plant, as well as infrastructure and facilities, which contain fuels and hazardous materials. ADAMA is dedicated to preventing and treating the pollution of land and water by these materials.
ADAMA’s plant in Ashdod has been requested to conduct various land and well surveys for groundwater by the Ministry of the Environment and by the Water Authority. When the surveys were presented, the plant was required to present a program to mitigate environmental risks in accordance with methodology set by the Ministry of the Environment. The plant presented a detailed program to the Water Authority for the treatment of the ground water, which has been accepted in principle by the Water Authority.
The ADAMA plant in Be’er Sheva has been requested by the Ministry of the Environment to conduct an historical land survey and sample tests on ground gases. Sample tests of the ground gases have been conducted in coordination the Ministry of the Environment, and as of the date hereof, the plant has not been required to take any further action in this connection.
Within the context of the integrated environmental regulation process, ADAMA’s plant at Neot Hovav has been required to present a historical land survey. The survey was presented to the Ministry of the Environment at the beginning of 2015. At this stage, ADAMA is unable to evaluate whether additional requirements will be placed upon it in relation to surveys or the treatment of land or ground water at its plant, what their substance might be and whether they would have any significant impact on it.
Pollution of the groundwater was discovered in the Neot Hovav Council in the past, following which the Council took various steps to halt the spreading pollution and to extract it, including the treatment and monitoring of the underground water. As the date hereof, ADAMA is not required to incur expenditures in the treatment of the pollution. The possibility exists that the Neot Hovav Council will require ADAMA to contribute to the costs of remediation in the future.  However,  ADAMA is unable at present to evaluate whether such a demand will be made and what the size of such a demand may be.
Adama’s Investments in the Environment. ADAMA’s investments in environmental compliance in 2015, amounted to approximately US$21 million (facilities) and approximately US$41 million (routine costs exclusive of depreciation). ADAMA intends to continue to make investments, insofar as may be required and deemed appropriate to exceed these standards on environmental issues, in order to realize its policy of optimizing compliance. In Adama’s assessment, in each of the years 2016 – 2018 the total environmental costs are expected to amount to approximately US$60 million.
Adama’s plan in Brazil –ADAMA’s Brazilian subsidiary has two main plants, located in the South of Brazil. To the best of ADAMA’s knowledge, as at the time of this annual report, all of the permits and the licenses are in full force and effect. The Brazilian subsidiary invests in safety and ecological facilities in its plants, including in the performance of independent environmental testing to ensure compliance with the terms of its licenses, control over water sources located near the plant and the monitoring of emissions into the atmosphere, based on advanced technology. Periodic tests on the volume of the emissions into the atmosphere and the water sources show that the Brazilian plants comply with the requirements of the State’s Ministry of the Environment. As part of that company’s policy for improving ecological processes, it invests in the correction of deficiencies that have been found, changes in production processes, the building of facilities for purifying wastewater, the storage of by-products and recycling.
d.Legislation, standards, regulation and exposure in the environmental field, in health and in safety.
Adama may bear significant civil (including through class actions) or criminal liability (including high fines and/or payments of high amounts of compensation and/or environmental monitoring and rehabilitation costs) in respect of a breach of environmental regulation and failure to comply with health and safety standards including on the basis of strict liability. Even though Adama makes substantial investments in its facilities and in building special facilities in accordance with environmental requirements, it is unable to verify that those investments will be sufficient to satisfy evolving requirements. In addition, Adama is subject lawsuits alleging physical or property damage as a result of exposures to hazardous materials, which are covered for the most part by Adama’s insurance policies.
Telecomunnications
Communications Regulations
Cellcom’s operations are subject to general legal provisions regulating the relationships and method of contracting with its customers. These provisions include the Consumer Protection Law, 5721-1981 and regulations promulgated thereunder and other laws detailed below. A substantial part of Cellcom’s operations are subject to the Communications Law, regulations enacted by the Ministry of Communications, and the provisions of the licenses granted to Cellcom by the Minister of Communications. Cellcom’s activies which include providing cellular service, landline, international telephone services and internet access, and infrastructure services are subject to licensing.
Supervision of Rates. The Communications Regulations (Telecommunications and Broadcasts) (Payments for Interconnect), 5760 - 2000 requires cellular operators to phase in gradual reduction of communications rates (i.e. payments that will be made by an in-country operator, another cellular operator or international operator to complete one minute of call time in the network of a cellular operator or for the sending of an SMS between cellular operators). This reduction has led to a considerable reduction in Cellcom’s revenues.
Moreover, in August 2013 the Communications Law was amended to authorize the Minister of Communications to set interconnection prices and regulate the use of networks owned by another operator based not only on the cost incurred to establish the network (according to the calculation method to be determined by the Minister of Communication) plus a reasonable profit, but also on one of the following: (1) flat payment for a service provided by the license holder; (2) reference to tariffs charged for a comparable service; or (3) reference to the cost of these services or with the interconnection costs charged in other countries. The Minister of Communications was also empowered to give instructions on structural separation for the providing various services, including segregating services provided by a license holder from services provided to a subscriber.
In the last few years, contract termination charges for cellular plans have been banned in the cellular and other communications markets, other than for customers who have more than a certain number of cellular lines or whose monthly payments exceed a certain amount for bundled service. The elimination of these charges led to a considerable increase in plan cancellations, increased the costs of retaining and acquiring customers, and accelerated erosion of rates.
Virtual Operators (MVNO). The Communications Law and related pronouncements regulate the activities of virtual operators. Notwithstanding that the MVNO regulations apply only to the activities of a virtual operator which has an operating agreement with a cellular operator, the regulations empower the Ministry of Communications together with the Economic Ministry to impose terms of an agreement including fixing the price to be charged for the services provided.
Other Third Generation Operators (UMTS). In 2012, Golan and Hot Mobile began to offer UMTS services. The conditions of the tender according to which Golan and Hot Mobile were granted those licenses included a number of benefits and concessions, including minimally low license fees and a mechanism to reduce the royalties they undertook to pay for the frequencies based on the operator’s market share in the private sector and setting long timetables to meet the geographical coverage requirements of the network and the right to use in-country migration services via other cellular operators’ networks. The Communications Law obliges the other cellular operators to provide in-country migration services to Golan and Hot Mobile for a period ranging from seven to ten years subject to certain conditions. In 2011, Cellcom entered into a contract with Golan to provide in-country migration services. Hot Mobile entered into a similar in-country migration agreement with Pelephone and later with Partner (which was subsequently replaced by a joint networks agreement with Partner) without intervention from the Ministry of Communications.

Regulation of Multi-Channel Television Services
As at the date of this Annual Report, television program streaming via the Internet is not subject to regulation in Israel. Should the recommendations of the committee for the examination of the arrangement of commercial broadcasts be adopted and the committee requires Cellcom to make additional investments or regulation is imposed that is not beneficial for Cellcom’s streamign services or for its ability to use the DTT infrastructures, the results of Cellcom’s streaming services may be adversely affected.
Cellcom’s Communications Licenses
Cellcom holds a general license for providing cellular services, valid until January 31, 2022, setting out conditions (including duties and restrictions) applicable to its activities, officers and shareholders holding certain percentages of Cellcom’s shares. The license may be extended by the Ministry of Communications for consecutive periods of six years, if Cellcom is in compliance with the provisions of the license and law, and makes requisite investments to its service and network. The Ministry of Communications has amended the license conditions in the past, and may amend them in the future, without Cellcom’s consent and in a manner that may limit its ability to conduct business. The license provides that Cellcom does not have exclusivity for providing services.
The cellular license can be revoked, suspended or limited in the following cases: total holdings of the founding shareholders or their successors (as defined in the license) is less than 26% of the control shares of Cellcom; total holdings of Israeli parties (as defined in the license), who are among the founding shareholders or their successors, is less than 20% of the total issued share capital and control shares of Cellcom; a majority of directors are not Israeli citizens or residents of Israel; fewer than 20% of the directors of Cellcom were appointed by Israeli parties; any an act or omission of Cellcom that adversely affects or restricts competition in the cellular sector; the aggregate equity of Cellcom, together with the aggregate equity of shareholders each holding 10% or more of the share capital, is less than US$200 million.
In light of the 2015 change in the control structure of IDBD, the Cellcom control structure has also changed, and requires the approval of the Ministry of Communications, including with regard to Israeli holding requirements included in the licenses of Cellcom, as Mr. Eduardo Elsztain is not a citizen of Israel. IDBD and Cellcom formally applied to the Ministry of Communications to approve these changes and amend the telecommunications licenses of Cellcom accordingly. If the request is not approved and another arrangement is not offered by the Ministry of Communications, Cellcom may face sanctions, which under the terms of its license, can include suspension or cancellation of its licenses.
According to Telecommunications Law, the Ministry of Communications may impose on telecommunication companies, including Cellcom, financial sanctions for breach of license and law. The amount of the sanction is calculated as a percentage of the revenue of the operator, and according to the degree of severity and extent of the breach, said may be significant.
In July 2015, Cellcom received (through a wholly owned entity) a uniform and general license for the provision of landline telephony services (which replaced the previous license for providing this service), for the period ending April 2026. A uniform and general license was also awarded to Netvision and replaced its general license for providing internet access services, international carriers, and a network access point for the period ending February 2022. In addition, an entity, fully controlled by Cellcom received a uniform and general license which replaced the landline telephony service license, for the period ending March 2026. These licenses can be extended for an additional period of 10 years, under terms similar to the terms of extension of the general cellular license.
The Ministry of Communications has issued rules providing for unification of all uniform licenses. The uniform license allows providers to also offer virtual operator services. The process of unifying the uniform licenses and the timetable have not yet been determined and it is possible that this process will have a legal, financial, tax and accounting effect on Cellcom’s and Netvision’s businesses. The provision of a number of services by one entity will require limitations also on discrimination between operators.
Cellcom holds other communications licenses: a special license for the provision of data transmission and communication services in Israel, a license to provide internet services, and licenses to provide cellular services, landline telecommunication services and internet services in the West Bank, for periods ending 2016-2018. These licenses include conditions similar to those of the general license for the provision of cellular services, as noted above.
According to regulations that apply to the uniform license, there are certain limitations on cross ownership among license holders.
2.Further Regulation Applicable to Communications Services
In July 2014, the Ministry of Communications announced a public hearing on the coverage and quality requirements for second-generation and third generation networks. The proposed requirements are stricter than those currently existing and if adopted, could have an adverse effect on the results of Cellcom. Cellcom is unable to assess whether the proposed changes will be adopted, and what the impact of these changes will have in practice on Cellcom’s operating results.
In addition, in August 2014, the Ministry of Communications announced a public hearing to consider call centers owned by communications operators. In addition, the Ministry of Communications proposed to amend the Communications Law (Telecommunications and Broadcasting), 1982, providing that a customer may claim pre-set financial compensation if the telephone call center does not reply within an average response time or if there is an overcharge error. Cellcom believes that adoption of these proposed changes could have a material adverse effect on Cellcom’s business.
3.Permits for Setting Up Base Sites
a. Cellcom’s cellular services genearlly are provided through base sites across Israel, their construction and licensing are included in TAMA 36 (District Zoning Plan) – Part A - National Master Plan for Communications - Small and Micro Broadcasting Facilities (“TAMA 36”), and Radiation Law. Regulating the deployment of wireless access devices, which are base sites with smaller dimensions, are, for the most part, regulated by Communications Law and Radiation Law. The construction of base sites requires a permit as per Planning and Building Law, 1965 (“Planning and Building Law”), and is subject to other approvals from multiple regulators.
Legal proceedings (civil, criminal and administrative) are pending against Cellcom, under which a number of arguments were raised concerning the legal compliance of some of Cellcom’s sites, alleging failure to obtain permits under Planning and Building Law, or based on development of sites in contravention of a permit.
Cellcom did not apply for a building permit for approximately 33% of its base sites on the basis of the exemptions for wireless access facilities provided by law. In 2010, the Supreme Court issued a Temporary Order at the request of the Government’s Attorney General, enjoining Cellcom, Partner, and Pelephone from proceeding with construction of these facilities on the basis of the exemption. A final determination of the regulatory authorities regarding applications for exemptions is pending as of the date of this Annual Report.
In addition, Cellcom provides in-building repeaters and micro-sites (“femtocells”) for its subscribers seeking a solution to poor indoor reception. Based on an opinion Cellcom received from legal counsel, Cellcom did not request building permits for the repeaters that were installed on roof tops, which are a small fraction of all repeaters installed. It is not clear whether the installation of a different type of in-building repeaters and micro-sites requires a building permit. Some require a specific permit while others require a permit from the Ministry of Environmental Protection, depending on their radiation levels. Cellcom also builds and operates microwave facilities as part of its transmission network. The different types of microwave facilities receive permits from the Ministry of Environmental Protection regarding their radiation levels. Based on an opinion of legal counsel, Cellcom believes that building permits are not required for the installation of microwave facilities on rooftops.
b. Indemnification obligation - under Planning and Construction Law, local planning and building committees may demand and receive, as a condition for granting a building permit for a site, a letter of indemnity for claims under Section 197 of Planning and Construction Law. By December 31, 2015, Cellcom had executed approximately 400 letters of indemnity as a condition for receiving permits. In some cases, Cellcom has not yet been built any sites. As at December 31, 2015, two requests for indemnification were received from one local committee on the basis of a letter of indemnity as noted, in an immaterial amount.

As a result of the requirement to deposit letters of indemnity, Cellcom may decide to dismantle or move some sites to less advantageous locations, or build certain sites, if it concludes that the risk of granting letters of indemnity exceeds the benefit derived from those sites, which may result in a deterioration of cellular services and damage network coverage.
c. Radiation Law, Regulations and Permits Thereunder - Radiation Law, Regulations and Principles thereunder included provisions relating to all aspects related to regulating the issue of non-ionizing radiation, including, inter alia, levels of exposure that are permissible.
In May 2012, the Ministries of Communications, Health and Environmental Protection, based on their assessment of the potential health consequences of fourth-generation telecommunications services in Israel, including increased exposure to non-ionizing radiation, issued a memorandum advising that deployment of the fourth-generation network should be based on existing base stations, other smaller base sites both internal and external, and if possible, using the wired infrastructure so that data traffic will be carried mainly through fixed communication lines and not through any cellular infrastructure. In August 2014, the Ministry of Communications allowed the use of fourth-generation infrastructures, and in January 2015 fourth-generation frequencies were awarded to cellular operators. The recommendations of May 2012, as noted, were not included in the tender documents or in said approval.
4.  
The Reduced Centralization Act
Given the holding structure of the I.D.B. Group, Cellcom is considered in the “third layer”. Cellcom is included in the list of centralized parties, and in the list of significant non-financial corporations under said Law. According to said Law, DIC and IDBD must take steps to have Cellcom cease to be a “third layer” by December 2019. DIC and IDBD have announced that they are considering steps to achieve this goal without giving up control of Cellcom, by taking DIC or IDBD private or implementing a merger of DIC and IDBD. As of the date of this Annual Report, there is no certainty regarding the implementation of these strategies. The provisions of the Reduced Centralization Act regarding the allocation of rights over public assets could adversely affect the ability of Cellcom to renew its cellular licenses and to receive new frequencies, which may adversely affect Cellcom’s ability to issue debt or adversely affect its business.
a.Changes in legislation and high regulatory intervention - legislative changes and active regulatory enforcement may have an adverse influence especially if material financial sanctions are imposed on Cellcom, on the ability of Cellcom to plan its management and on its operating results, if any of the following occurs: the cancelation or relief for the obligation for structural separation applicable to Bezeq and Hot, especially if the said cancelation or easing is given prior to the establishment of the effective wholesale market in landline communications, if tariffs do not encourage competition or if other regulation is set out in the wholesale landline market which adversely affects Cellcom’s operations; the granting of relief and benefits to competitors compared with Cellcom; the authorization of other operators to provide services to Cellcom subscribers which were previously provided only by Cellcom; the non-renewal of licenses and/or frequencies available to Cellcom or the increased use thereof, and the non-location of additional frequencies, where required; the imposition of additional requirements in respect of public safety or health, including with respect to base sites; imposition of additional restrictions or requirements for providing services and products and/or intervening in market conditions; imposition of a higher standard of service; imposition of stricter privacy policies; the imposition of regulation on streaming services, the imposition of conditions which are not beneficial for the users of DTT broadcasts, or the imposition of conditions that impact Cellcom and do not apply to other operators of streaming services over the internet.
b.Labor Law. In February 2015, a collective bargaining agreement was signed with the workers representative body and with the Histadrut for a period of three years (form 2015 to 2017) which applies to all employees of Cellcom and Netvision, except members of senior management. This agreements limits the right of Cellcom to make organizational and personal changes and makes such changes more expensive as reflected in the voluntary retirement plans executed in 2014 and 2015 and may also require greater management attention to administer.
Insurance
Areas of Activity of Clal Insurance Business Holdings
Clal Holdings offers general insurance such as car insurance, homeowners’ insurance, and credit and foreign trade risk insurance, among others, as well as health insurance. The activities of Clal Holdings and its subsidiaries are subject to the provisions of laws applicable insurance companies and to regulatory supervision. Clal Holdings’ subsidiaries are supervised by the Capital Markets, Insurance and Savings Commissioner (the “Insurance Commissioner”). Clal Insurance and its subsidiary, Clalbit Financing, are supervised by the Israel Securities Authority. Subsidiaries of the Clal Holdings Insurance Group have been subject to administrative enforcement proceedings and the imposition of fines. Clal Insurance is not in breach of any material regulatory provision applicable to its operations.
Capital Requirements of Insurance Companies
Minimum Capital – The Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Capital Regulations”) law prescribes minimum capital requirements for insurance companies. The capital required for insurance activities consists of a first layer of capital, based the greater of the initial capital and capital derived from the volume of activity in general insurance, the higher of the calculation based on premiums and the calculation based on outstanding claims, as well as other capital requirements. Failure to comply with the Capital Regulations will require the insurer to increase its equity up to the amount stated in the Capital Regulations or reduce the scope of its business accordingly, no later than the date of publication of the report, except in exceptional circumstances as approved by the Insurance Commissioner, that will then determine any supplementary capital requirements.
Breakdown of an Insurer’s Capital – The Insurance Commissioner issued a circular in August 2011 (“Circular”) that provides a framework for determining the composition of an insurer’s equity, in conjunction with the adoption in Israel of the Solvency II Directive (“Directive” or “Solvency II”), as amended and updated.
·Initial (core) capital (basic tier 1), equals the components included in capital attributable to shareholders of Clal Insurance. The overall capital ratio must be at least 60% of the total equity of the insurer.
·Secondary (tier 2) capital includes complex secondary capital instruments (excluding periodic accrued interest payments), subordinate secondary capital instruments (as defined by the Circular) and any other component or instrument approved by the Insurance Commissioner. A complex secondary capital instruments is one that is subordinated to any other instrument, except for initial capital, including financial instruments available to absorb losses by postponing payment of principal and interest. The first repayment date of secondary capital instruments will be after the end of the period that reflects the weighted average maturity of insurance liabilities, plus two years, or after 20 years, whichever is first, but no earlier than eight years from the date an instrument is issued. If the complex secondary capital instrument includes an incentive for early redemption, the first incentive payment date may not be earlier than five years from the date of issue of the instrument.

·Tertiary (tier 3) capital includes complex tertiary capital instruments (excluding periodic accrued interest payments) and any other component or instrument approved by the Insurance Commissioner. A tertiary capital instrument is subordinate to any other instrument, except for primary and secondary capital, and includes financial instruments available to absorb the insurer’s losses by postponing the payment of principal. Tertiary capital will must be junior to secondary capital and equal in the order of credit repayments. The first repayment date on tertiary capital instruments may not be earlier than five years from the date of issuance. If the complex tertiary capital instrument includes an incentive for early redemption, the first indentive payment date may not be earlier than five years from the date of issue of the instrument. Tertiary capital may not exceed 15% of the total capital of the insurer.
Insurance liabilities include liabilities that are not yield dependent but excludes any liability fully backed by lifetime indexed bonds and net of any reinsurance costs. Approval of the Insurance Commissioner is required for inclusion of hybrid capital instruments (primary, secondary or tertiary) in equity. The Circular includes a Temporary Order regarding the breakdown of an insurer’s equity (“Temporary Order”), which will apply until full implementation of the Directive in Israel, when announced by the Insurance Commissioner. The Temporary Order defines the secondary capital issued according to Capital Regulations, before amendment, as subordinate secondary capital and imposes a limit equal to 50% of basic capital.
Distribution of dividends – In accordance with rules promulgated by the Insurance Commissioner, a dividend distribution may not be approved, unless, after giving pro forma effect to the proposed distribution, the insurer has a ratio of recognized equity to required equity of at least 105%, as confirmed in filings with the Insurance Commissioner. Prior approval of the Insurance Commissioner is not required for any distribution of dividends if the total equity of the insurance company, as defined by Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Minimum Capital Regulations”), after giving effect to the distribution of the proposed dividend, exceeds 115% of the required equity.
In November 2014, the Insurance Commissioner outlined solvency rules (“rules” or “regime”, as applicable) based on Solvency II, in Israel, in a letter addressed to managers of the insurance companies (“Letter”). In the Letter, the Insurance Commissioner outlined a plan to adopt the 2016 European model for calculating capital and capital requirements for the local market, effective as of the annual reports for 2016 (“First Adoption Date”). During a period to be determined by the Insurance Commissioner and as conditions require, insurance companies will also be required to comply with capital requirements under existing regulations. The Letter stated that until final adoption, insurance companies must prepare additional quantitative assessment exercises (IQIS) for the 2014 -2015 period. These requirements are intended to assess the quantitative effects of adopting the model, as well as providing data for calibrating and adjusting the model. In addition, the Letter addressed an initiative to develop a framework for quarterly reporting of insurance companies’ solvency ratio. The Letter also referred to the Commissioner’s intention to publish provisions for managing capital and targets for internal capital, to address a gap survey that insurers will undertake with respect to their risk management systems, controls and corporate governance and a consultation paper to promote the process of self-assessment of risks and solvency (ORSA).
In April 2015, the Insurance Commissioner published a second letter titled “Plan for the Adoption of Rules for Solvency, based on Solvency II” and provisions for the IQIS4 exercises to be undertaken regarding the 2014 historical financial statements. The letter emphasized that the exercise reflects the decision of the Insurance Commissioner to impose adjustments required for the Israeli insurance market. The Letter further stated in connection with the proposed adoption of IQIS5 that the Insurance Commissioner would continue to monitor developments in the European markets and would consider adjustments relevant for Israel.
In July 2015, the Insurance Commissioner issued a letter concerning “transitional provisions regarding the application of solvency rules, based on Solvency II” (the “Letter on Transitional Provisions”). The transitional provisions were provided by reference to certain solvency rules set forth in the European Directive relating to, inter alia, a gradual adoption of capital requirements in respect of holdings of equity shares which may a component to be included in the calculation of core capital. In addition, the letter included transitional provisions regarding submission of a plan to improve the capital ratios of insurance companies whose ratios are negatively affected following adoption of the new solvency rules beginning with the financial statements for 2018. Adoption of the solvency rules are expected to change both the recognized regulatory and required regulatory capital and according to indications existing today, is expected to result in a significant decline in the ratio between recognized capital and required capital of Clal Insurance compared to capital ratios calculated according to capital ratio requirements currently in effect, and is expected to adversely affect the ability of Clal Insurance and Clal Insurance Enterprises to distribute dividends upon such adoption. However, as a rule, the capital requirements under the solvency rule are intended to serve as a capital cushion against more serious events, with a lower loss probability than the capital requirements under current rules.
In May 2015, the Board of Directors of Clal Insurance Enterprises and the Board of Directors of Clal Insurance directed its management team and the Risk Management Committee, which also functions as the Solvency Committee (“Committee”), to examine measures Clal Insurance may be able to employ to improve its capital ratio, in accordance with the new solvency rules and to recommend a course of action to the Board, including in relation to business adjustments and/or financial transactions related to Clal Insurance’s capital, its breakdown, and/or its responsibilities. The Committee and Management have begun this examination, and during the first stage, recommended that the Board issue secondary capital instruments. The Committee will continue to examine other measures in an effort to prepare the company for possible adoption of these proposed capital requirements, and related measures.
Clal Insurance has calculated its capital ratio using results as of December 31, 2014 (“Calculation Date”) and based on the IQIS4 rules and has determined that it would be in compliance, as of the Calculation Date, with the proposed capital requirements, in the context of the transitional provisions, even before taking pro forma account of the positive impact on the capital ratio provided by the subsequent issuance of subordinated notes. The related calculations were submitted to the Insurance Commissioner on August 31, 2015. The Insurance Commissioner has not yet published binding provisions for adoption, and there is uncertainty regarding the details of the final provisions. Clal Insurance will continue to monitor the quantitative aspects of the proposed solvency rules towards final adoption, in an effort to anticipate requisite controls and capital requirements.
On March 14, 2016, “IQIS Provisions for 2015” (“Draft”) was published in preparation for the adoption of Solvency II. Insurance companies are required to submit an additional quantitative evaluation survey on the basis of December 2015 results (“IQIS5”), by June 30, 2016. The Draft was issued by reference to the European legislation adapted for requirements of the local market and that goes beyond provisions for quantitative evaluation surveys previously issued. The main changes relate to establishing risk-free interest curves, through extrapolation to the ultimate forward rate point, the components of recognized capital, capital requirements less investments in infrastructure (capital and debt), adjusting capital requirements for management companies, and updating the formula for calculating capital requirements for risk premiums and reserves for general insurance. Clal Insurance is unable to assess the overall impact of the changes based on the provisions in the Draft to carry out a further quantitative evaluation survey, and will carry out an assessment of the current capital status, when the binding provisions will be finalized. According to the Draft, the IQIS5 calculation will be a factor in assessing preparedness of insurance companies and to the implementation and scope of the final provisions to be adopted.
Capital requirements under the Capital Regulations are based on the separate individual financial statements of an insurance company. For purposes of calculating recognized capital, an investment by an insurance company in an insurance company or a controlled management company, and in other investee companies will be calculated on the equity basis, according to a holding rate, which includes indirect holdings.
The minimum capital required of Clal Insurance has been reduced, with approval of the Insurance Commissioner, by 35% of the original difference attributed to the managing companies and provident funds under its control. However, when calculating the amount of dividends permitted for distribution, this difference will be added at level of the capital structure, as detailed in Paragraph 13.7.3 (C). In September 2013, the Insurance Commissioner notified Clal Insurance that the deducted amount to be added back to the minimum capital required, will be after a deduction for a tax reserve accrued by Clal Insurance following the acquisition of provident fund operations. The approval of the Insurance Commissioner, as noted above, will be canceled with adoption of capital requirements under the Directive (see Paragraph 13.7.3 (C)) that will replace the Capital Regulations.
In March 2013, Clal Insurance received a letter from the Insurance Commissioner regarding the determination of credit ratings according to an internal model used by Clal Insurance (“internal model”), to be applied as a risk rating methodology for a subject insured, according to conditions of the relevant sector. The Insurance Commissioner authorized Clal Insurance to allocate capital for adjusted loans, ranked according to its internal model and with reference to the rates specified in the Capital Regulations. If there is an external rating available, the capital allocation will be made using the lower of the available ratings. The letter also requires Clal Insurance to submit immediate and periodic reports as specified regarding these activities that make the specified transactions subject to review by the Commissioner of Insurance. As a result of its compliance with the provisions of the letter, Clal Insurance’s capital requirements were reduced by NIS 69 million, as at the end of the reporting period.

Permit Issued by the Insurance Commissioner to the Former Controlling Shareholders of IDB Holdings to Retain Control of Clal Insurance Enterprises and Consolidated Institutional Entities
On May 8, 2014, legal counsel for the former controlling shareholders of IDB Development (Ganden, Manor, and Livnat Groups) was notified by the Commissioner that in the context of arrangements among the creditors of IDB Holdings (“IDBH”), and given that they no longer controlled the Clal Insurance Enterprises Group, the authorization previously issued by the Insurance Commissioner for control of these entities was terminated, including, with respect to Clal Insurance, Clal Credit Insurance and Clal Pension and Provident Funds. IDB Holdings undertook to supplement (or to cause its controlled affiliates to supplement) the required equity of the insurers in compliance with the Capital Regulations, subject to the a cap of 50% of the required capital of an insurer, and that the obligation will take effect only if the insurer’s equity is determined to be negative, and such funding amount will then be equal to the amount of negative capital, up to the 50% cap.
In addition, IDB Holdings undertook to contribute to the equity of Clal Pension and Provident Funds up to the amount prescribed by the Provident Fund Regulations, for as long as IDB Holdings is the controlling shareholder of the institutional entities. The authorization specifies conditions and imposes restrictions on the ability of a holding entity to impose liens on the equity of IDBD’s institutional entities it holds. The former controlling shareholders were also required, as long as any liens existed on their equity interest of IDB Holdings, to ensure that Clal Insurance Enterprises complied with applicable capital requirements, such that the equity of Clal Insurance Enterprises at no time was less than the product of the holding rate of Clal Insurance Enterprises in Clal Insurance and 140% of the required minimum equity of Clal Insurance, calculated according to the Capital Regulations on September 30, 2005 (as the holding rate was linked to the CPI of September 2005).
At the end of the reporting period, the required minimum capital of Clal Insurance Enterprises was NIS 2.9 billion, greater that the amount required based on the foregoing calculation. The capital requirement is calculated on the basis of the financial statements of Clal Insurance Enterprises. Following termination of the control authorization, the former controlling shareholders have questioned whether the capital requirements applicable to Clal Insurance Enterprises thereunder continue to apply.
Clal Insurance is committed to finding a strategy to supplement its required equity in compliance with the Capital Regulations if the equity of Clal Credit Insurance becomes negative, and as long as Clal Insurance is the controlling shareholder of Clal Credit Insurance. Clal Insurance is committed to supplement the equity of Clal Pension and Provident Funds as necessary to ensure it complies with the minimum amount required by Income Tax Regulations (Rules for Approval and Management of Provident Funds), 1964 (“Income Tax Regulations”). This commitment is valid as long as Clal Insurance controls, directly or indirectly, Clal Pension and Provident Funds.
In February 2012, Supervision of Financial Services Regulations (Provident Funds) (Minimum Capital Required of a Management Company of a Provident Fund or Pension Fund), 2012, was published along with Income Tax Regulations (Rules for Approval and Management of Provident Funds) (Amendment 2), 2012 (“new regulations”).
Pursuant to the new regulations, the capital requirements for management companies were expanded to include capital requirements based on the volume of assets under management and applicable annual expenses, but not less than the initial capital of NIS 10 million. In addition, liquidity requirements were also prescribed. A fund management company may distribute dividends only to the extent of any excess above the minimum amount of equity required by said regulations. In addition, a fund management company must provide additional capital in respect of controlled management companies. As at the end of the reporting period, the management companies controlled by Clal Insurance have capital balances in excess of the minimum capital required by the capital regulations for management companies. In light of capital regulations for management companies and in order to finance the expansion of operating and investing activities of Clal Pension and Provident Funds, the Boards of Directors of Clal Insurance and Clal Pension and Provident Funds in 2015 and 2014 approved an subscribed shares of Clal Pension and Provident Funds in consideration for NIS 100 million and NIS 80 million, respectively.
Anti-Money Laundering. In September 2015, a draft Anti-Money Laundering Order was proposed which seeks to expand its application to certain provident funds, and reduced the amounts of accumulations, deposits and withdrawals subject to reporting. Furthermore, the draft order specifies a ‘know your customer’ process that must be undertaken before issuing a life insurance policy or opening a provident fund. In October 2015, a draft addendum to the Anti-Money Laundering Law, 5776-2015 was published to provide for changes to existing law that set forth stricter criminal penalties under the Anti-Money Laundering Law and set forth provisions for sharing of information between the Anti-Money Laundering Authority and the insurance commissioner. In the evaluation of Clal Insurance, the draft order and draft bill may adversely affect the sale of its products.

 
Subsidiaries and associated companies
 
The following table includes a description of our subsidiaries and associated companies as of June 30, 2015:2016:
 
Subsidiaries Effective Ownership and Voting Power Percentage Property/Activity
     
Agro Managers S.A  46.84%Agro Managers S.A. is engaged in doing by itself or on behalf of third parties investments in the country or overseas through long and short term loans with or without  warranties, derivatives, stocks and commodities as well as any kind of debentures or credit notes.
Agro-Uranga S.A  35.72%Agro-Uranga S.A. is an agricultural company which owns 2 farmlands (Las Playas and San Nicolás) that have 8.299 hectares on the state of  Santa Fe and Córdoba.
Agropecuaria Acres del Sud S.A.  100%(1)Agropecuaria Acres del Sud SA is principally engaged in the trading of agricultural products and by-products, and the acquisition/sales, leasing and construction of urban and rural properties.
Alafox  100%(2)Alafox S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Brasilagro Companhia Brasileira de Propiedades Agrícolas  39.76%(3)Brasilagro is mainly involved in four areas: sugar cane, crops and cotton, forestry activities, and livestock.
Codalis  100%(2)Codalis S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Doneldon  100%Doneldon S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Futuros y Opciones.Com S.A.  59.59%A leading agricultural web site which provides information about markets and services of economic and financial consulting through the Internet. The company has begun to expand the range of commercial services offered to the agricultural sector by developing direct sales of supplies, crops brokerage services and cattle operations.
      
FyO Trading S.A.  59,63%FyO Trading S.A.’s purpose is to engage, in its own name or on behalf of or associated with third parties, in activities related to the production of agricultural products and raw materials, export and import of agricultural products and national and international purchases and sales of agricultural products and raw materials.
Granos Olavarria S.A.  59,63%(4)Granos Olavarría S.A. is principally engaged to the warehousing of cereals and brokering of grains.
      
Helmir S.A.  100%Helmir S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and to the management and administration of the capital stock it owns on companies controlled by it.
IRSA Inversiones y Representaciones Sociedad Anónima  64.30%(3)It is a leading Argentine company devoted to the development and  management of real estate.
      
Ombú Agropecuaria S.A  100%(5)Ombú Agropecuaria S.A  is principally engaged in the trading of agricultural products and by-products, and the acquisition/sales, leasing and construction of urban and rural properties.
Sedelor  100%(2)Sedelor S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Sociedad Anónima Carnes Pampeanas S.A.  (formerly known as Exportaciones Agroindustriales Argentinas S.A.)  100% (6)Sociedad Anónima Carnes Pampeanas, a company that owns a cold storage plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,500 cattle head per month.
 
Yatay Agropecuaria S.A  100%(7)Yatay Agropecuaria S.A is principally engaged in the trading of agricultural products and by-products, and the acquisition/sales, leasing and construction of urban and rural properties.
Yuchán Agropecuaria S.A  100%(8)Yuchán Agropecuaria S.A is principally engaged in the trading of agricultural products and by-products, and the acquisition/sales, leasing and construction of urban and rural properties.
Subsidiaries
Effective Ownership and Voting Power Percentage
Property/Activity
Agro Managers S.A 
46.84%Agro Managers S.A. is engaged in doing by itself or on behalf of third parties investments in the country or overseas through long and short term loans with or without warranties, derivatives, stocks and commodities as well as any kind of debentures or credit notes.
Agro-Uranga S.A 
35.72%Agro-Uranga S.A. is an agricultural company which owns 2 farmlands (Las Playas and San Nicolás) that have 8.299 hectares on the state of Santa Fe and Córdoba.
Brasilagro Companhia Brasileira de Propiedades Agrícolas
39.76%(1)
Brasilagro is mainly involved in four productive activities: sugarcane, crops and cotton, forestry activities, and livestock.
Doneldon 
100%Doneldon S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Futuros y Opciones.Com S.A.59.59%A leading agricultural web site which provides information about markets and services of economic and financial consulting through the Internet. The company has begun to expand the range of commercial services offered to the agricultural sector by developing direct sales of supplies, crops brokerage services and cattle operations.
Agrofy S.A. 
45.23%
Agrofy S.A. is involved in the creation, operation, development, management, buying and selling of websites and domain names on the Internet.
Amauta Agro S.A. 
59,63%Amauta Agro S.A.’s purpose is to engage, in its own name or on behalf of or associated with third parties, in activities related to the production of agricultural products and raw materials, export and import of agricultural products and national and international purchases and sales of agricultural products and raw materials.
Granos Olavarria S.A. 
59,63%(2)
Granos Olavarría S.A. is principally engaged to the warehousing of cereals and brokering of grains.
Helmir S.A. 
100%Helmir S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and to the management and administration of the capital stock it owns on companies controlled by it.
IRSA Inversiones y Representaciones Sociedad Anónima
63.77%(1)
IRSA is a leading Argentine company devoted to the development and  management of real estate.
Sociedad Anónima Carnes Pampeanas S.A.  (formerly known as Exportaciones Agroindustriales Argentinas S.A.)
100%(3)
Sociedad Anónima Carnes Pampeanas, a company that owns a cold storage plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,500 cattle head per month.
 
(1) Includes Doneldon’s, Alafox´s Sedelor´s and Helmir's interest.
(2) Corresponds to Doneldon´s interest.
(3) Excludes effect of treasury stock.
(4)(2) Includes Futuros y Opciones.Com S.A.’s interest.
(5)(3) Includes Codalis’s, Alafox´s and Sedelor´sHelmir’s interest.
(6) Includes Helmir's interest.
(7) Includes Doneldon’s, Sedelor’s, Codalis’s and Helmir's  interest.
(8) Includes Doneldon’s, Alafox’s and Codalis’s interest.

 
92103

 

 
Overview of Agricultural PropertiesControl Systems
 
As of June 30, 2015, we owned, together with our subsidiaries, 31 farmlands, which have a total surface area of 622,220 hectares.
The following table sets forth our properties’ size (in hectares), primary current use and book value. The market value of farmland is generally higher the closer a farmland is located to Buenos Aires:
Owned Farmlands as of June 30, 2015 
  FacilityProvinceCountry Gross Size  Date of Acquisition Primary Current Use Net Book Value 
      (in hectares)      
(Ps. Millions) (1)
 
               
 1 El RecreoCatamarcaArgentina  12,395  May 95 Natural woodlands  1.3 
 2 Los PozosSaltaArgentina  239,639  May ’95 Cattle/ Agriculture/ Natural woodlands  152.6 
 3/4 
San Nicolás/Las Playas (2)
Santa Fe/CórdobaArgentina  2,966  May ‘97 Agriculture/ Dairy  20.0 
 5/6 La Gramilla/ Santa BárbaraSan LuisArgentina  7,072  Nov ‘97 Agriculture Under irrigation  44.9 
 7 La SuizaChacoArgentina  36,380  Jun ‘98 Agriculture/ Cattle  43.7 
 8 La EsmeraldaSanta FeArgentina  9,370  Jun ‘98 Agriculture/ Cattle  16.3 
 9 El TigreLa PampaArgentina  8,360  Apr ‘03 Agriculture/ Dairy  34.2 
 10 El InviernoLa PampaArgentina  1,946  Jun ‘05 Agriculture  9.2 
 11 San PedroEntre RiosArgentina  6,022  Sep ‘05 Agriculture  49.0 
 12/13 8 De Julio/ Estancia CarmenSanta CruzArgentina  100,911  May ‘07/ Sep ‘08 Sheep  11.0 
 14 Administración CactusSan LuisArgentina  171  Dec ‘97 Natural woodlands  1.5 
 15 Las VertientesCordobaArgentina  4   - Silo  0.7 
 16 La EsperanzaLa PampaArgentina  980  Mar ‘08 Agriculture  4.3 
 17 Finca MendozaMendozaArgentina  389(5) Mar ‘11 Natural woodlands  0.1 
 18 Establecimiento MendozaMendozaArgentina  9  Nov’03 Natural woodlands  6.8 
19/20/21/22 Las Londras/San Rafael/ Cuatro Vientos/ La PrimaveraSanta CruzBolivia  12,533  Nov-08/Jan-11 Agriculture  281.9 
23/24/25 
Jeroviá/Marangatú/Udra (3)
Mariscal  EstigarribiaParaguay  58,754  Feb-09 Agriculture /Natural Woodlands  214.2 
 26/31 
Brasilagro(4)
 Brazil  124,319       Agriculture /Forestry /Cattle  968.0 
   Subtotal    622,220        1,859.7 

(1)Acquisition costs plus improvements and furniture necessary for the production, less depreciation.
(2)Hectares and carrying amount in proportion to our 35.72% interest in Agro-Uranga S.A.
(3)Hectares and carrying amount in proportion to our 50.00% interest in Cresca through Brasilagro.
(4)See the section “Overview of Brasilagro’s Properties”.
(5)Corresponds to our 40% ownership of Establecimiento Mendoza.

Overview of Brasilagro’s Properties
As of June 30, 2015, we owned, together with our subsidiaries, 6 farmlands, which have a total surface area of 124.319 hectares, acquired at a highly convenient value compared to the average of the region, all of them with a great appreciation potential.
   Total Area   Net Book Value 
PropertiesPlace (ha) Use (Ps. Millions) 
Jatobá FarmlandJaborandi/BA  31,606 Agriculture  227.5 
Alto Taquari FarmlandAlto Taquari/MT  5,395 Agriculture  110.7 
Araucária FarmlandMineiros/GO  8,124 Agriculture  190.6 
Chaparral FarmlandCorrentina/BA  37,183 Agriculture  259.9 
Nova Buriti FarmlandJanuária/MG  24,212 Forestry  72.7 
Preferência FarmlandBarreiras/BA  17,799 Cattle  106.6 
 Subtotal Brazil  124,319    968.0 
           
Jeroviá/Marangatú/UdraMariscal Estigarribia, Paraguay  58,754 Agriculture /Natural Woodlands  214.2 
           
           
 Total  183,073    1,182.1 
           

Overview of Urban properties and investment business
As of June 30, 2015, most of our property  was located in Argentina. We lease our headquarters, located at Bolívar 108, (C1066AAB) Ciudad Autónoma de Buenos Aires. We do not currently lease any material properties other than our headquarters.

93


The following table sets forth certain information about our properties as of June 30, 2015:
Property (6)
 Date of Acquisition  
Leasable/ Sale m2(1)
 Location 
Net Book Value Ps.(2)
  Encumbrance  Outstanding principal amount Ps./000  Maturity Date  
Balance due at maturity
Ps./000
  Rate Use 
Occupancy rate (7)
 
Intercontinental Plaza(9)
 18/11/1997   22,535 City of Buenos Aires  48,783   -   -   -   -   - Office Rental  100.0%
Bouchard 710 01/06/2005   15,014 City of Buenos Aires  82,044   -   -   -   -   - Office Rental  100.0%
Bouchard 551 15/03/2007   - City of Buenos Aires  8,226   -   -   -   -   - Office Rental  100.0%
Libertador 498 20/12/1995   620 City of Buenos Aires  4,511   -   -   -   -   - Office Rental  100.0%
Maipú 1300 (10)
 28/09/1995   4,759 City of Buenos Aires  18,366   -   -   -   -   - Office Rental  90.9%
Madero 1020 21/12/1995   - City of Buenos Aires  120   -   -   -   -   - Office Rental  100.0%
Suipacha 652 22/11/1991   11,453 City of Buenos Aires  13,711   -   -   -   -   - Office Rental  96.7%
República Building 28/04/2008   19,885 City of Buenos Aires  195,539   -   -   -   -   - Office Rental  93.6%
Dique IV, Juana Manso 295 02/12/1997   11,298 City of Buenos Aires  56,266   -   -   -   -   - Office Rental  99.5%
Torre Bank Boston 27/08/2007   14,873 City of Buenos Aires  134,924   -   -   -   -   - Office Rental  100%
Terreno Catalinas Norte 17/12/2009   N/A City of Buenos Aires  109,496   -   -   -   -   - Other Rentals  N/A 
Dot Building (3)
 28/11/2006   11,242 City of Buenos Aires  126,365   -   -   -   -   - Office Rental  100.0%
Other Properties (5)
 N/A   N/A City of Buenos Aires  83,105   -   -   -   -   - Other Rentals  N/A 
Alto Palermo Shopping (3)
 23/11/1997   19,545.0 City of Buenos Aires  221,506   -   -   -   -   - Shopping Center  99.7%
Abasto Shopping (3)
 17/07/1994   36,669.1 City of Buenos Aires  271,860   -   -   -   -   - Shopping Center  100%
Alto Avellaneda (3)
 23/11/1997   36,728.6 Province of Buenos Aires  131,850   -   -   -   -   - Shopping Center  99.9%
Paseo Alcorta (3)
 06/06/1997   15,432.9 City of Buenos Aires  115,950   -   -   -   -   - Shopping Center  100%
Patio Bullrich (3)
 01/10/1998   11,636.2 City of Buenos Aires  106,248   -   -   -   -   - Shopping Center  100%
Alto Noa (3)
 29/03/1995   19,072.9 City of Salta  31,316   -   -   -   -   - Shopping Center  100%
Buenos Aires Design (3)
 18/11/1997   13,888.2 City of Buenos Aires  12,930   -   -   -   -   - Shopping Center  94.6%
Alto Rosario(3)
 09/11/2004   28,395.6 City of Rosario  115,908   -   -   -   -   - Shopping Center  97.9%
Mendoza Plaza Shopping (3)
 02/12/2004   42,039.5 City of Mendoza  102,781   -   -   -   -   - Shopping Center  96.1%
Córdoba Shopping – Villa Cabrera (3)
 31/12/2006   15,328.0 City of Cordoba  56,451  Hipoteca -Anticresis   1.4  Ene-17   3.3  Libor+1.5%+CER Shopping Center  99.8%
Dot Baires Shopping (3)
 01/05/2009   49,847.9 City of Buenos Aires  382,624   -   -   -       - Shopping Center  99.7%
Soleil Factory (3)
 01/07/2010   13,993.1 Province of Buenos Aires  84,301   -   -   -   -   - Shopping Center  99.4%
Alto Comahue (3)
 06/07/1999   9,456.9 Province of Neuquen  309,959   -   -   -   -   - Shopping Center (in construction)  94.2%
Distrito Arcos (3)
 01/12/2011   12,127.3 City of Buenos Aires  229,800   -   -   -   -   - Shopping Center (in construction)  97.3%
Santa María del Plata 10/07/1997   716,058 Province of Buenos Aires  222,787   -   -   -   -   - Land Reserve  N/A 
Patio Olmos (3)
 25/09/2007   5,147 City of Cordoba  27,319   -   -   -   -   - Land Reserve  N/A 
Caballito Plot of Land 11/03/1997   8,173 City of Buenos Aires  49,697   -   -   -   -   - Land Reserve  N/A 
Other Land Reserve (4)
  N/A   14,388,622 City and Province of Buenos Aires.  38,868   -   -   -   -   - Land Reserve  N/A 
Luján (3)
 31/05/08   1,160,000 Province of Buenos Aires.  24,291   -   -   -   -   - Land Reserve  N/A 
Hotel Llao Llao 01/06/1997   24.000 Ciudad de Bariloche  84,047   -   -   -   -   - Hotel  51.37%
Hotel Intercontinental 01/11/1997   37.600 City of Buenos Aires  56,140   -   -   -   -   - Hotel  68.74%
Hotel Libertador 01/03/1998   17.463 City of Buenos Aires  31,690   -   -   -   -   - Hotel  N/A 
(1) Total leasable area for each property. Excludes common areas and parking spaces.
(2) Cost of acquisition or development plus improvements, less accumulated depreciation, less allowances.
(3) Through IRSA Commercial Properties.
(4) Includes the following land reserves: Pontevedra plot; Isla Sirgadero; Mariano Acosta, San Luis and Merlo (through IRSA) and Intercontinental Plot (through IRSA Commercial Properties).
(5) Includes the following properties: Anchorena 665, Zelaya 3102, 3103 y 3105, Rivadavia 2768, Constitución 1111, Santa Maria del Plata, Puerto Retiro Plots 50%, Rio Parcel 50%, Libertador Parcel 50%.
(6) All assets are owned by us or through any our subsidiary.
(7) Percentage of occupation of each property. The land reserves are assets that the company remains in the portfolio for future development.
(8) During May, 2015, IRSA reported that, through IRSA Commercial Properties owns computer systems to monitor tenants’ sales (except stands) in all of its shopping centers. IRSA CP also conducts regular manual audits of its tenants accounting sales records in all of its shopping centers. Almost every store in those shopping centers has signed an agreement to transfera point of sale that is linked to a non related party 8,470 sqm correspondingmain computer server in the administrative office of such shopping center. IRSA CP  uses the information generated from the computer monitoring system for statistics regarding total sales, average sales, peak sale hours, etc., for marketing purposes and as a reference for the processes of internal audit. The lease contracts for tenants in Alto Avellaneda, Alto Palermo, Alcorta Shopping, Patio Bullrich, Buenos Aires Design, Abasto, Alto Rosario, Alto NOA, Dot Baires Shopping, Córdoba Shopping, Soleil Premium Outlet, La Ribera Shopping, Mendoza Plaza, Distrito Arcos and Alto Comahue contain a clause requiring tenants to nine office floors andbe linked to the sign of the deed and the delivery of the units was on June 30, 2015. During September, 2015, IRSA sold through IRSA Commercial Properties seven floors of Intercontinental Plaza, for more information please see “Item 4. Recent Developments.”
(9) Includes Ps. 21,900 thousand of Book Value that correspondscomputer monitoring system, there being certain exceptions to “Terreno Bariloche.”
(10)During November, 2015, IRSA sold two office floors and four units of parking space of Maipú 1300, for more information please see “Item 4. Recent Developments.”
this requirement.
 


94


Insurance
 
Agricultural Business
We carry insurance policies with insurance companies that we consider to be financially sound.
We employ multi-risk insurance for our farming facilities and industrial properties, which covers property damage, negligence liability, fire, falls, collapse, lightning and gas explosion, electrical and water damages, theft, and business interruption.
Such insurance policies have specifications, limits and deductibles which we believe are customary. Nevertheless, they do not cover damages to our crops.
We carry directors and officer’s insurance covering management’s civil liability, as well as legally mandated insurance, including employee personal injury.
We also provide life or disability insurance for our employees as benefits.
We believe our insurance policies are adequate to protect us against the risks for which we are covered. Nevertheless, some potential losses are not covered by insurance and certain kinds of insurance coverage may become prohibitively expensive.
The types of insurance used by us are the following:
Insured PropertyRisk Covered 
Amount Insured
(in Thousand of
  
Book Value
(in Thousand of
 
   Ps.)  Ps.) 
Buildings, machinery, silos, installation and furniture and equipmentTheft, fire and technical insurance  327,729   475,346 
VehiclesTheft, fire and civil and third parties liability  17,546   6,387 

Urban properties and investment business
IRSA carries insurance for directors and officers covering management’s civil liability, as well as legally mandated insurance, including employee personal injury. IRSA does not provide life or disability insurance for its employees as benefits. IRSA believes its insurance policies are adequate to protect it against the risks for which it is covered. Nevertheless, no assurances can be given that the insurance amount purchased by IRSA will be enough to protect itself from significant losses. See “Risk Factors - Risks Relating to IRSA’s Business.”
IRSA carries all-risk insurance for itsthe shopping centers and other buildings covering damages to the property damage caused by fire, explosion, gas leak, hail, stormstorms and winds,wind, earthquakes, vandalism, theft and business interruption. IRSA also has civilIn addition, we carry liability insurance covering allany potential damagesdamage to third parties or goods arising fromproperty caused by the developmentconduct of its businessesour business throughout the whole Argentine territory. IRSA isArgentina. We are in compliance with all the legal requirements relatingrelated to mandatory insurance, including statutory coverage underinsurance required by the Occupational Risk Law (Ley de Riesgos del Trabajo), life insurance required under collective bargaining agreements and other insurance required by the laws and decrees. Itsexecutive orders. Our history of damages is limited to only one single claim made as a resultresulting from a fire in Alto Avellaneda Shopping in March 2006, ina loss which the loss was substantially recovered from itsour insurers. These insurance policies have all thecontain specifications, limits and deductibles that are customary in the market and which IRSA believeswe believe are adequate forto the risks to which we are exposed in our daily operations. We further maintain liability insurance covering our directors’ and corporate officers’ liability.
Operations Center in Israel
IDBD is a holding company that invests, either directly or through its subsidiaries, associates and joint ventures in companies that operate in various sectors of the economy in Israel. IDBD is directly affected by the political, economic, military and regulatory conditions of Israel. The main regulations applicable to IDBD’s business are described below. For more information, see “Risk Factors– Risks related to IDBD and IDBD’s subsidiaries.”
General regulations applicable to our business in Israel
Proper Conduct of Banking Business
IDBD and certain of its affiliates are subject to supervision by the Israeli Supervisor of Banks relating to “Proper Conduct of Banking Business” which impose, among others limits on the aggregate principal amount of loans a financial institution can have outstanding to a single borrower, a group of related borrowers, and to the largest borrowers and groups of related borrowers of a banking entity (as these terms are defined in the aforesaid directives). IDBD, its controlling shareholders and its affiliates are considered a single group of borrowers for purposes of this regulation. These restrictions limit the ability of IDBD and its affiliates to borrow from a single bank in Israel, their ability to make investments where they require bank lines of credit, to invest in companies that have loans outstanding from banks in Israel, and to make business transactions together with groups that have such credit outstanding. In the period from 2013 and until the date of publication of the report, the concentration of credit risk of IDBD and its affiliates decreased as a result of a reduction in the amount of utilized credit for the group that includes IDBD, including as a result of a change of control that resulted in a re-characterization of the group for purposes of applicable regulation.

Reduced Centralization Act
In December 2013, the official “Reshumot” published in Israel the Promotion of Competition and Reduction of Centralization Law, N° 5774-2013 (the “Reduced Centralization Act ”) pursuant to which a pyramidal structure (or multiholding companies) of control in “reporting entities” (principally entities whose securities are held by public shareholders) is limited to two layers of reporting entities (with the holding company in the first layer not including a reporting entity that has no controlling shareholder). For this purpose, on the date of publication of the law in Reshumot, IDBD was considered a second-tier company and Discount Investments was considered a third-tier company, and as such, Discount Investments would not have been permitted to continue to control the operating companies after December 2019. As a result of the change in control of IDBD, IDBD and Discount Investments are no longer considered as second and third-tier companies, respectively, for the purpose of the Law. If Discount Investments is considered a second-tier company, it would be required by December 2019 at the latest, to cease controlling entities with publicly held securities.
In connection with evaluating the application of the Law, in August 2014, IDBD’s Board of Directors appointed an advisory committee to examine various alternatives to address the implications of the Law to comply with the provisions that apply to control in a pyramid structure (or multiholding companies) in order to enable continued control of IDBD and/or Discount Investments in “other tier companies” (currently held directly by Discount Investments) as of December 2019. The advisory committee has recommended the following alternatives:
(a)  
Taking either IDBD or Discount Investments private thereby removing the requirement that they be reporting entities (and as a result not a “tier company”); and
(b)  
Merge IDBD and Discount Investments.
The Board of Directors of Discount Investments has appointed an advisory committee with a similar function. As of the date of this Annual Report, no specific alternatives have been identified. The implementation of an alternative that would be adopted is likely to take several years.
Based on these analyses, IDBD considers it more likely that the completion of one of the specified alternatives will be adopted to comply with the restrictions of the Law regarding pyramidal holdings, while allowing IDBD to continue to control Discount Investments, and Discount Investments to continue to control Cellcom after December 2019. PBC, which currently is a third-tier company that controls each of Gav-Yam, Ispro and Mehadrin, has preliminarily evaluated application of the Law on its holding structure and determined that it will be able to maintain said control, as it has concluded that the Law has no effect over its financial statements.
IDBD, as a first-tier company, and Discount Investments, as a second-tier company, are not required to designate independent directors to their respective boards of directors or to appoint outside directors as required by the Law.
Pursuant to the provisions of the Law, the boards of directors of Cellcom, PBC, Elron, Gav-Yam, Ispro and Mehadrin, include a majority of independent outside directors. In June 2014, the Promotion of Competition and Reduction of Centralization (Classification of a Company as a Tier Company) Regulations, N° 5774-2014, came into effect, as part of which exemptions were provided for certain “third-tier” entities from changing the composition of their boards of directors to comply with the Reduced Centralization Act. Pursuant to this law and the Promotion of Competition and Reduction of Centralization (Concessions Regarding the Number of Outside directors) Regulations, N° 5774-2014, and in view of the number of directors who may be appointed with the consent of the Bronfman-Fisher Group (per the terms of the shareholders’ agreement between it and Discount Investments), the Board of Directors of Shufersal includes a majority of independent outside directors. In this context, in August 2014, Discount Investments entered into an agreement with an affiliate of the Bronfman-Fisher (which at the time held approximately 19% of the share capital of Shufersal), pursuant to which Discount Investments will vote in favor of the four directors designated by Bronfman-Fisher at the meeting of shareholders of Shufersal (out of a board of fifteen members), for so long as it holds the minimum defined percentage of the share capital of Shufersal, although Discount Investments reserves the right to object to any candidate on reasonable grounds.
These arrangements will be in effect so long as the restrictions of section 25(d) to the Reduced Centralization Act apply to Shufersal. Accordingly, Discount Investments, which as of December 31, 2015, owned approximately 53% of Shufersal’s share capital, is effectively able to appoint the majority of the members of Shufersal’s Board of Directors.
The Reduced Centralization Act includes provisions relating to a separation between significant affiliates and significant financial institutions. Consequently, so long as IDBD will be a significant operating entity, after December 11, 2019, IDBD will not be able to control Clal Insurance and additional financial affiliates within the Clal Holdings Insurance Enterprise Group or to hold more than 10% of the equity of any such entity (or more than a 5% stake in such an entity if it is exposedregarded as an insurer without a controlling shareholder).
In May 2015, updated lists were published on the website of the Ministry of Finance and the official gazette in connection with the Reduced Centralization Act, which includes a list of the centralization factors, the list of the significant corporations and a list of the significant financial institutions. In accordance with the provisions of the Reduced Centralization Act, a substantial financial institution or a significant real corporation will be deemed as a centralization factor that subjects these entities to the provisions of the Reduced Centralization Act, as well as any entity that is part of a business group that includes a significant financial entity or a significant real corporation. IDBD and its controlling shareholders (Eduardo Elsztain and entities through which he holds his interest in IDBD) and the companies of IDBD (including Discount Investments, Cellcom, PBC, Shufersal, Adama, Clal Holdings Insurance Enterprises, IDB Tourism, Noya Oil and Gas Explorations Ltd. and companies under the control of these companies) were included in the list of centralization factors, and these entities, except for Adama (excluding Eduardo Elsztain himself), were also included in the list of significant corporations. In addition, companies of Clal Holdings Insurance Enterprises, including Clal Insurance (except Clal Holdings Insurance Enterprises) and Epsilon Investment House Ltd. (held by Discount Investments) were also included in the list of the significant financial institutions.
Insofar as Clal Holdings Insurance Enterprises will continue to be considered a significant real entity, this may affect its ability to retain control of Clal Insurance, directly or indirectly after December 2019, which may adversely affect its ability to appoint joint directors in both of the companies (Clal Holdings Insurance Enterprises and Clal Insurance).
In light of the directives issued by the Commissioner in connection with the appointment of a trustee for holding control in Clal Holdings Insurance Enterprises, which currently are held by IDBD and considering the letter issued by the Commissioner on December 30, 2014 pursuant to which IDBD is required to sell its control shares in Clal Holdings Insurance Enterprises, Clal Holdings Insurance Enterprises has appealed to the Concentration Committee in connection with its classification as a significant real entity.
In November 2014, IDBD’s Board of Directors resolved, subject to requisite corporate approvals, to promote a consolidation of management functions at IDBD and Discount Investments, in order to achieving costs savings. In this regard, on March 29, 2016, IDBD’s Board of Directors approved the terms of office and of employment of Mr. Shalom Lapidot to be chief executive officer of both IDBD and Discount Investments, which was subsequently approved by the compensation committee of Discount Investments. The term of office of Mr. Lapidot is subject to approval of a general meeting of shareholders of Discount Investments.
Regulations applicable to each of the businesses in Israel
Real Estate
In recent years, there has been continued shortage in manpower in the construction and agricultural industries which typically are labor intensive and depend on foreign workers, including in the areas of Judea and Samaria. The security situation in Israel, as well as the shutdown of Judea and Samaria during certain periods of the year, have resulted in continued shortage in the workforce, driven by lower numbers of foreign workers from Judea and Samaria. In July 2015, the Minister of Finance increased the quota of foreign work permits to approximately 20,000 through the end of 2016, as a means to achieving the goal of increasing new construction projects by 70,000 during the year and to promote new housing starts to alleviate the housing crisis. Given the shortage of skilled workers, wages increased in general and in particular those of foreign construction workers. The shortage and unavailability of a skilled workforce, increased construction costs and resulted in longer timetables for the execution of new projects.

Supermarkets
Labor Law
The retail sector activities of Shufersal are subject to labor laws including the Employment of Workers by Human Resources Subcontractors Law, 5756-1996, the Extension Order in the Matter of Contract Workers in the Cleaning Branch in the Private Sector, the Minimum Wage Law, 5747-1987 and the Increased Enforcement of Labor Laws Law, 5772-2011. As of December 31, 2015, Shufersal employed approximately 1,000 workers, all of which are subject to minimum wage requirements. The majority of Shufersal’s employees are parties to a collective bargaining agreement.
The provisions of the Minimum Wage Law (Increase of Minimum Wage - Emergency Provision), 5772 - 2015 and the amendment of the Minimum Wage Law, 5747 – 1987, resulted in an increase in the minimum wage effective as of April 2015 and led to an increase of NIS 43 million in Shufersal’s wage expense in 2015 (compared with 2014). In Shufersal’s evaluation the increase of the minimum wage in Israel, changes to labor laws in Israel and the increased possibility of organized workers may detrimentally affect the business results of Shufersal and result in higher wage expenses of Shufersal.
Retail and Production
The activities of Shufersal are also subject to consumer protection laws, including the Food Law, the Defective Products Liability Law, 5740-1980, the Consumer Protection Law, 5741-1981, and the Consumer Product and Service Price Supervision Law, 5756-1996 that allows a consumer to institute a class action suit for damages caused to consumers as a whole based on the causes of action set out in that law.
The Public Health Protection (Food) Law, 5776-2015, sets forth quality standards and food safety measures and provides the relevant regulator supervisory and criminal and administrative enforcement powers. The provisions of the Food Protection Law affect production activities of Shufersal, including importation and food marketing activities. Shufersal is continuing the process of implementing procedures to comply with the provisions of the Food Protection Law that apply to its activities. Shufersal also operates pharmacies in certain of its stores, and is therefore subject to the provisions of the Pharmacists Ordinance (New Version), 5741-1981.
Shufersal is involved in manufacturing activities at three owned facilities where it produces principally private-branded baked goods which are subject to compliance with applicable production and quality assurance standards. Shufersal is continuously evaluating compliance of these facilities with the provisions of the Food Protection Law and as of the date of this Annual Report, Shufersal believes its operations comply in all material respects with the applicable provisions of this law.
The retail activities of each Shufersal store requires compliance with the Business License Order (Businesses Requiring a License), 5773-2013, principally providing that they obtain a business operating license for each unit. As of the date of this Annual Report, there are two units that are subject to legal proceedings regarding business licenses that are pending against Shufersal and its directors. Shufersal’s operating units are also subject to land development approvals and licensing, substantially all of which are in compliance.
The Food Law and the Anti Trusts Law
The Antitrust Law affects the activities of Shufersal, especially with respect of the possibility of carrying out future acquisitions for which approval is required from the Antitrust Commissioner (the “Commissioner”) and the influence on the trade arrangements of Shufersal with its suppliers. The Food Law regulates Shufersal’s trade arrangements with its suppliers which are regulated in detail which are designed to promote competition in the food supply industry. As of the date of this Annual Report, Shufersal believes that growth through acquisitions of a significant entity in the retail market would be limited. Moreover, provisions of the Food Law relating to geographical competition of retailers may influence the ability of Shufersal to expand organically through opening new stores in certain areas and under certain circumstances Shufersal may be required to close active branches under certain circumstances.
The Food Law includes the following three systems:
(a) with respect to activities of suppliers and retail trade, the Food Law prohibits:
i. a supplier interfering with the retail price of the products of another supplier;
ii. a retailer interfering with a supplier in the matter of the consumer price imposed by another retailer;
iii. a large supplier imposing its market position to influence the ordering or presentation of retail products within stores of a large retailer (Shufersal is included in the list of large retailers);
iv. a large supplier interfering with the price a retailer charges consumers for the products of that supplier, in the allocation of sales areas at any rate for the products of the supplier, for the acquisition of a product from the supplier in any scope from the total retail purchases of the product and of competing products, and for the purchase or sale of products which another supplier supplies to the retailer, including purchase quantities and goals, the sale area allocated to them in a store and any other commercial condition sought to be imposed;
v. a large retailer and a large supplier agreeing to set the pricing of a basket of products at a price that is lower than the marginal cost of production of the related product or that would require a consumer to purchase a minimum amount of the related product to achieve the reduces price;
vi. a large supplier conditioning the sale of its product to a retailer on the purchase of another product of that large supplier; and
vii.  a supplier forwarding payments to the large retailer, unless by way of a price reduction of the product units.
(b) Restrictions on geographical competition of retailers have adversely affected Shufersal’s expansion through organic growth and acquisitions. On September 28, 2014 Shufersal received a notification from the Antitrust Authority regarding demand areas of Shufersal’s large stores (“Notice of Demand Areas”). The stores that were the subject of the Commissioner’s request under the Law are 14 stores located in Haifa, 3 stores in Carmiel, 4 stores in Hadera, and 3 stores in Safed. As of the date of this Annual Report, Shufersal has not been required to close or dispose of any of its stores.
(c) Provisions designed to increase transparency of consumer prices, inter alia, by requiring a large retailer to publish on the internet and without cost to consumers, various data on prices of consumer goods it sells in its dailystores to allow consumers to compare prices with those of other retailers.
(d) Provisions regarding the contemporaneous application of the Food Law and the Antitrust law - In December 2015, the Commissioner published a statement on the parallel application of the Antitrust Law and the Food Law listing cases in which only the provisions of the Food Law will apply and no additional regulation will be required under the Antitrust Law. As of the date of the notice Shufersal’s operations comply with the Food Law. As of December 31, 2015 the implementation of the Food Law has had no significant impact on Shufersal’s business.
Shufersal’s acquisition of Clubmarket was approved by the Commissioner in 2005, and within this framework the Commissioner imposed a number of limitations on Shufersal’s activities including: prohibiting Shufersal from pricing products that result in a loss that is not proportionate to its business activities and are aimed to affect the operations of competitors from the market; prohibiting Shufersal from entering into agreements with suppliers that impose restrictions on those suppliers from doing business with competitors of Shufersal; and prohibiting Shufersal from attempting to influence commercial conditions between its suppliers and competitors.
Shufersal obtained an exemption from the Commissioner, available until October 14, 2018, regarding the operation of the Fourth Chain, which is a label company owned by a number of supermarket chains that was established to develop consumer goods. The Commissioner’s decision took into account the fact that Fourth Chain contracted with a third party that develops products for it under a private brand and the stipulated exemption exclusively permits these joint activities for the development of the private brand. Shufersal believes the Fourth Chain private label increases competition by establishing a cost-effective alternative to dominant branded consumer products.
The findings of the Commissioner in the matter of the rules of conduct among the largest store chains and the dominant suppliers in the food supply market, including under the provisions of the Food Law, and in the matter of the merger of Shufersal with Clubmarket, may have a detrimental effect on Shufersal’s business, its financial condition and operating results.

Agriculture
a.Operations Development and Licensing. ADAMA manufactures generic crop protection products which require production processes and licensing of existing molecules or processes. The primary development and licensing operation focuses on chemical-engineering development of production processes for new active ingredients and generic products, biological and agricultural testing intended for obtaining licenses, development of licensing information for the active ingredients and solutions that form licensing portfolios for the various regions, development of compounds, streamlining of production processes and development of new and specialized formulations of existing products. Moreover, ADAMA also engages in scientific-technological backup of existing production processes with emphasis on improving quality, efficiency, safety, environmental protection and reducing production costs. Furthermore, ADAMA develops several innovative substances, based on molecules acquired after a screening process, in which their effectiveness is proven. As of the date of this annual report, ADAMA operates research and development (R&D) facilities in Israel, India and Brazil and has started operating on R&D facility in China. In addition to chemical development, ADAMA develops licensed products through third party producers. At times, such development incorporates proprietary know-how and processes owned by ADAMA, as well as those developed jointly with subcontractors, in addition to processes and know-how of Adama’s suppliers.
Licensing - at various stages of manufacture and marketing, the substances and products marketed by ADAMA require licensing in each country in which it operates (ADAMA products that are manufactured and sold in Israel require licensing under the Crop Protection Law, 956). ADAMA has seven development and licensing centers in Europe, Israel, Latin America (Brazil), the United States and Asia, and licensing expertise in more than 100 countries. For its foregoing operations, ADAMA employs 170 employees around the world and also works with external contractors. Crop protection products are sold under the control of government authorities in each country (usually ministries of agriculture, health and the environment). The licensing requirements vary from time to time and in general have become more stringent over the years throughout the world, resulting in increased licensing costs and time commitments. The most demanding licensing standards are in the United States, Brazil, Japan and the EU. The rest of the world generally is adapting their requirements to the standards of the more advanced countries. In some countries, the license is not limited in time, but further development of licensing information is required every few years. Some of the countries grant licenses for 7-15 years and renew them at the end of that period subject additional testing Licensing costs and procedures differ from one state to another and may take several years. ADAMA is also required to make modifications to fully adapt any product in a certain country to the specific licensing requirements of that country. ADAMA regularly reviews the compliance of its products with the licensing requirements in the various countries in which they are sold, and adjusts them as needed. Licensing costs usually amount to hundreds of thousands of dollars per product and in some countries, such as the United States, the European Union and Japan, the costs can reach millions of dollars per product. In 2015, ADAMA received 276 new licenses for marketing its products (excluding expansion of labels of permitted products for new crops).
In 2015, ADAMA’s licensing expenses amounted to US$93.1 million, with the addition of depreciation the gross amount constitutes 3% of ADAMA’s revenue for 2015.
b.Labor Laws. Labor Relations in Israel. Labor relations of most of the employees of ADAMA’s subsidiaries are regulated under special collective agreements for limited periods. In addition, some of the employees of ADAMA’s subsidiaries in Israel are employed under personal agreements. As part of an agreement executed in 2011 between ADAMA and the Histadrut regarding employees in Israel, ADAMA undertook to carry on production, at the scope and on certain production lines, at the plants of the subsidiaries in Israel through June 1, 2017. In 2015, in addition to the provisions set aside by ADAMA in preceding years with regard to these understandings, ADAMA set aside a provision of US$12 million which is recorded in its financial statements under other expenses.
Labor Relations in Brazil. At two of ADAMA’s plants in Brazil, labor relations are subject to a collective bargaining agreement that is renewed every two years, and to the best of ADAMA’s knowledge, there has been no major labor unrest in recent years.
As of the date of this annual report, ADAMA believes that it is not dependent upon any of its employees.
c.Environmental Risks and Environmental Regulation
General. ADAMA is exposed to various environmental risks and its operations are subject to extensive environmental regulation, that varies by country where ADAMA operates. In recent years environmental legislation (or in stages of legislation) applicable to ADAMA’s operations have become much stricter as supervision and enforcement of these environmental requirements has tightened. ADAMA believes that this trend is expected to continue in the future.
ADAMA holds, as required by law, various permits and licenses such as business licenses, toxins permits and permits for pumping effluents into the sea. To the best of ADAMA’s knowledge, of the date of this annual report the permits and licenses applicable to ADAMA with regard to environmental issues are valid.
ADAMA’s environmental risk management policy: ADAMA attaches great importance to protecting the environment by accepting social and environmental responsibility and takes necessary measures to comply with the requirements of the law, and seeks to exceed compliance, through continuous dialogue with affected parties, including the authorities and the community.
Environmental Regulation. The key environmental law applicable to ADAMA’s operations are, inter alia, the Law for the Prevention of Nuisances, 1961; the Job Safety Ordinance (New Version), 1970; Business Licensing Law, 1968; Water Law, 1959; Law for the Prevention of Sea Pollution from Land-Based Sources, 1988 “Prevention of Sea Pollution”); Hazardous Materials Law, 1993 “Hazardous Materials Law”); Israel Clean Air Law, 2008 (“Clean Air Law”) and their regulations.
ADAMA continuously reviews the impact of environmental regulation on its business, acts to prevent or minimize environmental risks and to reduce environmental impacts that could be caused by its operations and invests considerable resources in ensuring compliance with the provisions of the environmental laws and those that may apply to it.
In September 2015, the Ministry of Environmental Protection issued for public comment a memorandum of the Integrated Environmental Licensing Law, 2015. The Memorandum of Law sets out one licensing procedure for businesses that have a substantial impact on the environment, at the end of which the business is granted an integrated environmental license in substitution of various environmental permits and licenses. The Memorandum of Law seeks to update and strengthen legal requirements applicable to, among other things, the use of hazardous substances, treatment of waste, compliance with building and construction laws, sanctions for license violation, etc. In view of the early stage of this legislation, ADAMA is unable to assess whether these obligations will apply to it or as to the scope thereof.
Air Quality. ADAMA’s plants are subject to regulation relating to air emissions under the Clean Air Law. ADAMA’s plants have duly filed applications for emission permits and some plants have already received valid emission permits or draft emission permits.

In May 2012, ADAMA signed an arbitration agreement with a group of Nir-Galim residents pursuant to which ADAMA agreed to comply with the recommendations of a certified expert to prevent future potential air and odor nuisances and to invest in facilities such as those mentioned above. In September 2015, the expert appointed pursuant to the mediation agreement announced that the mediation outline will be implemented in full by ADAMA and thereby the mediation proceedings came to an end. ADAMA makes substantial investments to minimize and prevent environmental consequences of its operations on air quality.
Effluents and Pumping into the Sea. The Prevention of Sea Pollution Law requires that the Ministry of Environmental Protection issue a permit for pumping wastewater or effluents into the sea. The ADAMA plant in Ashdod has such permit the terms of which have been made more stringent throughout the permit period as part of the general trend adopted by the Ministry.
Land. There are hazardous materials that are stored and located at Adama’s plant, as well as infrastructure and facilities, which contain fuels and hazardous materials. ADAMA is dedicated to preventing and treating the pollution of land and water by these materials.
ADAMA’s plant in Ashdod has been requested to conduct various land and well surveys for groundwater by the Ministry of the Environment and by the Water Authority. When the surveys were presented, the plant was required to present a program to mitigate environmental risks in accordance with methodology set by the Ministry of the Environment. The plant presented a detailed program to the Water Authority for the treatment of the ground water, which has been accepted in principle by the Water Authority.
The ADAMA plant in Be’er Sheva has been requested by the Ministry of the Environment to conduct an historical land survey and sample tests on ground gases. Sample tests of the ground gases have been conducted in coordination the Ministry of the Environment, and as of the date hereof, the plant has not been required to take any further action in this connection.
Within the context of the integrated environmental regulation process, ADAMA’s plant at Neot Hovav has been required to present a historical land survey. The survey was presented to the Ministry of the Environment at the beginning of 2015. At this stage, ADAMA is unable to evaluate whether additional requirements will be placed upon it in relation to surveys or the treatment of land or ground water at its plant, what their substance might be and whether they would have any significant impact on it.
Pollution of the groundwater was discovered in the Neot Hovav Council in the past, following which the Council took various steps to halt the spreading pollution and to extract it, including the treatment and monitoring of the underground water. As the date hereof, ADAMA is not required to incur expenditures in the treatment of the pollution. The possibility exists that the Neot Hovav Council will require ADAMA to contribute to the costs of remediation in the future.  However,  ADAMA is unable at present to evaluate whether such a demand will be made and what the size of such a demand may be.
Adama’s Investments in the Environment. ADAMA’s investments in environmental compliance in 2015, amounted to approximately US$21 million (facilities) and approximately US$41 million (routine costs exclusive of depreciation). ADAMA intends to continue to make investments, insofar as may be required and deemed appropriate to exceed these standards on environmental issues, in order to realize its policy of optimizing compliance. In Adama’s assessment, in each of the years 2016 – 2018 the total environmental costs are expected to amount to approximately US$60 million.
Adama’s plan in Brazil –ADAMA’s Brazilian subsidiary has two main plants, located in the South of Brazil. To the best of ADAMA’s knowledge, as at the time of this annual report, all of the permits and the licenses are in full force and effect. The Brazilian subsidiary invests in safety and ecological facilities in its plants, including in the performance of independent environmental testing to ensure compliance with the terms of its licenses, control over water sources located near the plant and the monitoring of emissions into the atmosphere, based on advanced technology. Periodic tests on the volume of the emissions into the atmosphere and the water sources show that the Brazilian plants comply with the requirements of the State’s Ministry of the Environment. As part of that company’s policy for improving ecological processes, it invests in the correction of deficiencies that have been found, changes in production processes, the building of facilities for purifying wastewater, the storage of by-products and recycling.
d.Legislation, standards, regulation and exposure in the environmental field, in health and in safety.
Adama may bear significant civil (including through class actions) or criminal liability (including high fines and/or payments of high amounts of compensation and/or environmental monitoring and rehabilitation costs) in respect of a breach of environmental regulation and failure to comply with health and safety standards including on the basis of strict liability. Even though Adama makes substantial investments in its facilities and in building special facilities in accordance with environmental requirements, it is unable to verify that those investments will be sufficient to satisfy evolving requirements. In addition, Adama is subject lawsuits alleging physical or property damage as a result of exposures to hazardous materials, which are covered for the most part by Adama’s insurance policies.
Telecomunnications
Communications Regulations
Cellcom’s operations are subject to general legal provisions regulating the relationships and method of contracting with its customers. These provisions include the Consumer Protection Law, 5721-1981 and regulations promulgated thereunder and other laws detailed below. A substantial part of Cellcom’s operations are subject to the Communications Law, regulations enacted by the Ministry of Communications, and the provisions of the licenses granted to Cellcom by the Minister of Communications. Cellcom’s activies which include providing cellular service, landline, international telephone services and internet access, and infrastructure services are subject to licensing.
Supervision of Rates. The Communications Regulations (Telecommunications and Broadcasts) (Payments for Interconnect), 5760 - 2000 requires cellular operators to phase in gradual reduction of communications rates (i.e. payments that will be made by an in-country operator, another cellular operator or international operator to complete one minute of call time in the network of a cellular operator or for the sending of an SMS between cellular operators). This reduction has led to a considerable reduction in Cellcom’s revenues.
Moreover, in August 2013 the Communications Law was amended to authorize the Minister of Communications to set interconnection prices and regulate the use of networks owned by another operator based not only on the cost incurred to establish the network (according to the calculation method to be determined by the Minister of Communication) plus a reasonable profit, but also on one of the following: (1) flat payment for a service provided by the license holder; (2) reference to tariffs charged for a comparable service; or (3) reference to the cost of these services or with the interconnection costs charged in other countries. The Minister of Communications was also empowered to give instructions on structural separation for the providing various services, including segregating services provided by a license holder from services provided to a subscriber.
In the last few years, contract termination charges for cellular plans have been banned in the cellular and other communications markets, other than for customers who have more than a certain number of cellular lines or whose monthly payments exceed a certain amount for bundled service. The elimination of these charges led to a considerable increase in plan cancellations, increased the costs of retaining and acquiring customers, and accelerated erosion of rates.
Virtual Operators (MVNO). The Communications Law and related pronouncements regulate the activities of virtual operators. Notwithstanding that the MVNO regulations apply only to the activities of a virtual operator which has an operating agreement with a cellular operator, the regulations empower the Ministry of Communications together with the Economic Ministry to impose terms of an agreement including fixing the price to be charged for the services provided.
Other Third Generation Operators (UMTS). In 2012, Golan and Hot Mobile began to offer UMTS services. The conditions of the tender according to which Golan and Hot Mobile were granted those licenses included a number of benefits and concessions, including minimally low license fees and a mechanism to reduce the royalties they undertook to pay for the frequencies based on the operator’s market share in the private sector and setting long timetables to meet the geographical coverage requirements of the network and the right to use in-country migration services via other cellular operators’ networks. The Communications Law obliges the other cellular operators to provide in-country migration services to Golan and Hot Mobile for a period ranging from seven to ten years subject to certain conditions. In 2011, Cellcom entered into a contract with Golan to provide in-country migration services. Hot Mobile entered into a similar in-country migration agreement with Pelephone and later with Partner (which was subsequently replaced by a joint networks agreement with Partner) without intervention from the Ministry of Communications.

Regulation of Multi-Channel Television Services
As at the date of this Annual Report, television program streaming via the Internet is not subject to regulation in Israel. Should the recommendations of the committee for the examination of the arrangement of commercial broadcasts be adopted and the committee requires Cellcom to make additional investments or regulation is imposed that is not beneficial for Cellcom’s streamign services or for its ability to use the DTT infrastructures, the results of Cellcom’s streaming services may be adversely affected.
Cellcom’s Communications Licenses
Cellcom holds a general license for providing cellular services, valid until January 31, 2022, setting out conditions (including duties and restrictions) applicable to its activities, officers and shareholders holding certain percentages of Cellcom’s shares. The license may be extended by the Ministry of Communications for consecutive periods of six years, if Cellcom is in compliance with the provisions of the license and law, and makes requisite investments to its service and network. The Ministry of Communications has amended the license conditions in the past, and may amend them in the future, without Cellcom’s consent and in a manner that may limit its ability to conduct business. The license provides that Cellcom does not have exclusivity for providing services.
The cellular license can be revoked, suspended or limited in the following cases: total holdings of the founding shareholders or their successors (as defined in the license) is less than 26% of the control shares of Cellcom; total holdings of Israeli parties (as defined in the license), who are among the founding shareholders or their successors, is less than 20% of the total issued share capital and control shares of Cellcom; a majority of directors are not Israeli citizens or residents of Israel; fewer than 20% of the directors of Cellcom were appointed by Israeli parties; any an act or omission of Cellcom that adversely affects or restricts competition in the cellular sector; the aggregate equity of Cellcom, together with the aggregate equity of shareholders each holding 10% or more of the share capital, is less than US$200 million.
In light of the 2015 change in the control structure of IDBD, the Cellcom control structure has also changed, and requires the approval of the Ministry of Communications, including with regard to Israeli holding requirements included in the licenses of Cellcom, as Mr. Eduardo Elsztain is not a citizen of Israel. IDBD and Cellcom formally applied to the Ministry of Communications to approve these changes and amend the telecommunications licenses of Cellcom accordingly. If the request is not approved and another arrangement is not offered by the Ministry of Communications, Cellcom may face sanctions, which under the terms of its license, can include suspension or cancellation of its licenses.
According to Telecommunications Law, the Ministry of Communications may impose on telecommunication companies, including Cellcom, financial sanctions for breach of license and law. The amount of the sanction is calculated as a percentage of the revenue of the operator, and according to the degree of severity and extent of the breach, said may be significant.
In July 2015, Cellcom received (through a wholly owned entity) a uniform and general license for the provision of landline telephony services (which replaced the previous license for providing this service), for the period ending April 2026. A uniform and general license was also awarded to Netvision and replaced its general license for providing internet access services, international carriers, and a network access point for the period ending February 2022. In addition, an entity, fully controlled by Cellcom received a uniform and general license which replaced the landline telephony service license, for the period ending March 2026. These licenses can be extended for an additional period of 10 years, under terms similar to the terms of extension of the general cellular license.
The Ministry of Communications has issued rules providing for unification of all uniform licenses. The uniform license allows providers to also offer virtual operator services. The process of unifying the uniform licenses and the timetable have not yet been determined and it is possible that this process will have a legal, financial, tax and accounting effect on Cellcom’s and Netvision’s businesses. The provision of a number of services by one entity will require limitations also on discrimination between operators.
Cellcom holds other communications licenses: a special license for the provision of data transmission and communication services in Israel, a license to provide internet services, and licenses to provide cellular services, landline telecommunication services and internet services in the West Bank, for periods ending 2016-2018. These licenses include conditions similar to those of the general license for the provision of cellular services, as noted above.
According to regulations that apply to the uniform license, there are certain limitations on cross ownership among license holders.
2.Further Regulation Applicable to Communications Services
In July 2014, the Ministry of Communications announced a public hearing on the coverage and quality requirements for second-generation and third generation networks. The proposed requirements are stricter than those currently existing and if adopted, could have an adverse effect on the results of Cellcom. Cellcom is unable to assess whether the proposed changes will be adopted, and what the impact of these changes will have in practice on Cellcom’s operating results.
In addition, in August 2014, the Ministry of Communications announced a public hearing to consider call centers owned by communications operators. In addition, the Ministry of Communications proposed to amend the Communications Law (Telecommunications and Broadcasting), 1982, providing that a customer may claim pre-set financial compensation if the telephone call center does not reply within an average response time or if there is an overcharge error. Cellcom believes that adoption of these proposed changes could have a material adverse effect on Cellcom’s business.
3.Permits for Setting Up Base Sites
a. Cellcom’s cellular services genearlly are provided through base sites across Israel, their construction and licensing are included in TAMA 36 (District Zoning Plan) – Part A - National Master Plan for Communications - Small and Micro Broadcasting Facilities (“TAMA 36”), and Radiation Law. Regulating the deployment of wireless access devices, which are base sites with smaller dimensions, are, for the most part, regulated by Communications Law and Radiation Law. The construction of base sites requires a permit as per Planning and Building Law, 1965 (“Planning and Building Law”), and is subject to other approvals from multiple regulators.
Legal proceedings (civil, criminal and administrative) are pending against Cellcom, under which a number of arguments were raised concerning the legal compliance of some of Cellcom’s sites, alleging failure to obtain permits under Planning and Building Law, or based on development of sites in contravention of a permit.
Cellcom did not apply for a building permit for approximately 33% of its base sites on the basis of the exemptions for wireless access facilities provided by law. In 2010, the Supreme Court issued a Temporary Order at the request of the Government’s Attorney General, enjoining Cellcom, Partner, and Pelephone from proceeding with construction of these facilities on the basis of the exemption. A final determination of the regulatory authorities regarding applications for exemptions is pending as of the date of this Annual Report.
In addition, Cellcom provides in-building repeaters and micro-sites (“femtocells”) for its subscribers seeking a solution to poor indoor reception. Based on an opinion Cellcom received from legal counsel, Cellcom did not request building permits for the repeaters that were installed on roof tops, which are a small fraction of all repeaters installed. It is not clear whether the installation of a different type of in-building repeaters and micro-sites requires a building permit. Some require a specific permit while others require a permit from the Ministry of Environmental Protection, depending on their radiation levels. Cellcom also builds and operates microwave facilities as part of its transmission network. The different types of microwave facilities receive permits from the Ministry of Environmental Protection regarding their radiation levels. Based on an opinion of legal counsel, Cellcom believes that building permits are not required for the installation of microwave facilities on rooftops.
b. Indemnification obligation - under Planning and Construction Law, local planning and building committees may demand and receive, as a condition for granting a building permit for a site, a letter of indemnity for claims under Section 197 of Planning and Construction Law. By December 31, 2015, Cellcom had executed approximately 400 letters of indemnity as a condition for receiving permits. In some cases, Cellcom has not yet been built any sites. As at December 31, 2015, two requests for indemnification were received from one local committee on the basis of a letter of indemnity as noted, in an immaterial amount.

As a result of the requirement to deposit letters of indemnity, Cellcom may decide to dismantle or move some sites to less advantageous locations, or build certain sites, if it concludes that the risk of granting letters of indemnity exceeds the benefit derived from those sites, which may result in a deterioration of cellular services and damage network coverage.
c. Radiation Law, Regulations and Permits Thereunder - Radiation Law, Regulations and Principles thereunder included provisions relating to all aspects related to regulating the issue of non-ionizing radiation, including, inter alia, levels of exposure that are permissible.
In May 2012, the Ministries of Communications, Health and Environmental Protection, based on their assessment of the potential health consequences of fourth-generation telecommunications services in Israel, including increased exposure to non-ionizing radiation, issued a memorandum advising that deployment of the fourth-generation network should be based on existing base stations, other smaller base sites both internal and external, and if possible, using the wired infrastructure so that data traffic will be carried mainly through fixed communication lines and not through any cellular infrastructure. In August 2014, the Ministry of Communications allowed the use of fourth-generation infrastructures, and in January 2015 fourth-generation frequencies were awarded to cellular operators. The recommendations of May 2012, as noted, were not included in the tender documents or in said approval.
4.  
The Reduced Centralization Act
Given the holding structure of the I.D.B. Group, Cellcom is considered in the “third layer”. Cellcom is included in the list of centralized parties, and in the list of significant non-financial corporations under said Law. According to said Law, DIC and IDBD must take steps to have Cellcom cease to be a “third layer” by December 2019. DIC and IDBD have announced that they are considering steps to achieve this goal without giving up control of Cellcom, by taking DIC or IDBD private or implementing a merger of DIC and IDBD. As of the date of this Annual Report, there is no certainty regarding the implementation of these strategies. The provisions of the Reduced Centralization Act regarding the allocation of rights over public assets could adversely affect the ability of Cellcom to renew its cellular licenses and to receive new frequencies, which may adversely affect Cellcom’s ability to issue debt or adversely affect its business.
a.Changes in legislation and high regulatory intervention - legislative changes and active regulatory enforcement may have an adverse influence especially if material financial sanctions are imposed on Cellcom, on the ability of Cellcom to plan its management and on its operating results, if any of the following occurs: the cancelation or relief for the obligation for structural separation applicable to Bezeq and Hot, especially if the said cancelation or easing is given prior to the establishment of the effective wholesale market in landline communications, if tariffs do not encourage competition or if other regulation is set out in the wholesale landline market which adversely affects Cellcom’s operations; the granting of relief and benefits to competitors compared with Cellcom; the authorization of other operators to provide services to Cellcom subscribers which were previously provided only by Cellcom; the non-renewal of licenses and/or frequencies available to Cellcom or the increased use thereof, and the non-location of additional frequencies, where required; the imposition of additional requirements in respect of public safety or health, including with respect to base sites; imposition of additional restrictions or requirements for providing services and products and/or intervening in market conditions; imposition of a higher standard of service; imposition of stricter privacy policies; the imposition of regulation on streaming services, the imposition of conditions which are not beneficial for the users of DTT broadcasts, or the imposition of conditions that impact Cellcom and do not apply to other operators of streaming services over the internet.
b.Labor Law. In February 2015, a collective bargaining agreement was signed with the workers representative body and with the Histadrut for a period of three years (form 2015 to 2017) which applies to all employees of Cellcom and Netvision, except members of senior management. This agreements limits the right of Cellcom to make organizational and personal changes and makes such changes more expensive as reflected in the voluntary retirement plans executed in 2014 and 2015 and may also require greater management attention to administer.
Insurance
Areas of Activity of Clal Insurance Business Holdings
Clal Holdings offers general insurance such as car insurance, homeowners’ insurance, and credit and foreign trade risk insurance, among others, as well as health insurance. The activities of Clal Holdings and its subsidiaries are subject to the provisions of laws applicable insurance companies and to regulatory supervision. Clal Holdings’ subsidiaries are supervised by the Capital Markets, Insurance and Savings Commissioner (the “Insurance Commissioner”). Clal Insurance and its subsidiary, Clalbit Financing, are supervised by the Israel Securities Authority. Subsidiaries of the Clal Holdings Insurance Group have been subject to administrative enforcement proceedings and the imposition of fines. Clal Insurance is not in breach of any material regulatory provision applicable to its operations. IRSA
Capital Requirements of Insurance Companies
Minimum Capital – The Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Capital Regulations”) law prescribes minimum capital requirements for insurance companies. The capital required for insurance activities consists of a first layer of capital, based the greater of the initial capital and capital derived from the volume of activity in general insurance, the higher of the calculation based on premiums and the calculation based on outstanding claims, as well as other capital requirements. Failure to comply with the Capital Regulations will require the insurer to increase its equity up to the amount stated in the Capital Regulations or reduce the scope of its business accordingly, no later than the date of publication of the report, except in exceptional circumstances as approved by the Insurance Commissioner, that will then determine any supplementary capital requirements.
Breakdown of an Insurer’s Capital – The Insurance Commissioner issued a circular in August 2011 (“Circular”) that provides a framework for determining the composition of an insurer’s equity, in conjunction with the adoption in Israel of the Solvency II Directive (“Directive” or “Solvency II”), as amended and updated.
·Initial (core) capital (basic tier 1), equals the components included in capital attributable to shareholders of Clal Insurance. The overall capital ratio must be at least 60% of the total equity of the insurer.
·Secondary (tier 2) capital includes complex secondary capital instruments (excluding periodic accrued interest payments), subordinate secondary capital instruments (as defined by the Circular) and any other component or instrument approved by the Insurance Commissioner. A complex secondary capital instruments is one that is subordinated to any other instrument, except for initial capital, including financial instruments available to absorb losses by postponing payment of principal and interest. The first repayment date of secondary capital instruments will be after the end of the period that reflects the weighted average maturity of insurance liabilities, plus two years, or after 20 years, whichever is first, but no earlier than eight years from the date an instrument is issued. If the complex secondary capital instrument includes an incentive for early redemption, the first incentive payment date may not be earlier than five years from the date of issue of the instrument.

·Tertiary (tier 3) capital includes complex tertiary capital instruments (excluding periodic accrued interest payments) and any other component or instrument approved by the Insurance Commissioner. A tertiary capital instrument is subordinate to any other instrument, except for primary and secondary capital, and includes financial instruments available to absorb the insurer’s losses by postponing the payment of principal. Tertiary capital will must be junior to secondary capital and equal in the order of credit repayments. The first repayment date on tertiary capital instruments may not be earlier than five years from the date of issuance. If the complex tertiary capital instrument includes an incentive for early redemption, the first indentive payment date may not be earlier than five years from the date of issue of the instrument. Tertiary capital may not exceed 15% of the total capital of the insurer.
Insurance liabilities include liabilities that are not yield dependent but excludes any liability fully backed by lifetime indexed bonds and net of any reinsurance costs. Approval of the Insurance Commissioner is required for inclusion of hybrid capital instruments (primary, secondary or tertiary) in equity. The Circular includes a Temporary Order regarding the breakdown of an insurer’s equity (“Temporary Order”), which will apply until full implementation of the Directive in Israel, when announced by the Insurance Commissioner. The Temporary Order defines the secondary capital issued according to Capital Regulations, before amendment, as subordinate secondary capital and imposes a limit equal to 50% of basic capital.
Distribution of dividends – In accordance with rules promulgated by the Insurance Commissioner, a dividend distribution may not be approved, unless, after giving pro forma effect to the proposed distribution, the insurer has a ratio of recognized equity to required equity of at least 105%, as confirmed in filings with the Insurance Commissioner. Prior approval of the Insurance Commissioner is not required for any distribution of dividends if the total equity of the insurance company, as defined by Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Minimum Capital Regulations”), after giving effect to the distribution of the proposed dividend, exceeds 115% of the required equity.
In November 2014, the Insurance Commissioner outlined solvency rules (“rules” or “regime”, as applicable) based on Solvency II, in Israel, in a letter addressed to managers of the insurance companies (“Letter”). In the Letter, the Insurance Commissioner outlined a plan to adopt the 2016 European model for calculating capital and capital requirements for the local market, effective as of the annual reports for 2016 (“First Adoption Date”). During a period to be determined by the Insurance Commissioner and as conditions require, insurance companies will also be required to comply with capital requirements under existing regulations. The Letter stated that until final adoption, insurance companies must prepare additional quantitative assessment exercises (IQIS) for the 2014 -2015 period. These requirements are intended to assess the quantitative effects of adopting the model, as well as providing data for calibrating and adjusting the model. In addition, the Letter addressed an initiative to develop a framework for quarterly reporting of insurance companies’ solvency ratio. The Letter also referred to the Commissioner’s intention to publish provisions for managing capital and targets for internal capital, to address a gap survey that insurers will undertake with respect to their risk management systems, controls and corporate governance and a consultation paper to promote the process of self-assessment of risks and solvency (ORSA).
In April 2015, the Insurance Commissioner published a second letter titled “Plan for the Adoption of Rules for Solvency, based on Solvency II” and provisions for the IQIS4 exercises to be undertaken regarding the 2014 historical financial statements. The letter emphasized that the exercise reflects the decision of the Insurance Commissioner to impose adjustments required for the Israeli insurance market. The Letter further stated in connection with the proposed adoption of IQIS5 that the Insurance Commissioner would continue to monitor developments in the European markets and would consider adjustments relevant for Israel.
In July 2015, the Insurance Commissioner issued a letter concerning “transitional provisions regarding the application of solvency rules, based on Solvency II” (the “Letter on Transitional Provisions”). The transitional provisions were provided by reference to certain solvency rules set forth in the European Directive relating to, inter alia, a gradual adoption of capital requirements in respect of holdings of equity shares which may a component to be included in the calculation of core capital. In addition, the letter included transitional provisions regarding submission of a plan to improve the capital ratios of insurance companies whose ratios are negatively affected following adoption of the new solvency rules beginning with the financial statements for 2018. Adoption of the solvency rules are expected to change both the recognized regulatory and required regulatory capital and according to indications existing today, is expected to result in a significant decline in the ratio between recognized capital and required capital of Clal Insurance compared to capital ratios calculated according to capital ratio requirements currently in effect, and is expected to adversely affect the ability of Clal Insurance and Clal Insurance Enterprises to distribute dividends upon such adoption. However, as a rule, the capital requirements under the solvency rule are intended to serve as a capital cushion against more serious events, with a lower loss probability than the capital requirements under current rules.
In May 2015, the Board of Directors of Clal Insurance Enterprises and the Board of Directors of Clal Insurance directed its management team and the Risk Management Committee, which also functions as the Solvency Committee (“Committee”), to examine measures Clal Insurance may be able to employ to improve its capital ratio, in accordance with the new solvency rules and to recommend a course of action to the Board, including in relation to business adjustments and/or financial transactions related to Clal Insurance’s capital, its breakdown, and/or its responsibilities. The Committee and Management have begun this examination, and during the first stage, recommended that the Board issue secondary capital instruments. The Committee will continue to examine other measures in an effort to prepare the company for possible adoption of these proposed capital requirements, and related measures.
Clal Insurance has purchased civil liabilitycalculated its capital ratio using results as of December 31, 2014 (“Calculation Date”) and based on the IQIS4 rules and has determined that it would be in compliance, as of the Calculation Date, with the proposed capital requirements, in the context of the transitional provisions, even before taking pro forma account of the positive impact on the capital ratio provided by the subsequent issuance of subordinated notes. The related calculations were submitted to the Insurance Commissioner on August 31, 2015. The Insurance Commissioner has not yet published binding provisions for adoption, and there is uncertainty regarding the details of the final provisions. Clal Insurance will continue to monitor the quantitative aspects of the proposed solvency rules towards final adoption, in an effort to anticipate requisite controls and capital requirements.
On March 14, 2016, “IQIS Provisions for 2015” (“Draft”) was published in preparation for the adoption of Solvency II. Insurance companies are required to submit an additional quantitative evaluation survey on the basis of December 2015 results (“IQIS5”), by June 30, 2016. The Draft was issued by reference to the European legislation adapted for requirements of the local market and that goes beyond provisions for quantitative evaluation surveys previously issued. The main changes relate to establishing risk-free interest curves, through extrapolation to the ultimate forward rate point, the components of recognized capital, capital requirements less investments in infrastructure (capital and debt), adjusting capital requirements for management companies, and updating the formula for calculating capital requirements for risk premiums and reserves for general insurance. Clal Insurance is unable to assess the overall impact of the changes based on the provisions in the Draft to carry out a further quantitative evaluation survey, and will carry out an assessment of the current capital status, when the binding provisions will be finalized. According to the Draft, the IQIS5 calculation will be a factor in assessing preparedness of insurance companies and to coverthe implementation and scope of the final provisions to be adopted.
Capital requirements under the Capital Regulations are based on the separate individual financial statements of an insurance company. For purposes of calculating recognized capital, an investment by an insurance company in an insurance company or a controlled management company, and in other investee companies will be calculated on the equity basis, according to a holding rate, which includes indirect holdings.
The minimum capital required of Clal Insurance has been reduced, with approval of the Insurance Commissioner, by 35% of the original difference attributed to the managing companies and provident funds under its directors’control. However, when calculating the amount of dividends permitted for distribution, this difference will be added at level of the capital structure, as detailed in Paragraph 13.7.3 (C). In September 2013, the Insurance Commissioner notified Clal Insurance that the deducted amount to be added back to the minimum capital required, will be after a deduction for a tax reserve accrued by Clal Insurance following the acquisition of provident fund operations. The approval of the Insurance Commissioner, as noted above, will be canceled with adoption of capital requirements under the Directive (see Paragraph 13.7.3 (C)) that will replace the Capital Regulations.
In March 2013, Clal Insurance received a letter from the Insurance Commissioner regarding the determination of credit ratings according to an internal model used by Clal Insurance (“internal model”), to be applied as a risk rating methodology for a subject insured, according to conditions of the relevant sector. The Insurance Commissioner authorized Clal Insurance to allocate capital for adjusted loans, ranked according to its internal model and officers’ liability.with reference to the rates specified in the Capital Regulations. If there is an external rating available, the capital allocation will be made using the lower of the available ratings. The letter also requires Clal Insurance to submit immediate and periodic reports as specified regarding these activities that make the specified transactions subject to review by the Commissioner of Insurance. As a result of its compliance with the provisions of the letter, Clal Insurance’s capital requirements were reduced by NIS 69 million, as at the end of the reporting period.

Permit Issued by the Insurance Commissioner to the Former Controlling Shareholders of IDB Holdings to Retain Control of Clal Insurance Enterprises and Consolidated Institutional Entities
On May 8, 2014, legal counsel for the former controlling shareholders of IDB Development (Ganden, Manor, and Livnat Groups) was notified by the Commissioner that in the context of arrangements among the creditors of IDB Holdings (“IDBH”), and given that they no longer controlled the Clal Insurance Enterprises Group, the authorization previously issued by the Insurance Commissioner for control of these entities was terminated, including, with respect to Clal Insurance, Clal Credit Insurance and Clal Pension and Provident Funds. IDB Holdings undertook to supplement (or to cause its controlled affiliates to supplement) the required equity of the insurers in compliance with the Capital Regulations, subject to the a cap of 50% of the required capital of an insurer, and that the obligation will take effect only if the insurer’s equity is determined to be negative, and such funding amount will then be equal to the amount of negative capital, up to the 50% cap.
In addition, IDB Holdings undertook to contribute to the equity of Clal Pension and Provident Funds up to the amount prescribed by the Provident Fund Regulations, for as long as IDB Holdings is the controlling shareholder of the institutional entities. The authorization specifies conditions and imposes restrictions on the ability of a holding entity to impose liens on the equity of IDBD’s institutional entities it holds. The former controlling shareholders were also required, as long as any liens existed on their equity interest of IDB Holdings, to ensure that Clal Insurance Enterprises complied with applicable capital requirements, such that the equity of Clal Insurance Enterprises at no time was less than the product of the holding rate of Clal Insurance Enterprises in Clal Insurance and 140% of the required minimum equity of Clal Insurance, calculated according to the Capital Regulations on September 30, 2005 (as the holding rate was linked to the CPI of September 2005).
At the end of the reporting period, the required minimum capital of Clal Insurance Enterprises was NIS 2.9 billion, greater that the amount required based on the foregoing calculation. The capital requirement is calculated on the basis of the financial statements of Clal Insurance Enterprises. Following termination of the control authorization, the former controlling shareholders have questioned whether the capital requirements applicable to Clal Insurance Enterprises thereunder continue to apply.
Clal Insurance is committed to finding a strategy to supplement its required equity in compliance with the Capital Regulations if the equity of Clal Credit Insurance becomes negative, and as long as Clal Insurance is the controlling shareholder of Clal Credit Insurance. Clal Insurance is committed to supplement the equity of Clal Pension and Provident Funds as necessary to ensure it complies with the minimum amount required by Income Tax Regulations (Rules for Approval and Management of Provident Funds), 1964 (“Income Tax Regulations”). This commitment is valid as long as Clal Insurance controls, directly or indirectly, Clal Pension and Provident Funds.
In February 2012, Supervision of Financial Services Regulations (Provident Funds) (Minimum Capital Required of a Management Company of a Provident Fund or Pension Fund), 2012, was published along with Income Tax Regulations (Rules for Approval and Management of Provident Funds) (Amendment 2), 2012 (“new regulations”).
Pursuant to the new regulations, the capital requirements for management companies were expanded to include capital requirements based on the volume of assets under management and applicable annual expenses, but not less than the initial capital of NIS 10 million. In addition, liquidity requirements were also prescribed. A fund management company may distribute dividends only to the extent of any excess above the minimum amount of equity required by said regulations. In addition, a fund management company must provide additional capital in respect of controlled management companies. As at the end of the reporting period, the management companies controlled by Clal Insurance have capital balances in excess of the minimum capital required by the capital regulations for management companies. In light of capital regulations for management companies and in order to finance the expansion of operating and investing activities of Clal Pension and Provident Funds, the Boards of Directors of Clal Insurance and Clal Pension and Provident Funds in 2015 and 2014 approved an subscribed shares of Clal Pension and Provident Funds in consideration for NIS 100 million and NIS 80 million, respectively.
Anti-Money Laundering. In September 2015, a draft Anti-Money Laundering Order was proposed which seeks to expand its application to certain provident funds, and reduced the amounts of accumulations, deposits and withdrawals subject to reporting. Furthermore, the draft order specifies a ‘know your customer’ process that must be undertaken before issuing a life insurance policy or opening a provident fund. In October 2015, a draft addendum to the Anti-Money Laundering Law, 5776-2015 was published to provide for changes to existing law that set forth stricter criminal penalties under the Anti-Money Laundering Law and set forth provisions for sharing of information between the Anti-Money Laundering Authority and the insurance commissioner. In the evaluation of Clal Insurance, the draft order and draft bill may adversely affect the sale of its products.

C. ORGANIZATIONAL STRUCTURE
Subsidiaries and associated companies
The following table includes a description of our subsidiaries and associated companies as of June 30, 2016:
Subsidiaries
Effective Ownership and Voting Power Percentage
Property/Activity
Agro Managers S.A 
46.84%Agro Managers S.A. is engaged in doing by itself or on behalf of third parties investments in the country or overseas through long and short term loans with or without warranties, derivatives, stocks and commodities as well as any kind of debentures or credit notes.
Agro-Uranga S.A 
35.72%Agro-Uranga S.A. is an agricultural company which owns 2 farmlands (Las Playas and San Nicolás) that have 8.299 hectares on the state of Santa Fe and Córdoba.
Brasilagro Companhia Brasileira de Propiedades Agrícolas
39.76%(1)
Brasilagro is mainly involved in four productive activities: sugarcane, crops and cotton, forestry activities, and livestock.
Doneldon 
100%Doneldon S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Futuros y Opciones.Com S.A.59.59%A leading agricultural web site which provides information about markets and services of economic and financial consulting through the Internet. The company has begun to expand the range of commercial services offered to the agricultural sector by developing direct sales of supplies, crops brokerage services and cattle operations.
Agrofy S.A. 
45.23%
Agrofy S.A. is involved in the creation, operation, development, management, buying and selling of websites and domain names on the Internet.
Amauta Agro S.A. 
59,63%Amauta Agro S.A.’s purpose is to engage, in its own name or on behalf of or associated with third parties, in activities related to the production of agricultural products and raw materials, export and import of agricultural products and national and international purchases and sales of agricultural products and raw materials.
Granos Olavarria S.A. 
59,63%(2)
Granos Olavarría S.A. is principally engaged to the warehousing of cereals and brokering of grains.
Helmir S.A. 
100%Helmir S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and to the management and administration of the capital stock it owns on companies controlled by it.
IRSA Inversiones y Representaciones Sociedad Anónima
63.77%(1)
IRSA is a leading Argentine company devoted to the development and  management of real estate.
Sociedad Anónima Carnes Pampeanas S.A.  (formerly known as Exportaciones Agroindustriales Argentinas S.A.)
100%(3)
Sociedad Anónima Carnes Pampeanas, a company that owns a cold storage plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,500 cattle head per month.
(1) Excludes effect of treasury stock.
(2) Includes Futuros y Opciones.Com S.A.’s interest.
(3) Includes Helmir’s interest.
103
 
D. PROPERTY, PLANTS AND EQUIPMENT
Control Systems
IRSA Commercial Properties owns computer systems to monitor tenants’ sales (except stands) in all of its shopping centers. IRSA CP also conducts regular manual audits of its tenants accounting sales records in all of its shopping centers. Almost every store in those shopping centers has a point of sale that is linked to a main computer server in the administrative office of such shopping center. IRSA CP  uses the information generated from the computer monitoring system for statistics regarding total sales, average sales, peak sale hours, etc., for marketing purposes and as a reference for the processes of internal audit. The lease contracts for tenants in Alto Avellaneda, Alto Palermo, Alcorta Shopping, Patio Bullrich, Buenos Aires Design, Abasto, Alto Rosario, Alto NOA, Dot Baires Shopping, Córdoba Shopping, Soleil Premium Outlet, La Ribera Shopping, Mendoza Plaza, Distrito Arcos and Alto Comahue contain a clause requiring tenants to be linked to the computer monitoring system, there being certain exceptions to this requirement.
Insurance
We carry all-risk insurance for the shopping centers and other buildings covering property damage caused by fire, explosion, gas leak, hail, storms and wind, earthquakes, vandalism, theft and business interruption. In addition, we carry liability insurance covering any potential damage to third parties or property caused by the conduct of our business throughout Argentina. We are in compliance with all legal requirements related to mandatory insurance, including insurance required by the Occupational Risk Law (Ley de Riesgos del Trabajo), life insurance required under collective bargaining agreements and other insurance required by laws and executive orders. Our history of damages is limited to one single claim resulting from a fire in Alto Avellaneda Shopping in March 2006, a loss which was substantially recovered from our insurers. These insurance policies contain specifications, limits and deductibles which we believe are adequate to the risks to which we are exposed in our daily operations. We further maintain liability insurance covering our directors’ and corporate officers’ liability.
Operations Center in Israel
IDBD is a holding company that invests, either directly or through its subsidiaries, associates and joint ventures in companies that operate in various sectors of the economy in Israel. IDBD is directly affected by the political, economic, military and regulatory conditions of Israel. The main regulations applicable to IDBD’s business are described below. For more information, see “Risk Factors– Risks related to IDBD and IDBD’s subsidiaries.”
General regulations applicable to our business in Israel
Proper Conduct of Banking Business
IDBD and certain of its affiliates are subject to supervision by the Israeli Supervisor of Banks relating to “Proper Conduct of Banking Business” which impose, among others limits on the aggregate principal amount of loans a financial institution can have outstanding to a single borrower, a group of related borrowers, and to the largest borrowers and groups of related borrowers of a banking entity (as these terms are defined in the aforesaid directives). IDBD, its controlling shareholders and its affiliates are considered a single group of borrowers for purposes of this regulation. These restrictions limit the ability of IDBD and its affiliates to borrow from a single bank in Israel, their ability to make investments where they require bank lines of credit, to invest in companies that have loans outstanding from banks in Israel, and to make business transactions together with groups that have such credit outstanding. In the period from 2013 and until the date of publication of the report, the concentration of credit risk of IDBD and its affiliates decreased as a result of a reduction in the amount of utilized credit for the group that includes IDBD, including as a result of a change of control that resulted in a re-characterization of the group for purposes of applicable regulation.

Reduced Centralization Act
In December 2013, the official “Reshumot” published in Israel the Promotion of Competition and Reduction of Centralization Law, N° 5774-2013 (the “Reduced Centralization Act ”) pursuant to which a pyramidal structure (or multiholding companies) of control in “reporting entities” (principally entities whose securities are held by public shareholders) is limited to two layers of reporting entities (with the holding company in the first layer not including a reporting entity that has no controlling shareholder). For this purpose, on the date of publication of the law in Reshumot, IDBD was considered a second-tier company and Discount Investments was considered a third-tier company, and as such, Discount Investments would not have been permitted to continue to control the operating companies after December 2019. As a result of the change in control of IDBD, IDBD and Discount Investments are no longer considered as second and third-tier companies, respectively, for the purpose of the Law. If Discount Investments is considered a second-tier company, it would be required by December 2019 at the latest, to cease controlling entities with publicly held securities.
In connection with evaluating the application of the Law, in August 2014, IDBD’s Board of Directors appointed an advisory committee to examine various alternatives to address the implications of the Law to comply with the provisions that apply to control in a pyramid structure (or multiholding companies) in order to enable continued control of IDBD and/or Discount Investments in “other tier companies” (currently held directly by Discount Investments) as of December 2019. The advisory committee has recommended the following alternatives:
(a)  
Taking either IDBD or Discount Investments private thereby removing the requirement that they be reporting entities (and as a result not a “tier company”); and
(b)  
Merge IDBD and Discount Investments.
The Board of Directors of Discount Investments has appointed an advisory committee with a similar function. As of the date of this Annual Report, no specific alternatives have been identified. The implementation of an alternative that would be adopted is likely to take several years.
Based on these analyses, IDBD considers it more likely that the completion of one of the specified alternatives will be adopted to comply with the restrictions of the Law regarding pyramidal holdings, while allowing IDBD to continue to control Discount Investments, and Discount Investments to continue to control Cellcom after December 2019. PBC, which currently is a third-tier company that controls each of Gav-Yam, Ispro and Mehadrin, has preliminarily evaluated application of the Law on its holding structure and determined that it will be able to maintain said control, as it has concluded that the Law has no effect over its financial statements.
IDBD, as a first-tier company, and Discount Investments, as a second-tier company, are not required to designate independent directors to their respective boards of directors or to appoint outside directors as required by the Law.
Pursuant to the provisions of the Law, the boards of directors of Cellcom, PBC, Elron, Gav-Yam, Ispro and Mehadrin, include a majority of independent outside directors. In June 2014, the Promotion of Competition and Reduction of Centralization (Classification of a Company as a Tier Company) Regulations, N° 5774-2014, came into effect, as part of which exemptions were provided for certain “third-tier” entities from changing the composition of their boards of directors to comply with the Reduced Centralization Act. Pursuant to this law and the Promotion of Competition and Reduction of Centralization (Concessions Regarding the Number of Outside directors) Regulations, N° 5774-2014, and in view of the number of directors who may be appointed with the consent of the Bronfman-Fisher Group (per the terms of the shareholders’ agreement between it and Discount Investments), the Board of Directors of Shufersal includes a majority of independent outside directors. In this context, in August 2014, Discount Investments entered into an agreement with an affiliate of the Bronfman-Fisher (which at the time held approximately 19% of the share capital of Shufersal), pursuant to which Discount Investments will vote in favor of the four directors designated by Bronfman-Fisher at the meeting of shareholders of Shufersal (out of a board of fifteen members), for so long as it holds the minimum defined percentage of the share capital of Shufersal, although Discount Investments reserves the right to object to any candidate on reasonable grounds.
These arrangements will be in effect so long as the restrictions of section 25(d) to the Reduced Centralization Act apply to Shufersal. Accordingly, Discount Investments, which as of December 31, 2015, owned approximately 53% of Shufersal’s share capital, is effectively able to appoint the majority of the members of Shufersal’s Board of Directors.
The Reduced Centralization Act includes provisions relating to a separation between significant affiliates and significant financial institutions. Consequently, so long as IDBD will be a significant operating entity, after December 11, 2019, IDBD will not be able to control Clal Insurance and additional financial affiliates within the Clal Holdings Insurance Enterprise Group or to hold more than 10% of the equity of any such entity (or more than a 5% stake in such an entity if it is regarded as an insurer without a controlling shareholder).
In May 2015, updated lists were published on the website of the Ministry of Finance and the official gazette in connection with the Reduced Centralization Act, which includes a list of the centralization factors, the list of the significant corporations and a list of the significant financial institutions. In accordance with the provisions of the Reduced Centralization Act, a substantial financial institution or a significant real corporation will be deemed as a centralization factor that subjects these entities to the provisions of the Reduced Centralization Act, as well as any entity that is part of a business group that includes a significant financial entity or a significant real corporation. IDBD and its controlling shareholders (Eduardo Elsztain and entities through which he holds his interest in IDBD) and the companies of IDBD (including Discount Investments, Cellcom, PBC, Shufersal, Adama, Clal Holdings Insurance Enterprises, IDB Tourism, Noya Oil and Gas Explorations Ltd. and companies under the control of these companies) were included in the list of centralization factors, and these entities, except for Adama (excluding Eduardo Elsztain himself), were also included in the list of significant corporations. In addition, companies of Clal Holdings Insurance Enterprises, including Clal Insurance (except Clal Holdings Insurance Enterprises) and Epsilon Investment House Ltd. (held by Discount Investments) were also included in the list of the significant financial institutions.
Insofar as Clal Holdings Insurance Enterprises will continue to be considered a significant real entity, this may affect its ability to retain control of Clal Insurance, directly or indirectly after December 2019, which may adversely affect its ability to appoint joint directors in both of the companies (Clal Holdings Insurance Enterprises and Clal Insurance).
In light of the directives issued by the Commissioner in connection with the appointment of a trustee for holding control in Clal Holdings Insurance Enterprises, which currently are held by IDBD and considering the letter issued by the Commissioner on December 30, 2014 pursuant to which IDBD is required to sell its control shares in Clal Holdings Insurance Enterprises, Clal Holdings Insurance Enterprises has appealed to the Concentration Committee in connection with its classification as a significant real entity.
In November 2014, IDBD’s Board of Directors resolved, subject to requisite corporate approvals, to promote a consolidation of management functions at IDBD and Discount Investments, in order to achieving costs savings. In this regard, on March 29, 2016, IDBD’s Board of Directors approved the terms of office and of employment of Mr. Shalom Lapidot to be chief executive officer of both IDBD and Discount Investments, which was subsequently approved by the compensation committee of Discount Investments. The term of office of Mr. Lapidot is subject to approval of a general meeting of shareholders of Discount Investments.
Regulations applicable to each of the businesses in Israel
Real Estate
In recent years, there has been continued shortage in manpower in the construction and agricultural industries which typically are labor intensive and depend on foreign workers, including in the areas of Judea and Samaria. The security situation in Israel, as well as the shutdown of Judea and Samaria during certain periods of the year, have resulted in continued shortage in the workforce, driven by lower numbers of foreign workers from Judea and Samaria. In July 2015, the Minister of Finance increased the quota of foreign work permits to approximately 20,000 through the end of 2016, as a means to achieving the goal of increasing new construction projects by 70,000 during the year and to promote new housing starts to alleviate the housing crisis. Given the shortage of skilled workers, wages increased in general and in particular those of foreign construction workers. The shortage and unavailability of a skilled workforce, increased construction costs and resulted in longer timetables for the execution of new projects.

Supermarkets
Labor Law
The retail sector activities of Shufersal are subject to labor laws including the Employment of Workers by Human Resources Subcontractors Law, 5756-1996, the Extension Order in the Matter of Contract Workers in the Cleaning Branch in the Private Sector, the Minimum Wage Law, 5747-1987 and the Increased Enforcement of Labor Laws Law, 5772-2011. As of December 31, 2015, Shufersal employed approximately 1,000 workers, all of which are subject to minimum wage requirements. The majority of Shufersal’s employees are parties to a collective bargaining agreement.
The provisions of the Minimum Wage Law (Increase of Minimum Wage - Emergency Provision), 5772 - 2015 and the amendment of the Minimum Wage Law, 5747 – 1987, resulted in an increase in the minimum wage effective as of April 2015 and led to an increase of NIS 43 million in Shufersal’s wage expense in 2015 (compared with 2014). In Shufersal’s evaluation the increase of the minimum wage in Israel, changes to labor laws in Israel and the increased possibility of organized workers may detrimentally affect the business results of Shufersal and result in higher wage expenses of Shufersal.
Retail and Production
The activities of Shufersal are also subject to consumer protection laws, including the Food Law, the Defective Products Liability Law, 5740-1980, the Consumer Protection Law, 5741-1981, and the Consumer Product and Service Price Supervision Law, 5756-1996 that allows a consumer to institute a class action suit for damages caused to consumers as a whole based on the causes of action set out in that law.
The Public Health Protection (Food) Law, 5776-2015, sets forth quality standards and food safety measures and provides the relevant regulator supervisory and criminal and administrative enforcement powers. The provisions of the Food Protection Law affect production activities of Shufersal, including importation and food marketing activities. Shufersal is continuing the process of implementing procedures to comply with the provisions of the Food Protection Law that apply to its activities. Shufersal also operates pharmacies in certain of its stores, and is therefore subject to the provisions of the Pharmacists Ordinance (New Version), 5741-1981.
Shufersal is involved in manufacturing activities at three owned facilities where it produces principally private-branded baked goods which are subject to compliance with applicable production and quality assurance standards. Shufersal is continuously evaluating compliance of these facilities with the provisions of the Food Protection Law and as of the date of this Annual Report, Shufersal believes its operations comply in all material respects with the applicable provisions of this law.
The retail activities of each Shufersal store requires compliance with the Business License Order (Businesses Requiring a License), 5773-2013, principally providing that they obtain a business operating license for each unit. As of the date of this Annual Report, there are two units that are subject to legal proceedings regarding business licenses that are pending against Shufersal and its directors. Shufersal’s operating units are also subject to land development approvals and licensing, substantially all of which are in compliance.
The Food Law and the Anti Trusts Law
The Antitrust Law affects the activities of Shufersal, especially with respect of the possibility of carrying out future acquisitions for which approval is required from the Antitrust Commissioner (the “Commissioner”) and the influence on the trade arrangements of Shufersal with its suppliers. The Food Law regulates Shufersal’s trade arrangements with its suppliers which are regulated in detail which are designed to promote competition in the food supply industry. As of the date of this Annual Report, Shufersal believes that growth through acquisitions of a significant entity in the retail market would be limited. Moreover, provisions of the Food Law relating to geographical competition of retailers may influence the ability of Shufersal to expand organically through opening new stores in certain areas and under certain circumstances Shufersal may be required to close active branches under certain circumstances.
The Food Law includes the following three systems:
(a) with respect to activities of suppliers and retail trade, the Food Law prohibits:
i. a supplier interfering with the retail price of the products of another supplier;
ii. a retailer interfering with a supplier in the matter of the consumer price imposed by another retailer;
iii. a large supplier imposing its market position to influence the ordering or presentation of retail products within stores of a large retailer (Shufersal is included in the list of large retailers);
iv. a large supplier interfering with the price a retailer charges consumers for the products of that supplier, in the allocation of sales areas at any rate for the products of the supplier, for the acquisition of a product from the supplier in any scope from the total retail purchases of the product and of competing products, and for the purchase or sale of products which another supplier supplies to the retailer, including purchase quantities and goals, the sale area allocated to them in a store and any other commercial condition sought to be imposed;
v. a large retailer and a large supplier agreeing to set the pricing of a basket of products at a price that is lower than the marginal cost of production of the related product or that would require a consumer to purchase a minimum amount of the related product to achieve the reduces price;
vi. a large supplier conditioning the sale of its product to a retailer on the purchase of another product of that large supplier; and
vii.  a supplier forwarding payments to the large retailer, unless by way of a price reduction of the product units.
(b) Restrictions on geographical competition of retailers have adversely affected Shufersal’s expansion through organic growth and acquisitions. On September 28, 2014 Shufersal received a notification from the Antitrust Authority regarding demand areas of Shufersal’s large stores (“Notice of Demand Areas”). The stores that were the subject of the Commissioner’s request under the Law are 14 stores located in Haifa, 3 stores in Carmiel, 4 stores in Hadera, and 3 stores in Safed. As of the date of this Annual Report, Shufersal has not been required to close or dispose of any of its stores.
(c) Provisions designed to increase transparency of consumer prices, inter alia, by requiring a large retailer to publish on the internet and without cost to consumers, various data on prices of consumer goods it sells in its stores to allow consumers to compare prices with those of other retailers.
(d) Provisions regarding the contemporaneous application of the Food Law and the Antitrust law - In December 2015, the Commissioner published a statement on the parallel application of the Antitrust Law and the Food Law listing cases in which only the provisions of the Food Law will apply and no additional regulation will be required under the Antitrust Law. As of the date of the notice Shufersal’s operations comply with the Food Law. As of December 31, 2015 the implementation of the Food Law has had no significant impact on Shufersal’s business.
Shufersal’s acquisition of Clubmarket was approved by the Commissioner in 2005, and within this framework the Commissioner imposed a number of limitations on Shufersal’s activities including: prohibiting Shufersal from pricing products that result in a loss that is not proportionate to its business activities and are aimed to affect the operations of competitors from the market; prohibiting Shufersal from entering into agreements with suppliers that impose restrictions on those suppliers from doing business with competitors of Shufersal; and prohibiting Shufersal from attempting to influence commercial conditions between its suppliers and competitors.
Shufersal obtained an exemption from the Commissioner, available until October 14, 2018, regarding the operation of the Fourth Chain, which is a label company owned by a number of supermarket chains that was established to develop consumer goods. The Commissioner’s decision took into account the fact that Fourth Chain contracted with a third party that develops products for it under a private brand and the stipulated exemption exclusively permits these joint activities for the development of the private brand. Shufersal believes the Fourth Chain private label increases competition by establishing a cost-effective alternative to dominant branded consumer products.
The findings of the Commissioner in the matter of the rules of conduct among the largest store chains and the dominant suppliers in the food supply market, including under the provisions of the Food Law, and in the matter of the merger of Shufersal with Clubmarket, may have a detrimental effect on Shufersal’s business, its financial condition and operating results.

Agriculture
a.Operations Development and Licensing. ADAMA manufactures generic crop protection products which require production processes and licensing of existing molecules or processes. The primary development and licensing operation focuses on chemical-engineering development of production processes for new active ingredients and generic products, biological and agricultural testing intended for obtaining licenses, development of licensing information for the active ingredients and solutions that form licensing portfolios for the various regions, development of compounds, streamlining of production processes and development of new and specialized formulations of existing products. Moreover, ADAMA also engages in scientific-technological backup of existing production processes with emphasis on improving quality, efficiency, safety, environmental protection and reducing production costs. Furthermore, ADAMA develops several innovative substances, based on molecules acquired after a screening process, in which their effectiveness is proven. As of the date of this annual report, ADAMA operates research and development (R&D) facilities in Israel, India and Brazil and has started operating on R&D facility in China. In addition to chemical development, ADAMA develops licensed products through third party producers. At times, such development incorporates proprietary know-how and processes owned by ADAMA, as well as those developed jointly with subcontractors, in addition to processes and know-how of Adama’s suppliers.
Licensing - at various stages of manufacture and marketing, the substances and products marketed by ADAMA require licensing in each country in which it operates (ADAMA products that are manufactured and sold in Israel require licensing under the Crop Protection Law, 956). ADAMA has seven development and licensing centers in Europe, Israel, Latin America (Brazil), the United States and Asia, and licensing expertise in more than 100 countries. For its foregoing operations, ADAMA employs 170 employees around the world and also works with external contractors. Crop protection products are sold under the control of government authorities in each country (usually ministries of agriculture, health and the environment). The licensing requirements vary from time to time and in general have become more stringent over the years throughout the world, resulting in increased licensing costs and time commitments. The most demanding licensing standards are in the United States, Brazil, Japan and the EU. The rest of the world generally is adapting their requirements to the standards of the more advanced countries. In some countries, the license is not limited in time, but further development of licensing information is required every few years. Some of the countries grant licenses for 7-15 years and renew them at the end of that period subject additional testing Licensing costs and procedures differ from one state to another and may take several years. ADAMA is also required to make modifications to fully adapt any product in a certain country to the specific licensing requirements of that country. ADAMA regularly reviews the compliance of its products with the licensing requirements in the various countries in which they are sold, and adjusts them as needed. Licensing costs usually amount to hundreds of thousands of dollars per product and in some countries, such as the United States, the European Union and Japan, the costs can reach millions of dollars per product. In 2015, ADAMA received 276 new licenses for marketing its products (excluding expansion of labels of permitted products for new crops).
In 2015, ADAMA’s licensing expenses amounted to US$93.1 million, with the addition of depreciation the gross amount constitutes 3% of ADAMA’s revenue for 2015.
b.Labor Laws. Labor Relations in Israel. Labor relations of most of the employees of ADAMA’s subsidiaries are regulated under special collective agreements for limited periods. In addition, some of the employees of ADAMA’s subsidiaries in Israel are employed under personal agreements. As part of an agreement executed in 2011 between ADAMA and the Histadrut regarding employees in Israel, ADAMA undertook to carry on production, at the scope and on certain production lines, at the plants of the subsidiaries in Israel through June 1, 2017. In 2015, in addition to the provisions set aside by ADAMA in preceding years with regard to these understandings, ADAMA set aside a provision of US$12 million which is recorded in its financial statements under other expenses.
Labor Relations in Brazil. At two of ADAMA’s plants in Brazil, labor relations are subject to a collective bargaining agreement that is renewed every two years, and to the best of ADAMA’s knowledge, there has been no major labor unrest in recent years.
As of the date of this annual report, ADAMA believes that it is not dependent upon any of its employees.
c.Environmental Risks and Environmental Regulation
General. ADAMA is exposed to various environmental risks and its operations are subject to extensive environmental regulation, that varies by country where ADAMA operates. In recent years environmental legislation (or in stages of legislation) applicable to ADAMA’s operations have become much stricter as supervision and enforcement of these environmental requirements has tightened. ADAMA believes that this trend is expected to continue in the future.
ADAMA holds, as required by law, various permits and licenses such as business licenses, toxins permits and permits for pumping effluents into the sea. To the best of ADAMA’s knowledge, of the date of this annual report the permits and licenses applicable to ADAMA with regard to environmental issues are valid.
ADAMA’s environmental risk management policy: ADAMA attaches great importance to protecting the environment by accepting social and environmental responsibility and takes necessary measures to comply with the requirements of the law, and seeks to exceed compliance, through continuous dialogue with affected parties, including the authorities and the community.
Environmental Regulation. The key environmental law applicable to ADAMA’s operations are, inter alia, the Law for the Prevention of Nuisances, 1961; the Job Safety Ordinance (New Version), 1970; Business Licensing Law, 1968; Water Law, 1959; Law for the Prevention of Sea Pollution from Land-Based Sources, 1988 “Prevention of Sea Pollution”); Hazardous Materials Law, 1993 “Hazardous Materials Law”); Israel Clean Air Law, 2008 (“Clean Air Law”) and their regulations.
ADAMA continuously reviews the impact of environmental regulation on its business, acts to prevent or minimize environmental risks and to reduce environmental impacts that could be caused by its operations and invests considerable resources in ensuring compliance with the provisions of the environmental laws and those that may apply to it.
In September 2015, the Ministry of Environmental Protection issued for public comment a memorandum of the Integrated Environmental Licensing Law, 2015. The Memorandum of Law sets out one licensing procedure for businesses that have a substantial impact on the environment, at the end of which the business is granted an integrated environmental license in substitution of various environmental permits and licenses. The Memorandum of Law seeks to update and strengthen legal requirements applicable to, among other things, the use of hazardous substances, treatment of waste, compliance with building and construction laws, sanctions for license violation, etc. In view of the early stage of this legislation, ADAMA is unable to assess whether these obligations will apply to it or as to the scope thereof.
Air Quality. ADAMA’s plants are subject to regulation relating to air emissions under the Clean Air Law. ADAMA’s plants have duly filed applications for emission permits and some plants have already received valid emission permits or draft emission permits.

In May 2012, ADAMA signed an arbitration agreement with a group of Nir-Galim residents pursuant to which ADAMA agreed to comply with the recommendations of a certified expert to prevent future potential air and odor nuisances and to invest in facilities such as those mentioned above. In September 2015, the expert appointed pursuant to the mediation agreement announced that the mediation outline will be implemented in full by ADAMA and thereby the mediation proceedings came to an end. ADAMA makes substantial investments to minimize and prevent environmental consequences of its operations on air quality.
Effluents and Pumping into the Sea. The Prevention of Sea Pollution Law requires that the Ministry of Environmental Protection issue a permit for pumping wastewater or effluents into the sea. The ADAMA plant in Ashdod has such permit the terms of which have been made more stringent throughout the permit period as part of the general trend adopted by the Ministry.
Land. There are hazardous materials that are stored and located at Adama’s plant, as well as infrastructure and facilities, which contain fuels and hazardous materials. ADAMA is dedicated to preventing and treating the pollution of land and water by these materials.
ADAMA’s plant in Ashdod has been requested to conduct various land and well surveys for groundwater by the Ministry of the Environment and by the Water Authority. When the surveys were presented, the plant was required to present a program to mitigate environmental risks in accordance with methodology set by the Ministry of the Environment. The plant presented a detailed program to the Water Authority for the treatment of the ground water, which has been accepted in principle by the Water Authority.
The ADAMA plant in Be’er Sheva has been requested by the Ministry of the Environment to conduct an historical land survey and sample tests on ground gases. Sample tests of the ground gases have been conducted in coordination the Ministry of the Environment, and as of the date hereof, the plant has not been required to take any further action in this connection.
Within the context of the integrated environmental regulation process, ADAMA’s plant at Neot Hovav has been required to present a historical land survey. The survey was presented to the Ministry of the Environment at the beginning of 2015. At this stage, ADAMA is unable to evaluate whether additional requirements will be placed upon it in relation to surveys or the treatment of land or ground water at its plant, what their substance might be and whether they would have any significant impact on it.
Pollution of the groundwater was discovered in the Neot Hovav Council in the past, following which the Council took various steps to halt the spreading pollution and to extract it, including the treatment and monitoring of the underground water. As the date hereof, ADAMA is not required to incur expenditures in the treatment of the pollution. The possibility exists that the Neot Hovav Council will require ADAMA to contribute to the costs of remediation in the future.  However,  ADAMA is unable at present to evaluate whether such a demand will be made and what the size of such a demand may be.
Adama’s Investments in the Environment. ADAMA’s investments in environmental compliance in 2015, amounted to approximately US$21 million (facilities) and approximately US$41 million (routine costs exclusive of depreciation). ADAMA intends to continue to make investments, insofar as may be required and deemed appropriate to exceed these standards on environmental issues, in order to realize its policy of optimizing compliance. In Adama’s assessment, in each of the years 2016 – 2018 the total environmental costs are expected to amount to approximately US$60 million.
Adama’s plan in Brazil –ADAMA’s Brazilian subsidiary has two main plants, located in the South of Brazil. To the best of ADAMA’s knowledge, as at the time of this annual report, all of the permits and the licenses are in full force and effect. The Brazilian subsidiary invests in safety and ecological facilities in its plants, including in the performance of independent environmental testing to ensure compliance with the terms of its licenses, control over water sources located near the plant and the monitoring of emissions into the atmosphere, based on advanced technology. Periodic tests on the volume of the emissions into the atmosphere and the water sources show that the Brazilian plants comply with the requirements of the State’s Ministry of the Environment. As part of that company’s policy for improving ecological processes, it invests in the correction of deficiencies that have been found, changes in production processes, the building of facilities for purifying wastewater, the storage of by-products and recycling.
d.Legislation, standards, regulation and exposure in the environmental field, in health and in safety.
Adama may bear significant civil (including through class actions) or criminal liability (including high fines and/or payments of high amounts of compensation and/or environmental monitoring and rehabilitation costs) in respect of a breach of environmental regulation and failure to comply with health and safety standards including on the basis of strict liability. Even though Adama makes substantial investments in its facilities and in building special facilities in accordance with environmental requirements, it is unable to verify that those investments will be sufficient to satisfy evolving requirements. In addition, Adama is subject lawsuits alleging physical or property damage as a result of exposures to hazardous materials, which are covered for the most part by Adama’s insurance policies.
Telecomunnications
Communications Regulations
Cellcom’s operations are subject to general legal provisions regulating the relationships and method of contracting with its customers. These provisions include the Consumer Protection Law, 5721-1981 and regulations promulgated thereunder and other laws detailed below. A substantial part of Cellcom’s operations are subject to the Communications Law, regulations enacted by the Ministry of Communications, and the provisions of the licenses granted to Cellcom by the Minister of Communications. Cellcom’s activies which include providing cellular service, landline, international telephone services and internet access, and infrastructure services are subject to licensing.
Supervision of Rates. The Communications Regulations (Telecommunications and Broadcasts) (Payments for Interconnect), 5760 - 2000 requires cellular operators to phase in gradual reduction of communications rates (i.e. payments that will be made by an in-country operator, another cellular operator or international operator to complete one minute of call time in the network of a cellular operator or for the sending of an SMS between cellular operators). This reduction has led to a considerable reduction in Cellcom’s revenues.
Moreover, in August 2013 the Communications Law was amended to authorize the Minister of Communications to set interconnection prices and regulate the use of networks owned by another operator based not only on the cost incurred to establish the network (according to the calculation method to be determined by the Minister of Communication) plus a reasonable profit, but also on one of the following: (1) flat payment for a service provided by the license holder; (2) reference to tariffs charged for a comparable service; or (3) reference to the cost of these services or with the interconnection costs charged in other countries. The Minister of Communications was also empowered to give instructions on structural separation for the providing various services, including segregating services provided by a license holder from services provided to a subscriber.
In the last few years, contract termination charges for cellular plans have been banned in the cellular and other communications markets, other than for customers who have more than a certain number of cellular lines or whose monthly payments exceed a certain amount for bundled service. The elimination of these charges led to a considerable increase in plan cancellations, increased the costs of retaining and acquiring customers, and accelerated erosion of rates.
Virtual Operators (MVNO). The Communications Law and related pronouncements regulate the activities of virtual operators. Notwithstanding that the MVNO regulations apply only to the activities of a virtual operator which has an operating agreement with a cellular operator, the regulations empower the Ministry of Communications together with the Economic Ministry to impose terms of an agreement including fixing the price to be charged for the services provided.
Other Third Generation Operators (UMTS). In 2012, Golan and Hot Mobile began to offer UMTS services. The conditions of the tender according to which Golan and Hot Mobile were granted those licenses included a number of benefits and concessions, including minimally low license fees and a mechanism to reduce the royalties they undertook to pay for the frequencies based on the operator’s market share in the private sector and setting long timetables to meet the geographical coverage requirements of the network and the right to use in-country migration services via other cellular operators’ networks. The Communications Law obliges the other cellular operators to provide in-country migration services to Golan and Hot Mobile for a period ranging from seven to ten years subject to certain conditions. In 2011, Cellcom entered into a contract with Golan to provide in-country migration services. Hot Mobile entered into a similar in-country migration agreement with Pelephone and later with Partner (which was subsequently replaced by a joint networks agreement with Partner) without intervention from the Ministry of Communications.

Regulation of Multi-Channel Television Services
As at the date of this Annual Report, television program streaming via the Internet is not subject to regulation in Israel. Should the recommendations of the committee for the examination of the arrangement of commercial broadcasts be adopted and the committee requires Cellcom to make additional investments or regulation is imposed that is not beneficial for Cellcom’s streamign services or for its ability to use the DTT infrastructures, the results of Cellcom’s streaming services may be adversely affected.
Cellcom’s Communications Licenses
Cellcom holds a general license for providing cellular services, valid until January 31, 2022, setting out conditions (including duties and restrictions) applicable to its activities, officers and shareholders holding certain percentages of Cellcom’s shares. The license may be extended by the Ministry of Communications for consecutive periods of six years, if Cellcom is in compliance with the provisions of the license and law, and makes requisite investments to its service and network. The Ministry of Communications has amended the license conditions in the past, and may amend them in the future, without Cellcom’s consent and in a manner that may limit its ability to conduct business. The license provides that Cellcom does not have exclusivity for providing services.
The cellular license can be revoked, suspended or limited in the following cases: total holdings of the founding shareholders or their successors (as defined in the license) is less than 26% of the control shares of Cellcom; total holdings of Israeli parties (as defined in the license), who are among the founding shareholders or their successors, is less than 20% of the total issued share capital and control shares of Cellcom; a majority of directors are not Israeli citizens or residents of Israel; fewer than 20% of the directors of Cellcom were appointed by Israeli parties; any an act or omission of Cellcom that adversely affects or restricts competition in the cellular sector; the aggregate equity of Cellcom, together with the aggregate equity of shareholders each holding 10% or more of the share capital, is less than US$200 million.
In light of the 2015 change in the control structure of IDBD, the Cellcom control structure has also changed, and requires the approval of the Ministry of Communications, including with regard to Israeli holding requirements included in the licenses of Cellcom, as Mr. Eduardo Elsztain is not a citizen of Israel. IDBD and Cellcom formally applied to the Ministry of Communications to approve these changes and amend the telecommunications licenses of Cellcom accordingly. If the request is not approved and another arrangement is not offered by the Ministry of Communications, Cellcom may face sanctions, which under the terms of its license, can include suspension or cancellation of its licenses.
According to Telecommunications Law, the Ministry of Communications may impose on telecommunication companies, including Cellcom, financial sanctions for breach of license and law. The amount of the sanction is calculated as a percentage of the revenue of the operator, and according to the degree of severity and extent of the breach, said may be significant.
In July 2015, Cellcom received (through a wholly owned entity) a uniform and general license for the provision of landline telephony services (which replaced the previous license for providing this service), for the period ending April 2026. A uniform and general license was also awarded to Netvision and replaced its general license for providing internet access services, international carriers, and a network access point for the period ending February 2022. In addition, an entity, fully controlled by Cellcom received a uniform and general license which replaced the landline telephony service license, for the period ending March 2026. These licenses can be extended for an additional period of 10 years, under terms similar to the terms of extension of the general cellular license.
The Ministry of Communications has issued rules providing for unification of all uniform licenses. The uniform license allows providers to also offer virtual operator services. The process of unifying the uniform licenses and the timetable have not yet been determined and it is possible that this process will have a legal, financial, tax and accounting effect on Cellcom’s and Netvision’s businesses. The provision of a number of services by one entity will require limitations also on discrimination between operators.
Cellcom holds other communications licenses: a special license for the provision of data transmission and communication services in Israel, a license to provide internet services, and licenses to provide cellular services, landline telecommunication services and internet services in the West Bank, for periods ending 2016-2018. These licenses include conditions similar to those of the general license for the provision of cellular services, as noted above.
According to regulations that apply to the uniform license, there are certain limitations on cross ownership among license holders.
2.Further Regulation Applicable to Communications Services
In July 2014, the Ministry of Communications announced a public hearing on the coverage and quality requirements for second-generation and third generation networks. The proposed requirements are stricter than those currently existing and if adopted, could have an adverse effect on the results of Cellcom. Cellcom is unable to assess whether the proposed changes will be adopted, and what the impact of these changes will have in practice on Cellcom’s operating results.
In addition, in August 2014, the Ministry of Communications announced a public hearing to consider call centers owned by communications operators. In addition, the Ministry of Communications proposed to amend the Communications Law (Telecommunications and Broadcasting), 1982, providing that a customer may claim pre-set financial compensation if the telephone call center does not reply within an average response time or if there is an overcharge error. Cellcom believes that adoption of these proposed changes could have a material adverse effect on Cellcom’s business.
3.Permits for Setting Up Base Sites
a. Cellcom’s cellular services genearlly are provided through base sites across Israel, their construction and licensing are included in TAMA 36 (District Zoning Plan) – Part A - National Master Plan for Communications - Small and Micro Broadcasting Facilities (“TAMA 36”), and Radiation Law. Regulating the deployment of wireless access devices, which are base sites with smaller dimensions, are, for the most part, regulated by Communications Law and Radiation Law. The construction of base sites requires a permit as per Planning and Building Law, 1965 (“Planning and Building Law”), and is subject to other approvals from multiple regulators.
Legal proceedings (civil, criminal and administrative) are pending against Cellcom, under which a number of arguments were raised concerning the legal compliance of some of Cellcom’s sites, alleging failure to obtain permits under Planning and Building Law, or based on development of sites in contravention of a permit.
Cellcom did not apply for a building permit for approximately 33% of its base sites on the basis of the exemptions for wireless access facilities provided by law. In 2010, the Supreme Court issued a Temporary Order at the request of the Government’s Attorney General, enjoining Cellcom, Partner, and Pelephone from proceeding with construction of these facilities on the basis of the exemption. A final determination of the regulatory authorities regarding applications for exemptions is pending as of the date of this Annual Report.
In addition, Cellcom provides in-building repeaters and micro-sites (“femtocells”) for its subscribers seeking a solution to poor indoor reception. Based on an opinion Cellcom received from legal counsel, Cellcom did not request building permits for the repeaters that were installed on roof tops, which are a small fraction of all repeaters installed. It is not clear whether the installation of a different type of in-building repeaters and micro-sites requires a building permit. Some require a specific permit while others require a permit from the Ministry of Environmental Protection, depending on their radiation levels. Cellcom also builds and operates microwave facilities as part of its transmission network. The different types of microwave facilities receive permits from the Ministry of Environmental Protection regarding their radiation levels. Based on an opinion of legal counsel, Cellcom believes that building permits are not required for the installation of microwave facilities on rooftops.
b. Indemnification obligation - under Planning and Construction Law, local planning and building committees may demand and receive, as a condition for granting a building permit for a site, a letter of indemnity for claims under Section 197 of Planning and Construction Law. By December 31, 2015, Cellcom had executed approximately 400 letters of indemnity as a condition for receiving permits. In some cases, Cellcom has not yet been built any sites. As at December 31, 2015, two requests for indemnification were received from one local committee on the basis of a letter of indemnity as noted, in an immaterial amount.

As a result of the requirement to deposit letters of indemnity, Cellcom may decide to dismantle or move some sites to less advantageous locations, or build certain sites, if it concludes that the risk of granting letters of indemnity exceeds the benefit derived from those sites, which may result in a deterioration of cellular services and damage network coverage.
c. Radiation Law, Regulations and Permits Thereunder - Radiation Law, Regulations and Principles thereunder included provisions relating to all aspects related to regulating the issue of non-ionizing radiation, including, inter alia, levels of exposure that are permissible.
In May 2012, the Ministries of Communications, Health and Environmental Protection, based on their assessment of the potential health consequences of fourth-generation telecommunications services in Israel, including increased exposure to non-ionizing radiation, issued a memorandum advising that deployment of the fourth-generation network should be based on existing base stations, other smaller base sites both internal and external, and if possible, using the wired infrastructure so that data traffic will be carried mainly through fixed communication lines and not through any cellular infrastructure. In August 2014, the Ministry of Communications allowed the use of fourth-generation infrastructures, and in January 2015 fourth-generation frequencies were awarded to cellular operators. The recommendations of May 2012, as noted, were not included in the tender documents or in said approval.
4.  
The Reduced Centralization Act
Given the holding structure of the I.D.B. Group, Cellcom is considered in the “third layer”. Cellcom is included in the list of centralized parties, and in the list of significant non-financial corporations under said Law. According to said Law, DIC and IDBD must take steps to have Cellcom cease to be a “third layer” by December 2019. DIC and IDBD have announced that they are considering steps to achieve this goal without giving up control of Cellcom, by taking DIC or IDBD private or implementing a merger of DIC and IDBD. As of the date of this Annual Report, there is no certainty regarding the implementation of these strategies. The provisions of the Reduced Centralization Act regarding the allocation of rights over public assets could adversely affect the ability of Cellcom to renew its cellular licenses and to receive new frequencies, which may adversely affect Cellcom’s ability to issue debt or adversely affect its business.
a.Changes in legislation and high regulatory intervention - legislative changes and active regulatory enforcement may have an adverse influence especially if material financial sanctions are imposed on Cellcom, on the ability of Cellcom to plan its management and on its operating results, if any of the following occurs: the cancelation or relief for the obligation for structural separation applicable to Bezeq and Hot, especially if the said cancelation or easing is given prior to the establishment of the effective wholesale market in landline communications, if tariffs do not encourage competition or if other regulation is set out in the wholesale landline market which adversely affects Cellcom’s operations; the granting of relief and benefits to competitors compared with Cellcom; the authorization of other operators to provide services to Cellcom subscribers which were previously provided only by Cellcom; the non-renewal of licenses and/or frequencies available to Cellcom or the increased use thereof, and the non-location of additional frequencies, where required; the imposition of additional requirements in respect of public safety or health, including with respect to base sites; imposition of additional restrictions or requirements for providing services and products and/or intervening in market conditions; imposition of a higher standard of service; imposition of stricter privacy policies; the imposition of regulation on streaming services, the imposition of conditions which are not beneficial for the users of DTT broadcasts, or the imposition of conditions that impact Cellcom and do not apply to other operators of streaming services over the internet.
b.Labor Law. In February 2015, a collective bargaining agreement was signed with the workers representative body and with the Histadrut for a period of three years (form 2015 to 2017) which applies to all employees of Cellcom and Netvision, except members of senior management. This agreements limits the right of Cellcom to make organizational and personal changes and makes such changes more expensive as reflected in the voluntary retirement plans executed in 2014 and 2015 and may also require greater management attention to administer.
Insurance
Areas of Activity of Clal Insurance Business Holdings
Clal Holdings offers general insurance such as car insurance, homeowners’ insurance, and credit and foreign trade risk insurance, among others, as well as health insurance. The activities of Clal Holdings and its subsidiaries are subject to the provisions of laws applicable insurance companies and to regulatory supervision. Clal Holdings’ subsidiaries are supervised by the Capital Markets, Insurance and Savings Commissioner (the “Insurance Commissioner”). Clal Insurance and its subsidiary, Clalbit Financing, are supervised by the Israel Securities Authority. Subsidiaries of the Clal Holdings Insurance Group have been subject to administrative enforcement proceedings and the imposition of fines. Clal Insurance is not in breach of any material regulatory provision applicable to its operations.
Capital Requirements of Insurance Companies
Minimum Capital – The Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Capital Regulations”) law prescribes minimum capital requirements for insurance companies. The capital required for insurance activities consists of a first layer of capital, based the greater of the initial capital and capital derived from the volume of activity in general insurance, the higher of the calculation based on premiums and the calculation based on outstanding claims, as well as other capital requirements. Failure to comply with the Capital Regulations will require the insurer to increase its equity up to the amount stated in the Capital Regulations or reduce the scope of its business accordingly, no later than the date of publication of the report, except in exceptional circumstances as approved by the Insurance Commissioner, that will then determine any supplementary capital requirements.
Breakdown of an Insurer’s Capital – The Insurance Commissioner issued a circular in August 2011 (“Circular”) that provides a framework for determining the composition of an insurer’s equity, in conjunction with the adoption in Israel of the Solvency II Directive (“Directive” or “Solvency II”), as amended and updated.
·Initial (core) capital (basic tier 1), equals the components included in capital attributable to shareholders of Clal Insurance. The overall capital ratio must be at least 60% of the total equity of the insurer.
·Secondary (tier 2) capital includes complex secondary capital instruments (excluding periodic accrued interest payments), subordinate secondary capital instruments (as defined by the Circular) and any other component or instrument approved by the Insurance Commissioner. A complex secondary capital instruments is one that is subordinated to any other instrument, except for initial capital, including financial instruments available to absorb losses by postponing payment of principal and interest. The first repayment date of secondary capital instruments will be after the end of the period that reflects the weighted average maturity of insurance liabilities, plus two years, or after 20 years, whichever is first, but no earlier than eight years from the date an instrument is issued. If the complex secondary capital instrument includes an incentive for early redemption, the first incentive payment date may not be earlier than five years from the date of issue of the instrument.

·Tertiary (tier 3) capital includes complex tertiary capital instruments (excluding periodic accrued interest payments) and any other component or instrument approved by the Insurance Commissioner. A tertiary capital instrument is subordinate to any other instrument, except for primary and secondary capital, and includes financial instruments available to absorb the insurer’s losses by postponing the payment of principal. Tertiary capital will must be junior to secondary capital and equal in the order of credit repayments. The first repayment date on tertiary capital instruments may not be earlier than five years from the date of issuance. If the complex tertiary capital instrument includes an incentive for early redemption, the first indentive payment date may not be earlier than five years from the date of issue of the instrument. Tertiary capital may not exceed 15% of the total capital of the insurer.
Insurance liabilities include liabilities that are not yield dependent but excludes any liability fully backed by lifetime indexed bonds and net of any reinsurance costs. Approval of the Insurance Commissioner is required for inclusion of hybrid capital instruments (primary, secondary or tertiary) in equity. The Circular includes a Temporary Order regarding the breakdown of an insurer’s equity (“Temporary Order”), which will apply until full implementation of the Directive in Israel, when announced by the Insurance Commissioner. The Temporary Order defines the secondary capital issued according to Capital Regulations, before amendment, as subordinate secondary capital and imposes a limit equal to 50% of basic capital.
Distribution of dividends – In accordance with rules promulgated by the Insurance Commissioner, a dividend distribution may not be approved, unless, after giving pro forma effect to the proposed distribution, the insurer has a ratio of recognized equity to required equity of at least 105%, as confirmed in filings with the Insurance Commissioner. Prior approval of the Insurance Commissioner is not required for any distribution of dividends if the total equity of the insurance company, as defined by Supervision of Financial Services (Insurance) (Minimum Equity Required of an Insurer), Regulations, 1998 (“Minimum Capital Regulations”), after giving effect to the distribution of the proposed dividend, exceeds 115% of the required equity.
In November 2014, the Insurance Commissioner outlined solvency rules (“rules” or “regime”, as applicable) based on Solvency II, in Israel, in a letter addressed to managers of the insurance companies (“Letter”). In the Letter, the Insurance Commissioner outlined a plan to adopt the 2016 European model for calculating capital and capital requirements for the local market, effective as of the annual reports for 2016 (“First Adoption Date”). During a period to be determined by the Insurance Commissioner and as conditions require, insurance companies will also be required to comply with capital requirements under existing regulations. The Letter stated that until final adoption, insurance companies must prepare additional quantitative assessment exercises (IQIS) for the 2014 -2015 period. These requirements are intended to assess the quantitative effects of adopting the model, as well as providing data for calibrating and adjusting the model. In addition, the Letter addressed an initiative to develop a framework for quarterly reporting of insurance companies’ solvency ratio. The Letter also referred to the Commissioner’s intention to publish provisions for managing capital and targets for internal capital, to address a gap survey that insurers will undertake with respect to their risk management systems, controls and corporate governance and a consultation paper to promote the process of self-assessment of risks and solvency (ORSA).
In April 2015, the Insurance Commissioner published a second letter titled “Plan for the Adoption of Rules for Solvency, based on Solvency II” and provisions for the IQIS4 exercises to be undertaken regarding the 2014 historical financial statements. The letter emphasized that the exercise reflects the decision of the Insurance Commissioner to impose adjustments required for the Israeli insurance market. The Letter further stated in connection with the proposed adoption of IQIS5 that the Insurance Commissioner would continue to monitor developments in the European markets and would consider adjustments relevant for Israel.
In July 2015, the Insurance Commissioner issued a letter concerning “transitional provisions regarding the application of solvency rules, based on Solvency II” (the “Letter on Transitional Provisions”). The transitional provisions were provided by reference to certain solvency rules set forth in the European Directive relating to, inter alia, a gradual adoption of capital requirements in respect of holdings of equity shares which may a component to be included in the calculation of core capital. In addition, the letter included transitional provisions regarding submission of a plan to improve the capital ratios of insurance companies whose ratios are negatively affected following adoption of the new solvency rules beginning with the financial statements for 2018. Adoption of the solvency rules are expected to change both the recognized regulatory and required regulatory capital and according to indications existing today, is expected to result in a significant decline in the ratio between recognized capital and required capital of Clal Insurance compared to capital ratios calculated according to capital ratio requirements currently in effect, and is expected to adversely affect the ability of Clal Insurance and Clal Insurance Enterprises to distribute dividends upon such adoption. However, as a rule, the capital requirements under the solvency rule are intended to serve as a capital cushion against more serious events, with a lower loss probability than the capital requirements under current rules.
In May 2015, the Board of Directors of Clal Insurance Enterprises and the Board of Directors of Clal Insurance directed its management team and the Risk Management Committee, which also functions as the Solvency Committee (“Committee”), to examine measures Clal Insurance may be able to employ to improve its capital ratio, in accordance with the new solvency rules and to recommend a course of action to the Board, including in relation to business adjustments and/or financial transactions related to Clal Insurance’s capital, its breakdown, and/or its responsibilities. The Committee and Management have begun this examination, and during the first stage, recommended that the Board issue secondary capital instruments. The Committee will continue to examine other measures in an effort to prepare the company for possible adoption of these proposed capital requirements, and related measures.
Clal Insurance has calculated its capital ratio using results as of December 31, 2014 (“Calculation Date”) and based on the IQIS4 rules and has determined that it would be in compliance, as of the Calculation Date, with the proposed capital requirements, in the context of the transitional provisions, even before taking pro forma account of the positive impact on the capital ratio provided by the subsequent issuance of subordinated notes. The related calculations were submitted to the Insurance Commissioner on August 31, 2015. The Insurance Commissioner has not yet published binding provisions for adoption, and there is uncertainty regarding the details of the final provisions. Clal Insurance will continue to monitor the quantitative aspects of the proposed solvency rules towards final adoption, in an effort to anticipate requisite controls and capital requirements.
On March 14, 2016, “IQIS Provisions for 2015” (“Draft”) was published in preparation for the adoption of Solvency II. Insurance companies are required to submit an additional quantitative evaluation survey on the basis of December 2015 results (“IQIS5”), by June 30, 2016. The Draft was issued by reference to the European legislation adapted for requirements of the local market and that goes beyond provisions for quantitative evaluation surveys previously issued. The main changes relate to establishing risk-free interest curves, through extrapolation to the ultimate forward rate point, the components of recognized capital, capital requirements less investments in infrastructure (capital and debt), adjusting capital requirements for management companies, and updating the formula for calculating capital requirements for risk premiums and reserves for general insurance. Clal Insurance is unable to assess the overall impact of the changes based on the provisions in the Draft to carry out a further quantitative evaluation survey, and will carry out an assessment of the current capital status, when the binding provisions will be finalized. According to the Draft, the IQIS5 calculation will be a factor in assessing preparedness of insurance companies and to the implementation and scope of the final provisions to be adopted.
Capital requirements under the Capital Regulations are based on the separate individual financial statements of an insurance company. For purposes of calculating recognized capital, an investment by an insurance company in an insurance company or a controlled management company, and in other investee companies will be calculated on the equity basis, according to a holding rate, which includes indirect holdings.
The minimum capital required of Clal Insurance has been reduced, with approval of the Insurance Commissioner, by 35% of the original difference attributed to the managing companies and provident funds under its control. However, when calculating the amount of dividends permitted for distribution, this difference will be added at level of the capital structure, as detailed in Paragraph 13.7.3 (C). In September 2013, the Insurance Commissioner notified Clal Insurance that the deducted amount to be added back to the minimum capital required, will be after a deduction for a tax reserve accrued by Clal Insurance following the acquisition of provident fund operations. The approval of the Insurance Commissioner, as noted above, will be canceled with adoption of capital requirements under the Directive (see Paragraph 13.7.3 (C)) that will replace the Capital Regulations.
In March 2013, Clal Insurance received a letter from the Insurance Commissioner regarding the determination of credit ratings according to an internal model used by Clal Insurance (“internal model”), to be applied as a risk rating methodology for a subject insured, according to conditions of the relevant sector. The Insurance Commissioner authorized Clal Insurance to allocate capital for adjusted loans, ranked according to its internal model and with reference to the rates specified in the Capital Regulations. If there is an external rating available, the capital allocation will be made using the lower of the available ratings. The letter also requires Clal Insurance to submit immediate and periodic reports as specified regarding these activities that make the specified transactions subject to review by the Commissioner of Insurance. As a result of its compliance with the provisions of the letter, Clal Insurance’s capital requirements were reduced by NIS 69 million, as at the end of the reporting period.

Permit Issued by the Insurance Commissioner to the Former Controlling Shareholders of IDB Holdings to Retain Control of Clal Insurance Enterprises and Consolidated Institutional Entities
On May 8, 2014, legal counsel for the former controlling shareholders of IDB Development (Ganden, Manor, and Livnat Groups) was notified by the Commissioner that in the context of arrangements among the creditors of IDB Holdings (“IDBH”), and given that they no longer controlled the Clal Insurance Enterprises Group, the authorization previously issued by the Insurance Commissioner for control of these entities was terminated, including, with respect to Clal Insurance, Clal Credit Insurance and Clal Pension and Provident Funds. IDB Holdings undertook to supplement (or to cause its controlled affiliates to supplement) the required equity of the insurers in compliance with the Capital Regulations, subject to the a cap of 50% of the required capital of an insurer, and that the obligation will take effect only if the insurer’s equity is determined to be negative, and such funding amount will then be equal to the amount of negative capital, up to the 50% cap.
In addition, IDB Holdings undertook to contribute to the equity of Clal Pension and Provident Funds up to the amount prescribed by the Provident Fund Regulations, for as long as IDB Holdings is the controlling shareholder of the institutional entities. The authorization specifies conditions and imposes restrictions on the ability of a holding entity to impose liens on the equity of IDBD’s institutional entities it holds. The former controlling shareholders were also required, as long as any liens existed on their equity interest of IDB Holdings, to ensure that Clal Insurance Enterprises complied with applicable capital requirements, such that the equity of Clal Insurance Enterprises at no time was less than the product of the holding rate of Clal Insurance Enterprises in Clal Insurance and 140% of the required minimum equity of Clal Insurance, calculated according to the Capital Regulations on September 30, 2005 (as the holding rate was linked to the CPI of September 2005).
At the end of the reporting period, the required minimum capital of Clal Insurance Enterprises was NIS 2.9 billion, greater that the amount required based on the foregoing calculation. The capital requirement is calculated on the basis of the financial statements of Clal Insurance Enterprises. Following termination of the control authorization, the former controlling shareholders have questioned whether the capital requirements applicable to Clal Insurance Enterprises thereunder continue to apply.
Clal Insurance is committed to finding a strategy to supplement its required equity in compliance with the Capital Regulations if the equity of Clal Credit Insurance becomes negative, and as long as Clal Insurance is the controlling shareholder of Clal Credit Insurance. Clal Insurance is committed to supplement the equity of Clal Pension and Provident Funds as necessary to ensure it complies with the minimum amount required by Income Tax Regulations (Rules for Approval and Management of Provident Funds), 1964 (“Income Tax Regulations”). This commitment is valid as long as Clal Insurance controls, directly or indirectly, Clal Pension and Provident Funds.
In February 2012, Supervision of Financial Services Regulations (Provident Funds) (Minimum Capital Required of a Management Company of a Provident Fund or Pension Fund), 2012, was published along with Income Tax Regulations (Rules for Approval and Management of Provident Funds) (Amendment 2), 2012 (“new regulations”).
Pursuant to the new regulations, the capital requirements for management companies were expanded to include capital requirements based on the volume of assets under management and applicable annual expenses, but not less than the initial capital of NIS 10 million. In addition, liquidity requirements were also prescribed. A fund management company may distribute dividends only to the extent of any excess above the minimum amount of equity required by said regulations. In addition, a fund management company must provide additional capital in respect of controlled management companies. As at the end of the reporting period, the management companies controlled by Clal Insurance have capital balances in excess of the minimum capital required by the capital regulations for management companies. In light of capital regulations for management companies and in order to finance the expansion of operating and investing activities of Clal Pension and Provident Funds, the Boards of Directors of Clal Insurance and Clal Pension and Provident Funds in 2015 and 2014 approved an subscribed shares of Clal Pension and Provident Funds in consideration for NIS 100 million and NIS 80 million, respectively.
Anti-Money Laundering. In September 2015, a draft Anti-Money Laundering Order was proposed which seeks to expand its application to certain provident funds, and reduced the amounts of accumulations, deposits and withdrawals subject to reporting. Furthermore, the draft order specifies a ‘know your customer’ process that must be undertaken before issuing a life insurance policy or opening a provident fund. In October 2015, a draft addendum to the Anti-Money Laundering Law, 5776-2015 was published to provide for changes to existing law that set forth stricter criminal penalties under the Anti-Money Laundering Law and set forth provisions for sharing of information between the Anti-Money Laundering Authority and the insurance commissioner. In the evaluation of Clal Insurance, the draft order and draft bill may adversely affect the sale of its products.

C. ORGANIZATIONAL STRUCTURE
Subsidiaries and associated companies
The following table includes a description of our subsidiaries and associated companies as of June 30, 2016:
Subsidiaries
Effective Ownership and Voting Power Percentage
Property/Activity
Agro Managers S.A 
46.84%Agro Managers S.A. is engaged in doing by itself or on behalf of third parties investments in the country or overseas through long and short term loans with or without warranties, derivatives, stocks and commodities as well as any kind of debentures or credit notes.
Agro-Uranga S.A 
35.72%Agro-Uranga S.A. is an agricultural company which owns 2 farmlands (Las Playas and San Nicolás) that have 8.299 hectares on the state of Santa Fe and Córdoba.
Brasilagro Companhia Brasileira de Propiedades Agrícolas
39.76%(1)
Brasilagro is mainly involved in four productive activities: sugarcane, crops and cotton, forestry activities, and livestock.
Doneldon 
100%Doneldon S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and in the management and administration of the capital stock it owns on companies controlled by it.
Futuros y Opciones.Com S.A.59.59%A leading agricultural web site which provides information about markets and services of economic and financial consulting through the Internet. The company has begun to expand the range of commercial services offered to the agricultural sector by developing direct sales of supplies, crops brokerage services and cattle operations.
Agrofy S.A. 
45.23%
Agrofy S.A. is involved in the creation, operation, development, management, buying and selling of websites and domain names on the Internet.
Amauta Agro S.A. 
59,63%Amauta Agro S.A.’s purpose is to engage, in its own name or on behalf of or associated with third parties, in activities related to the production of agricultural products and raw materials, export and import of agricultural products and national and international purchases and sales of agricultural products and raw materials.
Granos Olavarria S.A. 
59,63%(2)
Granos Olavarría S.A. is principally engaged to the warehousing of cereals and brokering of grains.
Helmir S.A. 
100%Helmir S.A. is involved in investments in entities organized in Uruguay or abroad through the purchase and sale of bonds, shares, debentures and any kind of securities and commercial paper under any of the systems or forms created or to be created, and to the management and administration of the capital stock it owns on companies controlled by it.
IRSA Inversiones y Representaciones Sociedad Anónima
63.77%(1)
IRSA is a leading Argentine company devoted to the development and  management of real estate.
Sociedad Anónima Carnes Pampeanas S.A.  (formerly known as Exportaciones Agroindustriales Argentinas S.A.)
100%(3)
Sociedad Anónima Carnes Pampeanas, a company that owns a cold storage plant in Santa Rosa, Province of La Pampa, with capacity to slaughter and process approximately 9,500 cattle head per month.
(1) Excludes effect of treasury stock.
(2) Includes Futuros y Opciones.Com S.A.’s interest.
(3) Includes Helmir’s interest.
103
D. PROPERTY, PLANTS AND EQUIPMENT
Overview of Agricultural Properties
As of June 30, 2016, we owned, together with our subsidiaries, 31 farmlands, which have a total surface area of 622,220 hectares.
The following table sets forth our properties’ size (in hectares), primary current use and book value. The market value of farmland is generally higher the closer a farmland is located to Buenos Aires:
Owned Farmlands as of June 30, 2016 
 FacilityProvinceCountryGross SizeDate of AcquisitionPrimary Current UseNet Book Value 
    (in hectares)  
(Ps. Millions) (1)
 
         
1El RecreoCatamarcaArgentina12,395May 95Natural woodlands1.3 
2Los PozosSaltaArgentina239,639May ’95Cattle/ Agriculture/ Natural woodlands152.6 
3/4
San Nicolás/Las Playas (2)
Santa Fe/CórdobaArgentina2,966May ‘97Agriculture/ Dairy19.4 
5/6La Gramilla/ Santa BárbaraSan LuisArgentina7,072Nov ‘97Agriculture Under irrigation44.9 
7La SuizaChacoArgentina36,380Jun ‘98Agriculture/ Cattle43.7 
8La EsmeraldaSanta FeArgentina9,370Jun ‘98Agriculture/ Cattle16.3 
9El TigreLa PampaArgentina8,360Apr ‘03Agriculture/ Dairy34.2 
10El InviernoLa PampaArgentina1,946Jun ‘05Agriculture9.2 
11San PedroEntre RiosArgentina6,022Sep ‘05Agriculture49.0 
12/138 De Julio/ Estancia CarmenSanta CruzArgentina100,911May ‘07/ Sep ‘08Sheep11.0 
14Administración CactusSan LuisArgentina171Dec ‘97Natural woodlands1.5 
15Las VertientesCordobaArgentina4-Silo0.7 
16La EsperanzaLa PampaArgentina980Mar ‘08Agriculture4.3 
17Finca MendozaMendozaArgentina
389(5)
Mar ‘11Natural woodlands0.1
18Establecimiento MendozaMendozaArgentina9Nov’03Natural woodlands6.8
19/20/21/22Las Londras/San Rafael/ Cuatro Vientos/ La PrimaveraSanta CruzBolivia12,533Nov-08/Jan-11Agriculture470.3
23/24/25
Jeroviá/Marangatú/Udra (3)
Mariscal  EstigarribiaParaguay58,754Feb-09Agriculture /Natural Woodlands244.0
26/31
Brasilagro(4)
 Brazil124,319 Agriculture/ Forestry/Cattle1,185.1
 Subtotal  622,220  2,294.6
(1)Acquisition costs plus improvements and furniture necessary for the production, less depreciation.
(2)Hectares and carrying amount in proportion to our 35.72% interest in Agro-Uranga S.A.
(3)Hectares and carrying amount in proportion to our 50.00% interest in Cresca through Brasilagro.
(4)See the section “Overview of Brasilagro’s Properties”.
(5)Corresponds to our 40% ownership of Establecimiento Mendoza.
Overview of Brasilagro’s Properties
As of June 30, 2016, we owned, together with our subsidiaries, 6 farmlands, which have a total surface area of 124,319 hectares, acquired at a highly convenient value compared to the average of the region, all of them with a great appreciation potential.
Properties
Place
Total Area
Use
Net Book Value
(ha)
(Ps. Millions)
Jatobá FarmlandJaborandi/BA31,606Agriculture263.1
Alto Taquari FarmlandAlto Taquari/MT5,395Agriculture144.6
Araucária FarmlandMineiros/GO8,124Agriculture237.4
Chaparral FarmlandCorrentina/BA37,183Agriculture322.9
Nova Buriti FarmlandJanuária/MG24,212Forestry89.6
Preferência FarmlandBarreiras/BA17,799Cattle127.5
 Subtotal Brazil124,319 1,185.1
     
Jeroviá/Marangatú/UdraMariscal Estigarribia, Paraguay58,754Agriculture /Natural Woodlands244.0
     
     
 Total183,073 1,129.1
In the ordinary course of business, the leases property or spaces for administrative or commercial use both in Argentina and Israel under operating lease arrangements. The agreements entered into include several clauses, including but not limited, to fixed, variable or adjustable payments.
Overview of Urban properties and investment business
As of June 30, 2016, most of our property was located in Argentina. We lease our headquarters, located at Bolívar 108, (C1066AAB) Ciudad Autónoma de Buenos Aires. We do not currently lease any material properties other than our headquarters.
104
The following table sets forth certain information about our properties in Argentina as of June 30, 2016:
Property (6)
 Date of Acquisition  
Leasable/
Sale m2 (1)
 Location 
Net Book
Value Ps.(2)
  Encumbrance  Outstanding principal amount Ps./000  Maturity Date  
Balance due at maturity
Ps./000
  Rate Use 
Occupancy rate (7)
 
Edificio República Apr-08   19,885 City of Buenos Aires  189   -   -   -   -   - Office Rental  100.0% 
Torre Bankboston Aug-07   14,873 City of Buenos Aires  134   -   -   -   -   - Office Rental  100.0% 
Bouchard 551 Mar-07   - City of Buenos Aires  8   -   -   -   -   - Office Rental  - 
Intercontinental Plaza Nov-97   6,569 City of Buenos Aires  10   -   -   -   -   - Office Rental  100.0% 
Bouchard 710 Jun-05   15,014 City of Buenos Aires  60   -   -   -   -   - Office Rental  100.0% 
Dique IV Dec-97   - City of Buenos Aires  -   -   -   -   -   - Office Rental  - 
Maipú 1300 Sep-95   1,353 City of Buenos Aires  5   -   -   -   -   - Office Rental  100.0% 
Libertador 498 Dec-95   620 City of Buenos Aires  3   -   -   -   -   - Office Rental  100.0% 
Suipacha 652/64 Nov-91   11,465 City of Buenos Aires  8   -   -   -   -   - Office Rental  90.7% 
Dot Building Nov-06   11,242 City of Buenos Aires  122   -   -   -   -   - Office Rental  100.0% 
Santa María del Plata Oct-97   106,610 City of Buenos Aires  13   -   -   -   -   - Other Rentals  100.0% 
Nobleza Picardo May-11   109,610 City of Buenos Aires  7   -   -   -   -   - Office Rental  74.8% 
Other Properties(5)
 N/A   38,646 N/A  266   -   -   -   -   - Other Rentals  42.8% 
Abasto(3)
 Jul-94   36,737.6 City of Buenos Aires, Argentina  245   -   -   -   -   - Shopping Center  99.8% 
Alto Palermo(3)
 Nov-97   18,966.0 City of Buenos Aires, Argentina  208   -   -   -   -   - Shopping Center  99.6% 
Alto Avellaneda(3)
 Dec-97   35,887.0 Province of Buenos Aires, Argentina  127   -   -   -   -   - Shopping Center  100.0% 
Alcorta Shopping(3)
 Jun-97   15,876.7 City of Buenos Aires, Argentina  116   -   -   -   -   - Shopping Center  89.1% 
Patio Bullrich(3)
 Oct-98   11,782.7 City of Buenos Aires, Argentina  109   -   -   -   -   - Shopping Center  99.1% 
Alto Noa(3)
 Mar-95   19,039.9 City of Salta, Argentina  32   -   -   -   -   - Shopping Center  100.0% 
Buenos Aires Design(3)
 Nov-97   13,903.1 City of Buenos Aires, Argentina  7   -   -   -   -   - Shopping Center  95.7% 
Mendoza Plaza(3)
 Dec-94   42,043.0 Mendoza, Argentina  92   -   -   -   -   - Shopping Center  95.2% 
Alto Rosario (3)
 Nov-04   28,795.5 Santa Fe, Argentina  127   -   -   -   -   - Shopping Center  100.0% 
Córdoba Shopping –Villa Cabrera(3)
 Dec-06   15,581.7 Córdoba, Argentina  53  Anticresis   3,2  Jan-17   17,7  Libor+1,5%+CER Shopping Center  99.2% 

Dot Baires Shopping(3)
 May-09   49,640.7 City of Buenos Aires, Argentina  368   -   -   -       - Shopping Center  100.0% 
Soleil Premium Outlet(3)
 Jul-10   13,991.1 Province of Buenos Aires, Argentina  80   -   -   -   -   - Shopping Center  100.0% 
La Ribera Shopping(3)
 Aug-11   9,850.6 Santa Fe, Argentina  24   -   -   -   -   - Shopping Center  99.3% 
Distrito Arcos (3)
 Dec-14   11,170.1 City of Buenos Aires, Argentina  280   -   -   -   -   - Shopping Center  97.0% 
Alto Comahue(3)
 Mar-15   9,889.6 Neuquén, Argentina  318   -   -   -   -   - Shopping Center  96.6% 
Patio Olmos(3)
 -   - -  26   -   -   -   -   - Shopping Center  - 
Caballito Plot of Land Nov-97   23,791 City of Buenos Aires  45,812   -   -   -   -   - Land Reserve  N/A 
Other Land Reserves (4)
 N/A   6,126,022 City and Province of Buenos Aires.  5,508   -   -   -   -   - Land Reserve  N/A 
Luján (3)
 May-12   1,160,000 Province of Buenos Aires.  41,861   -   -   -   -   - Land Reserve  N/A 
Intercontinental Nov-97   24,000 City of Buenos Aires  51   -   -   -   -   - Hotel  70.58% 
Sheraton Libertador Mar-98   37,600 City of Buenos Aires  28   -   -   -   -   - Hotel  73.42% 
Llao Llao(9)
 Jun-97   17,463 City of Bariloche  77   -   -   -   -   - Hotel  51.15% 
(1) Total leasable area for each property. Excludes common areas and parking spaces.
(2) Cost of acquisition or development plus improvements, less accumulated depreciation, less allowances.
(3) Through IRSA Commercial Properties.
(4) Includes the following land reserves: Pontevedra plot; Mariano Acosta, San Luis and Merlo (through IRSA) and Intercontinental Plot (through IRSA Commercial Properties) .
(5) Includes the following properties: Anchorena 665, Zelaya 3102, 3103 y 3105, Rivadavia 2768, Constitución 1111, Santa Maria del Plata, Puerto Retiro Plots 50%, Rio Parcel 50%, Libertador Parcel 50%.
(6) All assets are owned by us or through any our subsidiary.
(7) Percentage of occupation of each property. The land reserves are assets that the company remains in the portfolio for future development.
(8) Intern information of the Company.
(9) Includes Ps. 21,900 thousand of Book Value that corresponds to “Terreno Bariloche.”
 The following table sets forth certain information about our properties for the Operation Center in Israel as of June 30, 2016:
PropertyDate of acquisitionLocationNet book amountUse
TivoliOct-2015United States2,047Rental properties
Kiryat Ono MallOct-2015Israel1,598Rental properties
Shopping Center Modi’in AOct-2015Israel805Rental properties
HSBCOct-2015United States11,225Rental properties
Matam park - HaifaOct-2015Israel5,662Rental properties
Caesarea - Maichaley CarmelOct-2015Israel583Rental properties
Herzeliya NorthOct-2015Israel4,125Rental properties
Gav-Yam Center - HerzeliyaOct-2015Israel2,449Rental properties
Neyar Hadera Modi’inOct-2015Israel680Rental properties
Gav yam park - Beer ShevaOct-2015Israel700Rental properties
Hazomet Kfar SabaOct-2015Israel117Rental properties
BiluOct-2015Israel86Rental properties
Mazkeret BatiaOct-2015Israel109Rental properties
NetaniaOct-2015Israel849Rental properties
Rishon Le ZionOct-2015Israel70Rental properties
RehovotOct-2015Israel125Rental properties
Mizpe SapirOct-2015Israel124Rental properties
HolonOct-2015Israel327Rental properties
HaifaOct-2015Israel24Rental properties
OthersOct-2015Israel8,759Rental properties
TivoliOct-2015United States24Undeveloped parcels of land
Queensridge TowersOct-2015Israel266Undeveloped parcels of land
Zarchini RaananaOct-2015Israel78Undeveloped parcels of land
KurdaniOct-2015Israel-Undeveloped parcels of land
OthersOct-2015Israel1,777Undeveloped parcels of land
TivoliOct-2015United States1,981Properties under development
Ispro Planet – Beer Sheva – Phase 1Oct-2015Israel1,062Properties under development
OthersOct-2015Israel880Properties under development
Shufersal´s StoresOct-2015Israel10,478Supermarkets
Total57,010
106
Insurance
Agricultural Business
We carry insurance policies with insurance companies that we consider to be financially sound. We employ multi-risk insurance for our farming facilities and industrial properties, which covers property damage, negligence liability, fire, falls, collapse, lightning and gas explosion, electrical and water damages, theft, and business interruption. Such insurance policies have specifications, limits and deductibles which we believe are customary. Nevertheless, they do not cover damages to our crops. We carry directors and officer’s insurance covering management’s civil liability, as well as legally mandated insurance, including employee personal injury. We also provide life or disability insurance for our employees as benefits.
We believe our insurance policies are adequate to protect us against the risks for which we are covered. Nevertheless, some potential losses are not covered by insurance and certain kinds of insurance coverage may become prohibitively expensive.
The types of insurance used by us are the following:
Insured PropertyRisk Covered
Amount Insured
(in Millions of Ps.)
Book Value
(in Millions of Ps.)
Buildings, machinery, silos, installation and furniture and equipmentTheft, fire and technical insurance517490
VehiclesTheft, fire and civil and third parties liability177
Urban properties and investment business
IRSA carries all-risk insurance for its shopping centers and other buildings covering damages to the property caused by fire, explosion, gas leak, hail, storm and winds, earthquakes, vandalism, theft and business interruption. IRSA also has civil liability insurance covering all potential damages to third parties or goods arising from the development of its businesses throughout the whole Argentine territory. IRSA is in compliance with all the legal requirements relating to mandatory insurance, including statutory coverage under the Occupational Risk Law, life insurance required under collective bargaining agreements and other insurance required by the laws and decrees. Its history of damages is limited to only one claim made as a result a fire in Alto Avellaneda Shopping in March 2006, in which the loss was substantially recovered from its insurers. These insurance policies have all the specifications, limits and deductibles that are customary in the market and which IRSA believes are adequate for the risks to which it is exposed in its daily operations. IRSA also has purchased civil liability insurance to cover its directors’ and officers’ liability.
Control Systems
 
IRSA Commercial Properties has a computer systems to monitor tenants’ sales in all of our shopping centers (except stands). IRSA Commercial Properties also conduct regular manual audits of its tenants accounting sales records in all of our shopping centers. Almost every store in those shopping centers has a point of sale that is linked to a main computer server in the administrative office of such shopping center. Likewise, it uses the information generated from the computer monitoring system for statistics regarding total sales, average sales, peak sale hours, etc., for marketing purposes and as a reference for the processes of internal audit. The lease contracts for tenants in Alto Avellaneda, Alto Palermo, Alcorta Shopping, Patio Bullrich, Buenos Aires Design, Abasto, Alto Rosario, Alto NOA, Dot Baires Shopping, Córdoba Shopping, Soleil Premium Outlet, La Ribera Shopping, and Mendoza Plaza Shopping, Distrito Arcos and Alto Comahue contain a clause requiring tenants to be linked to the computer monitoring system, there being certain exceptions to this requirement.
 
Item 4A.  4A.                      Unresolved Staff Comments
 
None.
 
Item 5.                      Operating and Financial Review and Prospects
 
 
The following management’s discussion and analysis of our financial condition and results of operations should be read together with “Selected Consolidated Financial Data” and our Audited Consolidated Financial Statements and related notes appearing elsewhere in this annual report. This discussion and analysis of our financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. These forward-looking statements include such words as, “expects”, “anticipates”, “intends”, “believes” and similar language. Our actual results may differ materially and adversely from those anticipated in these forward-looking statements as a result of many factors, including without limitation those set forth elsewhere in this annual report. See Item 3 “Key Information – D. Risk Factors” for a more complete discussion of the economic and industry-wide factors relevant to us.
 
For purposes of the following discussion and analysis, unless otherwise specified, references to fiscal years 2016, 2015 2014 and 20132014 relate to the fiscal years ended June 30, 2016, 2015, 2014, and 20132014 respectively.
 
We maintain our accounting books and records in Pesos. Our Audited Consolidated Financial Statements as of June 30, 2015 and 2014 have been prepared in accordance with the accounting policies based on the IFRS issued by the IASB and the interpretations issued by the IFRIC applicable as of such date.
For more information plase see Note 41 to our Audited Consolidated Financial Statements, “Foreign currency assets and liabilities”.

95



Revenue Recognition
 
We derive our revenues primarily from:Our revenue is measured at the fair value of the consideration received or receivable.
 
(i)Revenue derived from the production and sale of crops, sugarcane, cattle and dairy,
(ii) leasing of our farmlands from third parties;
(iii) commodity brokerage activities; and
(iv) through the consolidation of our financial statements with IRSA's, we record revenue from the rental and operation of services at offices and shopping centers in Argentina, the development and sale of properties, consumer finance transactions, and hotel operations.
Revenues from sales of goods areis recognized when: (a) any significantmaterial risks and rewards of ownership of such goodsbenefits derived from title to property have been transferred; (b) the entity is no longer related to thecompany does not retain any management offunction on the assets sold and neithernor does the entity retainit have any control over them;whatsoever on such assets; (c) the amount of the revenues and costs associated withto the transaction canmay be reliably measured;measured on a reliable basis; and (d) therethe company is a likelihood that the entity will receiveexpected to accrue the economic benefits associated withto the transaction.
 
The revenues arisingRevenue derived from the supplyprovision of services areis recognized when (a) the amount of the revenuesrevenue and costs associated withto the services canmay be reliably measured;measured on a reliable basis; (b) therethe company is a likelihood that the entity will receiveexpected to accrue the economic benefits associated withto the transaction, and (c) the degreelevel of progresscompletion of the service canservices may be reliably measured.measured on a reliable basis.

 
Agricultural businessand agricultural-related activities:
 
The revenuesRevenue from the agriculture and livestock businessour agricultural activities originate mainly incomes primarily from sales of both agricultural and livestock productsproduce and biological assets, in the supplyfrom provision of different services related to agribusinessthe activity and in the lease of agricultural land.from leases from farmlands.
 
Revenues fromWe recognize revenue on product sales are accounted for when the agricultural productsproduce or the biological assets are delivered and the customers acquiretake ownership and assume the associated risks, allrisk of loss, which habitually happensis when the products are either received by the customer at its or a designated location or collected directly picked up by customers, the customer from the cultivation bases, collection of receivablesthe relevant receivable is likelyprobable and the value of revenues may be reliably measured.selling price is fixed or determinable. Net sales of agricultural products represent the amount billed,invoiced value of goods, net of trade discounts and bonuses,allowances, if any.
 
In addition, there is the supply of different services associated with the agricultural and livestock breeding businessWe also provide agricultural-related (including thoughbut not limited to irrigationwatering and feedlot services) as well asand brokerage services. Revenuesservices to third parties. Revenue from services are accounted for when theis recognized as services are rendered.
 
We also lease land to third parties inunder operating lease agreements. Lease income is recognized on a straight-line basis over the frameworkperiod of operating leases. Revenues from leases are accounted for using the straight-line method throughout the lease period.lease.
 
Urban Properties and Investments Business
Investment property activities:
 
Our revenues derive basically from leasing
·Rental and operating space at offices and shoppingservices - Shopping centers in Argentina, developing and selling properties, financing consumption and operating hotels. This section reflects our policies concerning revenue recognition as well as the policies of our subsidiaries, both those in which we have a controlling stake and those in which we have joint control.
Development and Sale of Propertiesportfolio
 
Revenues derived from the development and sales of real estatebusiness activities developed in our shopping centers mainly include mainly the revenues from the sale of properties held for sale. The revenues from the sale of real estate are booked when the significant risks and rewards of ownership have been transferred to the buyer. This usually happens when the purchase and sale deeds are signed and when the transaction is not subject to conditions (except when the expectation is that the payment or completion will significantly occur after such exchange). When sales are subject to conditions, it is only when the conditions are satisfied that the sales are booked.
We apply the IFRIC 15 “Agreements for the Construction of Real Estate'”. The IFRIC 15 lays down the guidelines to decide which standard to apply when accounting for the construction of real estate, that is the IAS 11 “Construction Contracts ” or the IAS 18 “Revenue”. IFRIC 15 interprets that an agreement satisfies the requirements to be considered a construction contractrental income under IAS 11 when the buyer is in a position to specify the main structural elements of the design of the property before or during the works. In addition, IFRIC 15 interprets that an agreement is for the sale of goods within the scope of IAS 18 when the construction works is conducted independently from the agreement and the buyer only has limited influence on the design. The Company analyzed the nature of its agreements and determined that they fall within the scope of IAS 18. Therefore, the Company recognizes revenues associated with the sale of residential homes and commercial units when the legal conveyance takes place according to IAS 18.
We also enter into barter transactions where the Company normally exchanges undeveloped parcels of land with third-party developers for future property to be developed on the bartered land. In certain circumstances, the Company also receives cash as part of these transactions. The legal title together with all risks and rewards of ownership to the land are transferred to the developer upon sale. The Company generally requires the developer of the subject parcel to issue surety insurance or to mortgage the land in favor of the Company as performance guarantee. If the developer does not fulfill its obligations, the Company forecloses on the land through the execution of the mortgage or the surety insurance policy, in addition to imposing a cash penalty for breach.
The Company determines that its barter transactions have commercial substance and that the conditions for revenue recognition on the transfer of land are met at the time the transaction is consummated. Revenue is then recognized at the fair value of the goods delivered, adjusted by the amount of cash received, if any. In exchange for delivery of the land, the Company receives cash, if any, and an in-kind receivable. Such receivable is initially recognized at fair value but is not subsequently re-measured. In exchange for delivering the parcel, the Company receives cash and/or a right to receive future units to be developed on the subject parcels. The in-kind receivable is initially recognized at cost (being the fair value of the transferred land) as an intangible asset in the statement of financial position in the line item “Right to receive future units (Barter transactions)”. The mentioned intangible asset is not adjusted in subsequent years unless there are indicia of impairment.
The Company may sell residential units to third-party buyers once they are finished and have been transferred by the developer. In these cases, the revenues from these transactions are recognized when the significant risks and rewards of ownership have been actually transferred to the buyer. This normally happens when the title deed to the property is drawn up.
However, the Company may start to sell the residential units during the construction period or even before the construction period starts. In these cases, buyers generally make an initial payment to the Company, with the outstanding balance being paid at the time when the unit sold to the buyer is actually delivered. In these cases, it is only when the units have been transferred to the buyers and the title deeds are signed, in other words, at the time of the legal closing, that the revenues from these sales are booked. And the reason for this is that in the event of the developer failing to complete the residential units, and thus, failing to deliver them to the buyer, the Company will be contractually bound to reimburse the buyer for any initial payment received plus a fine. The Company may then institute legal proceedings against the developer on grounds of defaulting on the agreement. The Company considers that the most significant risk associated with the asset held by the Company (that is, the right to receive the units) is non-performance by the developer (that is, failure to complete the construction of the units) which risk is not been transferred to the buyers at the moment when the initial payment is received.

96


Office Buildings and Other Leases and Services
Revenues from office and other property rentals include mainly the revenues from office rentals in the form of operating leases, revenuesadmission rights, commissions and revenue from several services and the expenses recovered fromprovided to our lessees.
 
RevenuesRental income from the rental of offices and other properties assigned in leaseshopping center leased out under operating leases, admission rights and fees related to their real estate agent business are recognized in the statementincome statements on a straight-line basis over the term of income using the straight-line method for the duration of such operating leases. When lease incentives are conferred, thesegranted, they are accounted forrecognized as aan integral part of the net consideration for the use of the property and are therefore recognized by application ofon the same straight-line method.basis.
 
Contingent leasesrents, being lease payments that are bookednot fixed at the inception of a lease, are recorded as income in the periodsyears in which they are collected. Rental increasesearned. Rent reviews are bookedrecognized when they aresuch reviews have been agreed upon with the lessees.tenants.
 
Lease agreementscontracts also stipulateprovide that the common area maintenance charges and collective promotion funds of our shopping centers are borne by the corresponding lessees, generally on a proportionally basis. These common area maintenance charges include all such expenses convenient and necessary for various purposes including, but not limited to, the operation, maintenance, management, safety, preservation, repair, supervision, insurance and enhancement of the shopping centers. The lessor is responsible for determining the need and suitability of incurring a common area expense. We makes the original payment for such expenses, which are then reimbursed by the lessees. We have assessed the substance of the transactions and conclude that we are acting as a principal since it has exposure to the significant risks and rewards associated with the Company’s buildingsrendering of services. Service charge income is presented within rental income and services, separately from property operating expenses. Property operating expenses are expensed as incurred.
·Rental and services - Offices and other rental properties
Rental income from offices and other rental properties are to be borne by the lessees, generally in a percentage proportion. Common area maintenanceinclude rental income from office leased out under operating leases, income for services and expenses comprise all those expenses that are necessary or advisable to operate, maintain, manage, safeguard, preserve, repair, supervise, cover with insurance and perfect the Company’s rental buildings and properties. It is the Company who carries out management functions over its rental properties. The Company assumes responsibility for initially paying these expenses, which are subsequently recoveredrecovery paid from lessees. The Company considers that it acts as principal in these cases. Revenues for these items are recognized when the services are supplied and are included within revenues from rentals and services, though separate from common area maintenance expenses. These expenses are charged to the statement of income as soon as they are incurred.tenants.
 
Shopping Center Properties
The revenues derivedRental income from the businesses conductedoffices and other rental properties leased out under operating leases is recognized in the Company’s shopping centers mainly comprise revenues from retail store rentals in the form of operating leases, admission fees, commissions and revenues from the different services rendered to the Company’s lessees.
All lease agreements in Argentina are cancelable pursuant to Argentine Law 23,091 “Lease law” as amended by Law 24,808 “Lease Law”. Under the law, a lease is not cancelable within the first six months of the agreement, but provides that after that initial non-cancelable period, tenants may rescind agreements at any time upon giving prior written notice to lessors. Cancellations are subject to one-and-a-half month’s rent if rescinded during the first year of the lease and one month’s rent if rescinded after the first year of the lease.
The Company analyzed the definition of the lease term under IAS 17, which lays down that a noncancellable lease is a lease that can be cancelled only (a) in the event of any remote contingency, (b) when the lessor has given permission, (c) if the lessee enters into a new lease with the same lessor, or (d) when the lessee pays an additional amount at the inception of the lease that results in assuming that lease continuity is reasonably certain.
The Company has determined that in all operating leases, the term of the lease for accounting purposes coincides with the lease term. The Company concluded that in spite of the ability to cancel leases contemplated by the law, lessees would incur significant economic penalties and other setbacks if their leases were cancelled prior to their expiration dates. The Company considers that the scope of these setbacks is such that lease continuity on the part of lessees is reasonably certain at the inception of the lease. The Company drew this conclusion in view of factors such as (i) the strategic geographical location of the Company’s investment properties; (ii) the characteristics of lessees (most of whom are locally and internationally renowned chain stores), (iii) the limited availability of similar spaces in areas where the Company has its investment properties; (iv) lessees’ brand images and other competition-related aspects; (v) the significant expenses incurred by lessees to renew, maintain and improve the spaces rented for them to reflect the lessee’s own image; and (vi) that most of the Company’s lessees only have shopping center outlets with only a few, or sometimes without, stores at the street level.
Lessees at shopping centers are generally bound to pay a lease that consists in the highest of: (i) a basic monthly rental (the "Base Rent"), and (ii) a specific percentage of monthly gross retail sales of the lessee (the "Percentage Rent") (which generally ranges from 4% to 10% of gross sales of the lessee). In addition, pursuant to the rental indexation clause in most leases, the lessee's Base Rent is generally increased between 7% and 12% per year during the term of the lease.
In addition, certain lease agreements include provisions that set forth variable rentals based on specific sales volumes or some other type of index.
The revenues derived from rentals of stores and other spaces in shopping centers in the form of operating leases with scheduled rental increases are recognized on a straight-tine basis over the term of those leases. Any incentives conferred by the Company to the lessees, if any, are recognized as reductions in the revenues from rentalsincome statements on a straight-line basis over the term of the lease.
Contingent rentals, that is, the rentals whose pricesleases. When lease incentives are not pre-established and may not be determined at the inception of the lease,granted, they are recognized as revenues inan integral part of the periods in which they are known and can be determined. The increases in rentals are accountednet consideration for at the time they are agreed upon withuse of the lessees.
Lessees at the Company’s shopping centers generally pay a non-reimbursable admission fee at the time they sign a lease agreement or when they renew an existing agreement. These admission fees are considered as additional revenues from rentalsproperty and are therefore recognized inon the statement of income on asame straight-line basis over the term of the respective lease agreements.
The Company also acts as a real estate broker in negotiating and entering into the lease agreements for its shopping centers: it therefore receives commissions when acting in such capacity. A transaction is deemed to have been successful when both parties have signed the respective lease agreement. Commissions are considered to be additional revenues from rentals and are recognized in the statement of income on a straight-line basis over the term of the respective lease agreement.basis.
 
Lease agreementscontracts also stipulateprovide that the common area maintenance expenses associated with the Company’s shopping centersof our offices and other rental properties are to be borne by the corresponding lessees, generally inon a percentage proportion. Commonproportionally basis. These common area maintenance expenses compriseinclude all thosesuch expenses that areconvenient and necessary or advisablefor various purposes including, but not limited to, operate, maintain, manage, safeguard, preserve,the operation, maintenance, management, safety, preservation, repair, supervise, cover withsupervision, insurance and perfectenhancement of the Company’s shopping centers. It isoffices and other rental properties. We make the lessor who determines whether it is necessary or advisable to incur a given common area maintenance expense. The Company assumes responsibilityoriginal payment for initially paying thesesuch expenses, which are subsequently recovered fromthen reimbursed by the lessees. The Company considersWe considered that it actswe act as a principal in these cases.
Revenues Th accrues reimbursements from tenants for recoverable portions of all these itemsexpenses as service charge revenue in the period the applicable expenditures are included within revenuesincurred and is presented separately from rentals and services, though separate from common area maintenanceproperty operating expenses. TheseProperty operating expenses are charged to the statement of incomerecognized as soon as they are incurred.
 
Pursuant
· Revenues from supermarkets
Revenue from the sale of goods in the ordinary course of business are recognized at the fair value of the consideration collected or receivable, net of returns and discounts. Where the credit term is short and financing is that typical in the industry, consideration is not discounted. Where the credit term is longer than the industry’s average, in accounting for the consideration, theCompany discounts it to its net present value by using the client’s risk premium or the market rate. The difference between the fair value and the nominal amount is accounted for under financial income. If discounts are granted and their amount can be measured reliably, the discount is recognized as a reduction of revenue.
Generally, the Company recognizes revenue upon delivery of goods to the lease agreements, lesseesclient. In international sales, revenue is recognized upon loading goods with the forwarder. Where two or more products are also obligatedsold under one single contract, the Company separates each component and gives them a separate accounting treatment. The attribution of value to participateeach component is based on the relative fair value of each unit. Should the fair value not be measurable on a reliable basis, then revenue is attributed based on the difference arising between the total amount of the executed contract and the fair value of the goods delivered.
As regards client loyalty programs, the fair value of the consideration received or receivable in Common Advertising Funds (“FPC”) aimed at providing for the Company’s advertising and promotional activities. Participation in these funds generally comprises a percentage calculated over the lease prices accrued every month. Revenues for these items are equally included within revenues from rentals and services, though separate from advertising and promotional expenses. These expenses are chargedrelation to the statementinitial sale is allocated across the rewards credits and the other components of income as soon as theythe sale. The amount allocated to rewards credits is estimated based on the market value of the goods to be delivered. The fair value of the right to purchase products at a discount is calculated considering the expected exchange ratio and the expected terms. Such amount is deferred and revenue is recognized only where rewards credits are incurred.exchanged and the Company has complied with its obligation to provide the products at a discount, or else when such reward credits have expired. The amount of revenue recognized under such circumstances is based on the number of reward credits that have been exchanged for products with discounts, in relation to the total number of reward credits expected to be exchanged. Deferred revenue is then reversed when reward credits are no longer likely to be exchanged.
 
In addition, revenues from shopping centers also include revenues from management and other services, such as parking lots. In addition, revenue includes income from property management fees.  These revenues are recognized in profit and loss for the year when the servicesCompany acts as agent and not as main supplier in a transaction, revenue is recognized at the net amount of commissions. Revenue from commissions is recognized based on transactions conducted by credit card companies at the rate and on the date they are rendered.credited. Revenue from credit margins of credit cards is recognized on the date the client is bound to pay and revenue for subscription fees is recognized on a monthly basis.
 

97


Hotels·Revenue from communication services and sale of communication equipment
 
RevenuesRevenue derived from hotel operations include mainly roomthe use of communication networks by the Company, including mobile phones, Internet services, cateringinternational calls, fixed line calls, interconnection rates and roaming service rates, are recognized when the service is provided, proportionally to the extent the transaction has been realized, and provided all other services. Revenuescriteria have been met for revenue recognition.
Revenue from the sale of products at hotelsmobile phone cards are accountedinitially recognized as deferred revenue and then recognized as revenue as they are used or upon expiration, whichever takes place earlier.
A transaction involving the sale of equipment to a final user normally also involves a service sale transaction. In general, this type of sale is performed without a contractual obligation by the client to consume telephone services for whena minimum amount over a predetermined period. As a result, the products are deliveredCompany records the sale of equipment separately and any significant risks and rewards of ownership are transferredrecognizes revenue pursuant to the buyer. Any revenues derivedtransaction value upon delivery of the equipment to the client. Revenue from sales oftelephone services are recognized and accounted for as they are provided. When the client is bound to make a minimum consumption of services during a predefined period, the contract formalizes a transaction of several elements and, therefore, revenue from the sale of equipment is recorded at an amount that should not exceed its fair value, and is recognized upon delivery of the timeequipment to the client and provided the criteria for recognition are met. The Company ascertains the fair value of renderingindividual elements, based on the service. All other revenues are booked on an accrual basis.price at which it is normally sold, after taking into account the relevant discounts.
 
ArgentineRevenue derived from long-term contracts is recognized at the present value of future cash flows, discounted at market rates prevailing on the transaction date. Any difference between the original credit and its net present value is accounted for as interest income over the credit term.
·  
Revenue from tourism services
Revenue from the provision of tourist services is recognized when the following conditions are met:
-  
the revenue amount may be reliably measured;
-  
the economic benefits associated to the transaction are expected to have an impact on the Company;
-  
the degree of completion of the transaction may be measured on a reliable basis; and
-  
expenses incurred in relation to the transaction as well as all necessary costs to finalize the transaction may be reliably measured.
Effects of the Global Macroeconomic Environment
Most of our assets are located in Argentina, where we conduct our operations, and in Israel. Therefore, our financial condition and the results of our operations are significantly dependent upon the economic conditions prevailing in both countries.
 
The table below shows Argentina’s GDP growth, inflation, Dollar exchange rates and the appreciation (devaluation)(depreciation) of the Peso against the U.S. Dollar for the indicated periods.
 
 Fiscal year ended June 30,  Fiscal year ended June 30,
 2015  2014  2013  2016 2015 2014
GDP growth  1.2%  0.0%  5.5% (3.4%) 1.2% 0.0%
Inflation (IPIM)(1)
  13.4%  27.7%  13.5% 26.7% 13.6% 27.7%
Inflation (CPI)(2)
  15.0%  15.0% (4)  10.5% 47.1% 14.0% 
15.0% (2)
Appreciation (depreciation) of the Peso against the U.S. Dollar(3)  (12%)  (50.6%)  (19.1%) (65.9%) (11.8%) (50.6%)
Average exchange rate per US$1.00(3)(4)
 Ps.8.6098  Ps.6.9333  Ps.4.9339  Ps.14.9900 Ps.9.034 Ps.8.083
Appreciation (depreciation) of the NIS against the U.S. Dollar (1.1%) (10.0%) 5.6%
 

(1)  IPIM is the wholesale price index as measured by the Argentine Ministry of Economy and Production.
(2)  CPI is the consumer price index as measured by the Argentine Ministry of Economy and Production.
(3)  Represents average of the selling and buying exchange rate.
(1)  
(4)  In January 2014 the Argentine government established IPCNu, which more broadly reflects consumer prices by considering price information from the 23 provinces of Argentina and the City of Buenos Aires. Therefore, the consumer price index for the fiscal year ended June 30, 2014 only takes into account the six month period starting on January 1, 2014.
IPIM is the wholesale price index as measured by the Argentine Ministry of Economy and Production. Given the modifications to the system that INDEC uses to measure IPIM, there is no data for any price variations from July 1, 2015 to June 30, 2016. For that reason, we show accumulated prices from January 1, 2016 to June 30, 2016, published by INDEC.
(2)  
CPI is the consumer price index as measured by the Argentine Ministry of Economy and Production. Since January 2014, the Argentine government established IPCNu, which more broadly reflects consumer prices by considering price information from the 23 Argentine provinces and the City of Buenos Aires. Therefore, the consumer price index for our fiscal 2014 only takes into account the six-month period after the new consumer price index was introduced. Given the modifications to the system that INDEC uses to measure CPI, there is no data for any price variations for the fiscal year ended at June 30, 2016, yet. For that reason, we show the interanual inflation published by “Dirección General de Estadísticas y Censos de la Ciudad de Buenos Aires, Ministerio de Hacienda”. It differs from inflation reported for 2015 and 2014 because of the change of government and changes in the systems of measure of the INDEC. See Item 3.(a) Risk Factors —Risks Relating to Argentina - There are concerns about the accuracy of Argentina’s official inflation statistics.
(3)  
Depreciation corresponding to fiscal year 2016 is mostly due to the devaluation that took place on December 17, 2015. See Risk factor “Exchange controls and restrictions on transfers abroad and capital inflow restrictions have been limited in the past, and may limit the availability of international credit.”
(4)  
Represents average of the selling and buying exchange rate.
 
Sources: INDEC, Argentine Ministry of Economy and Production, City of Buenos Aires Ministry of Treasury, Banco de la Nación Argentina.Argentina, Bloomberg.
 
According to the IMF estimates, Argentina’s growth projectionsGDP for 2016 show that GDPis expected to contract by 0.3%. This decrease1.8% compared to 2015 due to a slight adjustment recession during the year, primarily due to the correction of macroeconomic and microeconomic distortions. However, growth is based largelyexpected to strengthen to 2.7% in 2017 on the mismatch inback of moderating inflation and more supportive monetary and fiscal policy policies by the balance of payments and deterioration in the availability of external financing due largelyCentral Bank. According to the poor state of negotiations with the holdouts of Argentina’s sovereign bonds.
Consumption continuesOrganisation for Economic Co-operation and Development (“OECD”) Israel’s economic growth is projected to be the main driver of economic activity: salesremain at 2.5% in shopping centers and supermarkets grew 33.3% and 26,1%,  respectively,2016, before rising to 3% in nominal terms as of June 2015 compared with the same period of 2014, mainly due to higher salaries in nominal terms.2017.
 
Argentine GDP grew in 2015,decreased 3.4% during our fiscal 2016, compared to GDP contractiongrowth of 1.2% in 2014.our fiscal 2015. Consumption was the primary driver of economic activity, as shopping center sales grew 36.6% in 201541.4% as of June 30, 2016, compared to 2014,June 30, 2016, driven by the increase in nominal salaries. As of June 2015,30, 2016, the unemployment rate was at 6.6%9.3% of the country’s economically active population, acompared to 6.6% as of June 30, 2015. For the year on year decrease of 12 percentage points.ended at December 31, 2015, Israel’s growth reached 2.5% and remained at the same level for 2016.
 
Argentina’s country risk, measured by the Emerging Market Bond Index, decreased 9397 basis points for the 12 months ended June 30, 2015,2016, maintaining a high spread vis-à-vis the rest of theother countries in the region. The debt premium paid by Argentina was at 631518 points in June 2015,2016, compared to 304352 paid by Brazil, and 194213 paid by Mexico.
 
Changes
In regard to the Argentine economy, changes in short-short and long-term interest rates, unemployment and inflation may reduce the availability of consumer credit and the purchasing power of individuals who frequent shopping centers. These factors, combined with low GDP growth, may reduce general consumption rates in our shopping centers. Since most of the leaseleases agreements in our shopping centers for most of our main source of revenue, require tenants to pay a percentage of their total sales as rent, a general reduction in consumption may reduce our revenue. A reduction in the number of shoppers in our shopping centers and consequently, in the demand for parking, may also reduce our revenues from services rendered.
 
FactorsRegarding Israel’s economy, and based on information published by OECD, domestic demand is expected to remain the main driver of growth, while external demand is projected to recover slowly due to the high exchange rates that Affect our Resultshold back exports. In this context, unemployment is expected to remain low, and inflation is projected to increase at very low levels.
 
Effects of the Argentine macroeconomic environment
Most of our assets are located in Argentina, where we conduct our operations. Therefore, our financial condition and the results of our operations are significantly dependent upon the economic conditions prevailing in Argentina.
Changes in short- and long-term interest rates, unemployment and inflation may reduce the availability of consumer credit and the purchasing power of individuals who frequent shopping centers. These factors, combined with low GDP growth, may reduce general consumption rates in our shopping centers. Since most of the lease agreements in our shopping centers, our main source of revenue, require tenants to pay a percentage of their total sales as rent, a general reduction in consumption may reduce our revenue. A reduction in the number of shoppers in our shopping centers and consequently, in the demand for parking, may also reduce our revenues from services rendered.

98


Effects of inflation
 
From 1997 until the end of 2001, the Argentine government’s policies substantially reduced the level of inflation. Therefore, during that period inflation did not significantly affect our financial condition and results of operations.
The following are annual inflation rates since 2002,during our fiscal years indicated, based on information published by the INDEC, which is dependent on the Argentine Ministry of Economy and Production:
 
Year ended June 30, Consumer Price IndexWholesale Price Index
2002  28.4%88.2%
2003  10.2%8.1%
2004  4.9%8.6%
2005  9.0%7.7%
2006  11.0%12.1%
2007  8.8%9.4%
2008  9.3%13.8%
2009  5.3%5.6%
2010  11.0%15.5%
2011  9.7%12.5%
2012  9.9%12.8%
2013  10.5%13.5%
2014  15.0
%(1)
27.7%
2015  15.0%13.4%
Fiscal Year ended June 30
Consumer
Price Index(1)
Wholesale
Price Index
20119.7%12.5%
20129.9%12.8%
201310.5%13.5%
                                  2014 (from January 2014)15.0%27.7%
201515.0%13.4%
201647.1%
26.7%(2)
 
(1)
In January 2014 the Argentine government established IPCNu, which more broadly reflects consumer prices by considering price information from the 23 provinces of Argentina and the City of Buenos Aires. Therefore, the consumer price index for the fiscal year ended June 30, 2014 only takes into account the six month period starting on January 1, 2014.
(2)  
Given the modifications to the system that INDEC uses to measure IPIM, there is no data for any price variations from July 1, 2015 to June 30, 2016. For that reason, we show accumulated prices from January 1, 2016 to June 30, 2016, published by INDEC.
 
Continuing increases in inflation arewill likely to have an adverse effect on our operations. Additionally, the minimum lease amounts paid bypayments from tenants in our shopping centers are generally adjusted in accordance with the CER, an inflation index published by the Central Bank. Although higher inflation rates in Argentina may increase the minimum lease amount,payments, given that tenants tend to pass on any increases in their ownincreased expenses to consumers, higher inflation maythis trend could lead to increased salehigher prices charged by tenants for their products,on goods sold which will ultimately reduce theircould result in lower sales volumes and consequentlytherefore reduce the portioncomponent of rent we receive based on their total sales.sales revenue.
 
Since the INDEC modified itsthe methodology usedit uses to calculate the consumer price index in January 2007, there have been concerns about the accuracy of Argentina’s official inflation statistics, which led to the creation of the IPCNu in February 2014 in order to address the quality of official data. However, despite
Regarding rates of inflation in Israel, the Consumer Price Index, according to OECD was 0.5% increase in the prices for 2014, and deflation of 0.6% in 2015. Likewise, inflation projected for 2016 and 2017 is (0.2)% and 0.8%, respectively.
Seasonality
Our shopping centers business is directly affected by seasonality, as if results in  fluctuations in the level of our tenants’ sales. During Argentine summer holidays (January and February) our tenants’ sales are generally at their lowest level, whereas during winter holidays (July) and in December (Christmas) they reach their highest level. Clothing retailers generally change their collections in spring and autumn, positively affecting our shopping center sales. Sales at discount prices at the end of each season are also one of the main sources revenue.
Also, in the Israeli retail segment business results are subject to seasonal fluctuations as a result of the consumption behavior of the population proximate to the Pesach holidays (March and/or April) and Rosh Hashanah and Sukkoth holidays (September and/or October). This also affects the balance sheet values of inventory, customers and suppliers. Our revenues from cellular services are usually affected by seasonality, with the third calendar quarter of each year characterized by higher roaming revenues due to increased incoming and outgoing tourism.
In 2016, the Passover holiday fell at the end of April, compared to 2015 when it was at the beginning of April. The timing of the holiday affects Shufersal’s sales and special offers in the second quarter of 2016, compared to last year. The Passover holiday in the second quarter of 2016 had a greater effect on Shufersal’s results than in the corresponding quarter in 2015, therefore analysis of the results for the first half of the year compared to the corresponding period in 2015 better represents the changes adoptedbetween the periods.
Effects of interest rate fluctuations
Most of our U.S. Dollar denominated debt accrues interest at a fixed rate. An increase in interest rates will not necessary result in a significant increase in our financial costs and may not materially affect our financial condition or our results of operations.
Effects of foreign currency fluctuations
A significant portion of our financial debt is denominated in U.S. dollars. Therefore, a depreciation or devaluation of the Argentine Peso against the U.S. dollar would increase our indebtedness measured in Pesos and materially affect our results of operations. Foreign currency exchange rate fluctuations significantly increase the risk of default on our mortgages and lease receivables. Foreign currency exchange restrictions that may be imposed by the INDECArgentine Government could prevent or restrict our access to U.S. dollars, affecting our ability to service our U.S. dollar denominated liabilities.
During fiscal year 2016 and 2015, the Peso depreciated against the U.S. dollar and other curren cies by approximately 66% and 12%, respectively, which caused an impact on the comparability of our results of operations for the year ended June 30, 2016 to our results of operations for the year ended June 30, 2015, primarily in our revenues from office rentals and our net assets and liabilities denominated in foreign currency. The devaluation affected assets and liabilities denominated in foreign currency, and this effect is shown in the line “financial results, net” of our income statement.
As a result of the devaluation of the Peso and the discontinuation of the official exchange rate by the newly elected Argentine government that took office in December 2015, the exchange rate was Ps.13.0400 per US$1.00 on December 31, 2015 and Ps.15.5100 per US$1.00 on September 30, 2016.

During fiscal year 2016 and 2015, Israeli New Shekel depreciated against the U.S. dollar and other currencies by approximately 2.2% and 10%, respectively, which caused an impact on the comparability of our results of IDBD´s operations for the year ended June 30, 2016 to IDBD´s results of operations for the year ended June 30, 2015. As of June 30 2016, the offer exchange rate for June 30, 2016 was NIS 3.8575=U.S.$1.00, and NIS 3.7464 per US$1.00 on September 30, 2016. According to the measurement procedure withinformation published in the IPCNu, there are still some differences betweenMonetary Policy Report in July 2016 by the figures resulting from this indicator and those recorded by private consultants,Bank of Israel, various models of the Argentinian Congress andequilibrium exchange rate indicate that the provincial statistic agencies. See “Risk Factors—There are concernsShekel could be overvalued. For more information about the accuracy of Argentina’s official inflation statistics.exchange rates, see “Local Exchange Market and Exchange Rates.
 
Critical Accounting Policies and EstimatesEstimates.
 
Our Audited Consolidated Financial Statements are prepared in accordance with and compliance with IFRSs as issued by the IASB, and the accounting policies employed are set out in our Company’s Accounting Policies section in the financial statements. In applying these policies, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. The actual outcome could differ from those estimates. Some of these policies require a high level of judgment because the areas are especially subjective or complex.
 
The discussion below should also be read in conjunction with our disclosure of significant IFRSsIFRS accounting policies, includedwhich is provided in Note 2 to our Audited Consolidated Financial Statements, “Summary of significant accounting policies”.
 
We believe that the most criticalNot all of these significant accounting policies require management to make subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies that management considers critical because of the level of complexity, judgment or estimations involved in their application and significant areastheir impact on the consolidated financial statements. These judgments involve assumptions or estimates in respect of judgment and estimation are in:future events. Actual results may differ from these estimates.
 
·  EstimationMain assumptionsPotential implications
Business combinationscombination - Allocation of acquisition pricesAssumptions regarding timing, amount of future revenues and expenses, revenue growth, expected rate of return, economic conditions, discount rate, among others.Should any of the assumptions made be inaccurate the recognized combination may not be correct.
Recoverable amounts of cash-generating units (even those including goodwill), associates and assets.
The discount rate and the expected growth rate before taxespurchase price allocation;in connection with cash-generating units.
The discount rate and the expected growth rate after taxes – in connection with associates.
Cash flows are determined based on past experiences with the asset or with similar assets and in accordance with the Company’s best factual assumption relative to the economic conditions expected to prevail.
Business continuity and share market public in connection with cash-generating unit value of the companies.
Appraisals made by external appraisers and valuators with relation to the assets’ fair value, net of realization costs (including real estate assets).
Should any of the assumptions made be inaccurate, this could lead to differences in the recoverable values of cash-generating units.
·  Control, joint control or significant influenceJudgment relative to the determination that the Company holds an interest in the shares of investees (considering the existence and influence of significant potential voting rights), its right to designate members in the executive management of such companies (usually the Board of directors) based on the investees’ bylaws; the composition and the rights of other shareholders of such investees and their capacity to establish operating and financial policies for investees or to take part in the establishment thereof.Accounting treatment of investments as subsidiaries (consolidation) or associates (equity method).
Estimated useful life of intangible assets, investment properties and property, plant and equipmentEstimated useful life of assets based on their conditions.Recognition of accelerated or decelerated depreciation by comparison against final actual earnings (losses).
Fair value valuation of investment propertiesFair value valuation made by external appraisers and valuators.Incorrect exposure of financial instruments;investment property values.
Income tax expense
The Company estimates the income tax amount payable for transactions where the Treasury’s Claim cannot be clearly determined.
Additionally, the Company evaluates the recoverability of assets due to deferred taxes considering whether some or all of the assets will not be recoverable.
Upon the improper determination of the provision for income tax, the Company will be bound to pay additional taxes, including fines and compensatory and punitive interest.
·  Allowance for doubtful accounts;
·  accountsTaxation;
·  A periodic review is conducted of receivables risks in the Company’s clients’ portfolios. Bad debts based on the expiration of account receivables and account receivables’ specific conditions.Trading properties;
·  Impairment testingImproper recognition of goodwill and other non-current assets;
·  Venture capital organization;
·  Aquisitioncharges / reimbursements of assets carried out between entities under common control;
·  Biological assets and agricultural produce at the point of harvest;
Business combinations – purchase price allocation
We account for the acquisition of subsidiaries using the acquisition method. Accounting for business combinations requires us the determination of the fair value of the various assets and liabilities of the acquired business. We use all available information to make these fair value determinations, and for major acquisitions, may hire an independent appraisal firm to assist us in making these fair value estimates. In some instances, assumptions with respect to the timing and amount of future revenues and expenses associated with an asset might have to be used in determining its fair value.
Actual timing and amount of net cash flows from revenues and expenses related to that asset over time may differ materially from those initial estimates, and if the timing is delayed significantly or if the net cash flows decline significantly, the asset could become impaired.
During the fiscal year ended June 30, 2015, we did not acquire new businesses.

99


Fair Value of Financial Instruments
Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. We use our judgment to select a variety of methods and make assumptions that are based on market conditions existing at statement of financial position. When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods.
The Company developed an internal valuation model to determine the fair value of the IDBD shares under these circumstances. This model is principally based and is sensitive to the number of shares eligible to be tendered. In one end of the spectrum, all of the shares outstanding  may be tendered, and on the opposite end, only the Creditors’ shares are eligible for tendering as per the judge’s ruling. The objective of the methodology is to arrive at a fair value of the IDBD’s share by subtracting from the quoted market price the value of the right to participate in the tender offer embedded in such quoted price. The relative weight of the “right to participate in the tender offer” embedded in IDBD’s quoted market price is sensitive and varies depending on the number of shares deemed eligible for tendering. Each scenario reflects a different number of shares eligible for tendering. A probability of occurrence has been assigned to each scenario based on available evidence. This methodology results in a weighted-probability value representing the fair value of IDBD’s shares recognized in the financial statements. The Company considers this value as a reasonable proxy for the fair value of the IDBD share.
We use a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table:

DescriptionPricing modelPricing methodParametersRangeallowance for bad debt.
Foreign currency-contractsHybrid financial instrument related to the non-recourse loan from Koor (Adama)Present
·The value methodof Adama’s shares.
·Unobserved data underlying the binomial model applied to the determination of the embedded derivative instruments’ value.
Theoretical priceMoney market curve, interest-rate curve; Foreign exchange curve.-Changes in losses or profits resulting from the variation in the fair value of the embedded derivative, and variations in the book amount of the primary contract recognized as revenues or expenses from financing.
Commitment to tender offer IDBDLevel 2 and 3 financial instrumentsBlack-ScholesTheoretical price
Main assumptions used by the Company are:
·Projected discounted income  as per discount rate
·Values determined in accordance with the company’s shares in equity funds on the basis of its financial statements, based on fair value or investment assessments.
·Comparable market multiple (EV/GMV ratio).
·Underlying asset price;price (market price) and share price volatility (historical) and interest-rate curve (NIS rate curve).
Underlying asset price
3.5 to 4.7
Share price volatility
30% to 40%
Money market interest rate 0.7%(Libor curve).
Wrong recognition of a charge to 1%income.
Other BorrowingsProbability estimate of contingent liabilitiesWeighted probabilityWhether more economic resources may be spent in relation to litigation against the Company; such estimate is based on legal advisors’ opinions.Charge / reversal of the difference between market price and the Commitmentprovision in relation to tender offer of shares in IDBDTheoretical priceUnderlying asset price; share price volatility (historical) and interest-rate curve (NIS rate curve). IRSA 2017 interest-rate and scenario weights.
Underlying asset price
1.55 to 2.35
Share price volatility
60% to 80%
Money market interest rate 0.02% to 0.9%
a claim.
IDBD SharesBiological assetsWeighted probabilityMain assumptions used in valuation are: yields, operating costs, selling expenses, future of the difference between market price and the Commitment to tender offer of shares in IDBDTheoretical priceUnderlying asset price; share price volatility (historical) and interest-rate curve (NIS rate curve). IRSA 2017 interest-rate and scenario weights.
Underlying asset price
1.55 to 2.35
Share price volatility
60% to 80%
Money market interest rate 0.02% to 0.9%
Call option of Arcos
Discounted cash flow-Projected income and discounted interestsales prices, discount rate.-
Interest rate swaps
Cash flowTheoretical priceInterest rate and cash flow forward contract.-
Preferred sharesWrong recognition/valuation of CondorBinomial treeTheoretical price Underlying asset price (market price), share price volatility (historical) and money market interest-rate curve (Libor rate).
Underlying asset price 1.96 to 2.65
Share price volatility 56% to 76%
Money market interest rate 0.67% to
0.83%
Warrants of CondorBlack-ScholesTheoretical priceUnderlying asset price (market price), share price volatility (historical) and money market interest-rate curve (Libor rate).
Underlying asset price 1.96 to 2.65
Share price volatility 56% to 76%
Money market interest rate 0.67% to
0.83%
biological assets. See sensitivities modeled on these parameters in Note 14.

Allowance for Doubtful Accounts
We maintain an allowance for trade receivables to account for estimated losses resulting from the inability of customers to make required payments. When evaluating the adequacy of an allowance for trade receivables, we base our estimates on the aging of accounts receivable balances and historical write-off experience, customer credit worthiness and changes in customer payment terms.
If the financial condition of customers were to deteriorate, actual write-offs might be higher than expected.
Taxation
We are subject to income taxes in numerous jurisdictions. Our tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Company’s total tax charge necessarily involves a degree of estimation and judgment in respect of certain items whose tax treatment may not be always determined with certainty due to interpretation. The final resolution of some of these items may give rise to material profits, losses and/or cash flows. The complexity of our structure makes the estimation and judgment more challenging. The resolution of issues may not always be within our control and may depend on the efficiency of legal action, if necessary. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result there can be substantial differences between the tax charge in the consolidated income statement and tax payments.
We recognize deferred tax assets only to the extent it is probable that future taxable profit will be available against which the temporary differences can be utilized. We assess the realizability of deferred tax assets by considering whether it is probable that some portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
The amounts recognized in our Audited Consolidated Financial Statements in respect of each matter are derived from our best estimate and judgment as described in Note 5 to our Audited Consolidated Financial Statements.
Trading Properties
Trading properties include land and work in progress in respect of development sites with a view to sale. Trading properties are carried at the lower of cost or net realizable value. On each development, judgment is required to assess whether the cost of land and any associated construction work in progress is in excess of its net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs to completion and estimated selling costs.
The estimation of the net realizable value of our trading properties under development is inherently subjective due to a number of factors, including their complexity, unusually large size, the substantial expenditure required and long timescales to completion. In addition, as a result of these timescales to completion, the plans associated with these developments could be subject to significant variation. As a result, the net realizable values of our trading properties are subject to a degree of uncertainty and are made on the basis of assumptions, which may not prove to be accurate.
If actual results differ from the assumptions upon which the external valuer has based its valuation, this may have an impact on the net realizable value of our trading properties, which would in turn have an effect on our financial condition.
 

100


Impairment Testing of Goodwill and Other Non-current Assets
 
IFRS requires us to undertake an annual test for impairment of its property, plant and equipment, investment property and finite-lived intangible assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, we are required to make certain assumptions in respect of highly uncertain matters including management’s expectations of estimates of future cash flows, market rents for similar properties in the same location and condition, and discount rates.
For purposes of the impairment testing, we group assets at the lowest levels for which there are separately identifiable cash flows, known as cash generating units or CGUs. Given the nature of our assets and activities, most of our individual assets do not generate independent cash flows that are independent of those from CGUs. Therefore, we estimate the recoverable amount of the CGU to which the asset belongs, except where the fair value less costs to sell of the individual asset is higher than its book value; or the value in use of the asset can be estimated as being close to its fair value less costs to sell, where fair value can be reliably determined.
Generally, we consider each shopping center, office building and undeveloped property as a separate CGU. Details of the methods, estimates and assumptions we make in our annual impairment testing of goodwill are included in Note 6 in the Consolidated Financial Statements. No impairment of goodwill was identified.
Venture Capital Organization
We generally account for our investments in associates under the equity method. However, IAS 28 “Investments in Associates” provides an exemption from applying the equity method where investments in associates are held through “Venture Capital Organizations” (VCO) or venture capital entities, as defined in Spanish, even when we are not a VCO. This type of investment may be accounted for at fair value with changes in net income for the years because such measure proves to be more useful to users of financial statements than the equity method.
Acquisition of Assets Carried Out Between Entities Under Common Control
The Company has elected to recognize acquisition of assets or groups of assets carried out between entities under common control who also qualify as “Business Combination” according to IFRS 3, using the acquisition method.
Biological Assets and Agricultural Produce at the Point of Harvest
We measure biological assets, which include unharvested crops, beef and dairy cattle, sheep, and sugarcane plantations (at initial recognition, when the biological asset has attained significant biological growth, and at each subsequent measurement reporting date) and agricultural produce, which include harvested crop, raw meat, raw milk, wool and others, at fair value less costs to sell. We measure biological assets that have not attained significant biological growth or when the impact of biological transformation on price is not expected to be material, at cost less any impairment losses, which approximates fair value.
When an active market exists for biological assets, we use the quoted market price in the most relevant market as a basis to determine the fair value of our biological assets, as in the case of cattle. For other biological assets where there is neither an active market or market-determined prices during the growth cycle, we determine their fair value through the use of discounted cash flow (“DCF”) valuation.
The DCF method requires us to populate the models with highly subjective assumptions, including observable and unobservable inputs. The models we use to estimate the fair value of our biological assets are generally based on data not observable in the market, and the use of unobservable inputs is significant to the overall valuation of the assets.
The key assumptions used in our models include future market prices, estimated yields at the point of harvest, and estimated costs of harvesting and other costs.
The market prices used in our DCF models are determined by reference to observable data in the relevant market for the agricultural produce. We estimate our harvesting costs and other costs based on historical and statistical data. We estimate yields based on several factors, including the location of the farmland, soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of our control, including but not limited to extreme or unusual weather conditions, plagues and other diseases.
All of these assumptions are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used may result in a significant increase or decrease to the fair value of biological assets recognized at any given time. Cash flows are projected based on estimated production. Estimates of production in themselves are dependent on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact on estimated production, and could therefore affect estimates of future cash flows used in the assessment of fair value (the valuation models and their assumptions are reviewed annually, and, if necessary, adjusted).
Further details on valuation methods, sensitivity analysis and other factors is included in Note 5 to our Audited Consolidated Financial Statements.
Business Segment Information
 
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are componentscomponent of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”). SuchCODM. According to IFRS 8, the CODM represents a function whereby strategic decisions are made and resources are assigned. The CODM function is carried out by the Company’s Executive Committee in deciding how to allocate resources and in assessing performance, without prejudicePresident of the powersCompany, Mr. Eduardo S. Elsztain. In addition, and responsibilitiesdue to the acquisition of IDBD, two responsibility levels have been established for resource allocation and assessment of results of the management body, that is to say,two operations centers, through executive committees in Argentina and Israel.
As a result of the Boardcontrol of Directors. CODM evaluatesIDBD, the businessCompany reports its financial and equity performance based on the differencesnew segment structure. Comparative information has been modified to reflect the new organization insofar as possible.
Segment information is reported from the perspective of products and services: (i) agricultural business and (ii) urban properties and investment business. In addition, this last segment is reported divided from the geographic point of view in two Operations Centers to manage its global interests: Argentina and Israel. Within each operations center, the Company considers separately the various activities being developed, which represent reporting operating segments given the nature of its products, services, operations and risks. The amount reported forManagement believes the operating segment clustering in each segment item isoperations center reflects similar economic characteristics in each region, as well as similar products and services offered, types of clients and regulatory environments.
Agricultural business:
In the measure reported tothird quarter, we have changed the presentation of the agricultural business segments which are reviewed by the CODM for these purposes. In turn,a better alignment with the Boardcurrent business vision and the metrics used to such end. Four operating segments (crops, cattle, dairy and sugarcane) have been aggregated into a single operating segment named “Agricultural production”. Management consider for the aggregation the nature of Directors’ management is assessed by the Shareholders’ Meeting, which isproduction processes (growing of biological assets), the governance body.methods used to distribute their products and the nature of the regulatory environment (agricultural business). Therefore this quarter three segments are considered:
 
Operating segments identified are disclosedThe "Agricultural production" segment consists of planting, harvesting and sale of crops as reportable segments if they meet anywheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the following quantitative thresholds:production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane.
 
·  The operating segment’s reported revenue, including both sales to external customers and inter-segment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments;
The “Land transformation and sales” segment comprises gains from the disposal and development of farmlands activities
 
·  The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of:
·  the combined reported profit of all operating segments that do not report a loss; and
·  the combined reported loss of all operating segments that report a loss.
·  Its assets are 10% or more of the combined assets of all operating segments.

101

As well as this, the operating segments that do not meet anyThe "Other segments" column includes, principally, agricultural services (for example, irrigation); leasing of the quantitative thresholds can be considered as reportable segments if the management estimates that this information could be useful for the users of the financial statements.
If, after determining reportable segments in accordance with the preceding quantitative thresholds, the total external revenue attributableour farms to those segments amounts to less than 75% of the total Company’s consolidated external revenue, additional segments are identified as reportable segments, even if they do not meet the thresholds described above, until at least 75% of the Company’s consolidated external revenue is included in reportable segments. Once the 75% of the Company’s consolidated external revenue is included in reportable segments, the remaining operating segments may be aggregatedthird parties; feedlot farming, slaughtering and processing in the "All other segments" column.
Segment information has been preparedmeat refrigeration plant; and classified according to different types of businesses in which the Company conducts its activities. The Company operates in two businesses areas, namely, Agricultural business and Investment and Development Properties business.brokerage activities, among others.
 
The Company’s Agricultural business is further comprised of eight reportable segments: (the reporting segments of crops, cattle, dairy, sugarcane, agricultural rentals and services and other segments are included within “Agriculture” activities):
·  
The “Crops” Segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Company is focused on the long-term performance of the land and seeksamounts corresponding to maximize the use of the land through crop rotation; the use of technology and techniques. In this way, the type and quantity of harvested crops change in each agricultural campaign.
·  
The “Cattle” Segment consists of breeding, purchasing and/ or fattening of free-range beef cattle for sale to meat processors and local livestock auction markets.
·  
The “Dairy” Segment consists of breeding and/ or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers.
·  
The “Sugarcane” Segment consists of planting, harvesting and sale of sugarcane.
·  
The “Agriculture Rentals and Services” Segment consists of services (for example: irrigation) and leasing of the Company’s farms to third parties.
·  
The “Land Transformation and Sales” Segment comprises gains from the disposal and development of farmlands activities.
·  
The “Agro-industrial” Segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant.
·  
The "Other Segments" column consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure includes the brokerage and sale of inputs activities.
The Company’s Urban Properties and Investments business is further comprised of six operative segments:
·  
The “Shopping Center Properties” Segment includes results from the commercial exploitation and development of shopping centers. Such results originate mainly from the lease and the delivery of services related to the lease of commercial facilities and other spaces in the Company’s shopping centers.
·  
The “Offices” Segment includes the operating results of our lease of office space and other rental properties and service revenues related to this activity.
·  
The “Development and Sale of Properties” Segment includes the operating results of the sales of undeveloped parcels of land and/or trading properties, as the results related with its development and maintenance. Also included in this segment are the results of the sales of real property intended for rent, sales of hotels and other properties included in the International segment.
·  
The “Hotels” Segment includes the operating results of the Company’s hotels principally comprised of room, catering and restaurant revenues.
·  
The “International” Segment includes the return on investments in subsidiaries and/or associates that mainly operate in the United States in relation to the lease of office buildings and hotels in that country and the return on investment in IDBD at fair value.
·  
The "Financial Operations and Others" Segment primarily includes the financial activities carried out by the Company's associates, Banco Hipotecario S.A. and Tarshop S.A. and consumer finance residual financial operations of APSAMedia S.A. (currently merged with IRSA Commercial Properties). The e-commerce activities conducted through the associate Avenida Inc. are also included until the first quarter of the current fiscal year. This investment began to be considered a financial asset from the second quarter of this fiscal year.
For ease of presentation, the following table present summarized information for the two lines of business of the Company, i.e. agriculture and Urban Properties and Investments activities. The following tables represent the reportable segments of each of the Company’s lines of business.

102

Below is a summarized analysis of the lines of business of the Company for the yearsfiscal year ended June 30, 2015 and 2014, and 2013.have been retroactively adjusted to reflect changes in segment information.
 
  Year ended June 30, 2015 
  
Agricultural business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues  2,361,010   2,547,062   4,908,072 
Costs  (3,385,675)  (633,467)  (4,019,142)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,347,447   -   1,347,447 
Changes in the net realizable value of agricultural produce after harvest  (34,471)  -   (34,471)
Gross Profit  288,311   1,913,595   2,201,906 
Gain from disposal of investment properties  -   1,150,230   1,150,230 
Gain from disposal of farmlands  569,521   -   569,521 
General and administrative expenses  (246,470)  (378,125)  (624,595)
Selling expenses  (284,830)  (195,866)  (480,696)
Other operating results, net  (18,123)  28,679   10,556 
Profit from operations   308,409   2,518,513   2,826,922 
Share of profit / (loss) of associates and joint ventures  846   (1,036,256)  (1,035,410)
Segment Profit   309,255   1,482,257   1,791,512 
Investment properties  77,202   3,493,645   3,570,847 
Property, plant and equipment  2,078,497   256,891   2,335,388 
Trading properties  -   136,084   136,084 
Goodwill  8,395   24,440   32,835 
Units to be received under barters  -   90,486   90,486 
Biological assets  586,847   -   586,847 
Inventories  495,919   23,134   519,053 
Interests in associates and joint ventures  33,343   2,381,670   2,415,013 
Total segment assets  3,280,203   6,406,350   9,686,553 
Urban properties and investments:
 
 
  Year ended June 30, 2014 
  
Agricultural business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues  1,812,108   2,155,760   3,967,868 
Costs  (2,617,972)  (648,279)  (3,266,251)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,172,739   -   1,172,739 
Changes in the net realizable value of agricultural produce after harvest  (17,447)  -   (17,447)
Gross Profit  349,428   1,507,481   1,856,909 
Gain from disposal of investment properties  -   230,918   230,918 
Gain from disposal of farmlands  91,356   -   91,356 
General and administrative expenses  (239,630)  (300,066)  (539,696)
Selling expenses  (208,932)  (150,109)  (359,041)
Other operating results, net  (29,540)  (47,922)  (77,462)
(Loss) / Profit from operations   (37,318)  1,240,302   1,202,984 
Share of profit / (loss) of associates and joint ventures  11,479   (436,766)  (425,287)
Segment (Loss) / Profit   (25,839)  803,536   777,697 
Investment properties  51,432   3,540,437   3,591,869 
Property, plant and equipment  2,417,078   237,860   2,654,938 
Trading properties  -   143,059   143,059 
Goodwill  10,428   24,784   35,212 
Units to be received under barters  -   85,077   85,077 
Assets held for sale  -   1,357,866   1,357,866 
Biological assets  651,582   -   651,582 
Inventories  432,634   17,220   449,854 
Interests in associates and joint ventures  37,226   1,966,019   2,003,245 
Total segment assets  3,600,380   7,372,322   10,972,702 

Operations Center in Argentina
 

103



  Year ended June 30, 2013 
  
Agricultural
business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues  1,355,430   1,728,248   3,083,678 
Costs  (2,045,779)  (601,236)  (2,647,015)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  888,493   -   888,493 
Changes in the net realizable value of agricultural produce after harvest  11,756   -   11,756 
Gross Profit  209,900   1,127,012   1,336,912 
Gain from disposal of investment properties  -   177,999   177,999 
Gain from disposal of farmlands  149,584   -   149,584 
General and administrative expenses  (153,675)  (198,773)  (352,448)
Selling expenses  (173,976)  (117,230)  (291,206)
Other operating results, net  3,345   92,425   95,770 
Profit from operations   35,178   1,081,433   1,116,611 
Share of profit / (loss) of associates and joint ventures  9,191   (20,864)  (11,673)
Segment Profit   44,369   1,060,569   1,104,938 
             
Investment properties  25,317   4,306,984   4,332,301 
Property, plant and equipment  1,675,420   231,734   1,907,154 
Trading properties  -   129,677   129,677 
Goodwill  6,438   75,852   82,290 
Units to be received under barters  -   93,225   93,225 
Biological assets  402,594   -   402,594 
Inventories  239,010   16,428   255,438 
Interests in associates and joint ventures  31,223   1,154,830   1,186,053 
Total segment assets  2,380,002   6,008,730   8,388,732 

Within this center, IRSA operates in the following segments:
 

104

The “Shopping centers” segment includes assets and results of the activity of shopping centers portfolio, principally comprised of lease and service revenues related to rental of commercial space and other spaces in the shopping centers of the Company.
 
(I)  Agriculture line of business:
The “Office and others” segment includes the assets and the operating results of the activity of lease of office space and other rental properties and service revenues related to this activity.
The “Sales and developments” segment includes assets and the operating results of the sales of undeveloped parcels of land and/or trading properties, as the results related with its development and maintenance. Also included in this segment are the results of the sales of real property intended for rent, sales of hotels and other properties included in the International segment.
The “Hotels” segment includes the operating results of the hotels principally comprised of room, catering and restaurant revenues.
The “International” segment primarily includes assets and operating profit or loss from business related to associates Condor and Lipstick. Through these associates, the Company derives revenue from hotels and an office building in United States, respectively. Until September 30, 2014, this segment included revenue from a subsidiary that owned the building located at 183 Madison Ave in New York, United States, which was sold on September 29, 2014. Additionally, until October 11, 2015, this international segment only included results from the investment in IDBD carried at fair value.
The “Financial operations and others” segment primarily includes the financial activities carried out by BHSA and Tarshop and other residual financial operations.
 
The following tables presentCODM periodically reviews the reportable segmentsresults and certain asset categories and assesses performance of the agriculture line of business of the Company for the years ended June 30, 2015, 2014 and 2013:
  June 30, 2015 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business 
Revenues (i)  986,717   143,562   71,940   197,828   37,175   1,437,222   -   806,018   117,770   2,361,010 
Costs                                                                        (1,795,443)  (224,556)  (133,259)  (368,172)  (19,201)  (2,540,631)  (9,002)  (739,201)  (96,841)  (3,385,675)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  918,319   166,734   74,919   187,475   -   1,347,447   -   -   -   1,347,447 
Changes in the net realizable value of agricultural produce after harvest  (34,474)  3   -   -   -   (34,471)  -   -   -   (34,471)
Gross Profit / (Loss)  75,119   85,743   13,600   17,131   17,974   209,567   (9,002)  66,817   20,929   288,311 
Gain from disposal of farmlands              -   -   -   -   -   -   569,521   -   -   569,521 
General and administrative expenses             (159,036)  (25,753)  (4,920)  (19,821)  (2,140)  (211,670)  (2,106)  (25,334)  (7,360)  (246,470)
Selling expenses                (160,378)  (20,109)  (3,667)  (7,770)  (717)  (192,641)  (2,383)  (77,146)  (12,660)  (284,830)
Other operating results, net              (8,636)  (3,158)  (773)  (1,669)  (336)  (14,572)  (4,601)  (288)  1,338   (18,123)
Profit / (Loss) from Operations   (252,931)  36,723   4,240   (12,129)  14,781   (209,316)  551,429   (35,951)  2,247   308,409 
Share of profit of associates               845   1   -   -   -   846   -   -   -   846 
Segment Profit / (Loss)   (252,086)  36,724   4,240   (12,129)  14,781   (208,470)  551,429   (35,951)  2,247   309,255 
                                         
Investment properties           -   -   -   -   77,202   77,202   -   -   -   77,202 
Property, plant and equipment       1,420,781   187,100   21,951   293,386   28,681   1,951,899   53,522   18,102   54,974   2,078,497 
Goodwill                                                                        5,352   -   -   2,400   -   7,752   -   -   643   8,395 
Biological assets       57,813   375,357   40,555   113,122   -   586,847   -   -   -   586,847 
Inventories                                                                        307,853   58,529   1,010   2,418   -   369,810   -   23,415   102,694   495,919 
Interests in associates             30,530   20   -   -   -   30,550   -   -   2,793   33,343 
Total segment assets (ii)    1,822,329   621,006   63,516   411,326   105,883   3,024,060   53,522   41,517   161,104   3,280,203 

(i)  Of all of the Company’s revenues corresponding to the agricultural business, Ps. 1,668.86 million is originated in Argentina and Ps. 692.15 million in other countries, principally Brazil which acconts for Ps. 553.97 million.
(ii)   Of all of the Company’s assets included in the segmentoperating segments corresponding to the agricultural business Ps. 1,378.99 million is located in Argentina and Ps. 1,902.36 million in other countries, principally Brazil for Ps. 1,187.37 million.
  June 30, 2014 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business 
Revenues (i)  836,822   90,315   53,935   123,851   29,142   1,134,065   -   554,084   123,959   1,812,108 
Costs                                                                        (1,540,681)  (160,660)  (104,334)  (206,751)  (17,374)  (2,029,800)  (8,228)  (479,689)  (100,255)  (2,617,972)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  868,351   145,321   62,840   96,227   -   1,172,739   -   -   -   1,172,739 
Changes in the net realizable value of agricultural produce after harvest  (17,624)  177   -   -   -   (17,447)  -   -       (17,447)
Gross Profit / (Loss)               146,868   75,153   12,441   13,327   11,768   259,557   (8,228)  74,395   23,704   349,428 
Gain from disposal of farmlands            -   -   -   -   -   -   91,356   -   -   91,356 
General and administrative expenses             (147,193)  (27,183)  (5,746)  (28,261)  (2,669)  (211,052)  (1,130)  (16,880)  (10,568)  (239,630)
Selling expenses         (117,829)  (13,854)  (2,249)  (4,871)  (779)  (139,582)  (3,873)  (54,751)  (10,726)  (208,932)
Other operating results, net   (29,355)  (1,999)  (417)  104   (222)  (31,889)  (82)  (868)  3,299   (29,540)
Profit / (Loss) from Operations   (147,509)  32,117   4,029   (19,701)  8,098   (122,966)  78,043   1,896   5,709   (37,318)
Share of profit of associates            11,029   7   -   -   -   11,036   -   -   443   11,479 
Segment Profit / (Loss)   (136,480)  32,124   4,029   (19,701)  8,098   (111,930)  78,043   1,896   6,152   (25,839)
                                         
Investment properties           -   -   -   -   51,432   51,432   -   -   -   51,432 
Property, plant and equipment        1,701,388   158,507   19,451   423,902   9,794   2,313,042   51,534   18,930   33,572   2,417,078 
Goodwill                                                                        6,745   -   -   3,025   -   9,770   -   -   658   10,428 
Biological assets   154,630   312,068   37,263   142,873   -   646,834   -   65   4,683   651,582 
Inventories                                                                        302,052   28,881   651   1,702   -   333,286   -   25,878   73,470   432,634 
Interests in associates            34,395   23   -   -   -   34,418   -   -   2,808   37,226 
Total segment assets (ii)  2,199,210   499,479   57,365   571,502   61,226   3,388,782   51,534   44,873   115,191   3,600,380 

(i)  Of allurban properties and investment business of the Company’s revenues corresponding to the agricultural business, Ps. 1,277.62 million is originated inoperations center Argentina and Ps. 534.49 million in other countries, principally Brazil which accounts for Ps. 415.02 million.
(ii)  Of allbased on a measure of profit or loss of the Company’s assets includedsegment composed by the operating income plus the equity in earnings of joint ventures and associates. The valuation criteria used in preparing this information are consistent with IFRS standards used for the segment corresponding topreparation of the agricultural business, Ps. 1,252.06 million is located in Argentina and Ps. 2,348.32 million in other countries, principally Brazil which accountsAudited Consolidated Financial Statements, except for Ps. 1,727.36 million.the following:
 

 
  June 30, 2013 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business 
Revenues (i)  750,376   82,939   38,818   160,259   30,834   1,063,226   -   208,921   83,283   1,355,430 
Costs                                                                    (1,227,832)  (147,290)  (74,826)  (302,206)  (12,052)  (1,764,206)  (5,675)  (204,681)  (71,217)  (2,045,779)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  572,081   79,336   40,741   197,317   -   889,475   -   -   (982)  888,493 
Changes in the net realizable value of agricultural produce after harvest  11,801   (45)  -   -   -   11,756   -   -   -   11,756 
Gross Profit / (Loss)  106,426   14,940   4,733   55,370   18,782   200,251   (5,675)  4,240   11,084   209,900 
Gain from disposal of farmlands    -   -   -   -   -   -   149,584   -   -   149,584 
General and administrative expenses      (89,585)  (13,719)  (3,125)  (24,163)  (4,416)  (135,008)  (572)  (10,986)  (7,109)  (153,675)
Selling expenses         (115,923)  (11,482)  (1,842)  (4,006)  (1,711)  (134,964)  (10,628)  (21,507)  (6,877)  (173,976)
Other operating results, net    (11,014)  (3,545)  (803)  (27)  (1,135)  (16,524)  (147)  (1,305)  21,321   3,345 
Profit / (Loss) from Operations   (110,096)  (13,806)  (1,037)  27,174   11,520   (86,245)  132,562   (29,558)  18,419   35,178 
Share of profit of associates           8,117   -   -   -   -   8,117   -   16   1,058   9,191 
Segment Profit / (Loss)   (101,979)  (13,806)  (1,037)  27,174   11,520   (78,128)  132,562   (29,542)  19,477   44,369 
                                         
Investment properties                -   -   -   -   25,317   25,317   -   -   -   25,317 
Property, plant and equipment                1,115,211   136,824   21,440   303,283   456   1,577,214   58,026   20,287   19,893   1,675,420 
Goodwill                                                                    4,443   -   -   1,995   -   6,438   -   -   -   6,438 
Biological assets      56,395   197,136   28,134   111,063   -   392,728   -   66   9,800   402,594 
Inventories                                                                    154,730   23,184   433   939   -   179,286   -   10,419   49,305   239,010 
Interests in associates              28,858   -   -   -   -   28,858   -   -   2,365   31,223 
Total segment assets (ii)  1,359,637   357,144   50,007   417,280   25,773   2,209,841   58,026   30,772   81,363   2,380,002 

(i)  Of all of the Company’s revenues corresponding to the agricultural business, Ps. 803.9 million is originatedOperating results of joint ventures: Cresca, Cyrsa, NPSF, Puerto Retiro, Baicom and Quality are evaluated by the CODM applying proportional consolidation method. Under this method the income/loss generated and assets, are reported in Argentina and Ps. 551.6 million in other countries, principally Brazil which accounts for Ps. 453.2 million.
(ii)   Of all of the Company’s assets included in the segment corresponding to the agricultural business, Ps. 883.1 million is located in Argentina and Ps. 1,496.9 million in other countries, principally Brazil which accounts for Ps. 1,190.1 million.

(II)           Urban properties and investments
The following tables present the reportable segments of the Urban Properties and Investments line of business of the Company for the years ended June 30, 2015, 2014 and 2013:
   June 30, 2015 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  
Financial operations
and others
  Total Urban Properties and Investments 
Revenues (i)  1,778,310   332,728   13,707   396,297   25,873   147   2,547,062 
Costs                                                                        (291,183)  (36,368)  (19,457)  (278,672)  (7,121)  (666)  (633,467)
Gross Profit / (Loss)  1,487,127   296,360   (5,750)  117,625   18,752   (519)  1,913,595 
Gain from disposal of investment properties  -   -   1,150,230   -   -   -   1,150,230 
General and administrative expenses    (136,151)  (58,971)  (49,690)  (77,567)  (55,746)  -   (378,125)
Selling expenses               (112,825)  (21,130)  (9,146)  (52,386)  -   (379)  (195,866)
Other operating results, net              (48,810)  (117,610)  13,093   (461)  184,886   (2,419)  28,679 
Profit / (Loss) from Operations                 1,189,341   98,649   1,098,737   (12,789)  147,892   (3,317)  2,518,513 
Share of profit / (loss) of associates and joint ventures  -   (2,570)  (1,712)  1,254   (1,191,116)  157,888   (1,036,256)
Segment Profit / (Loss)  1,189,341   96,079   1,097,025   (11,535)  (1,043,224)  154,571   1,482,257 
                             
Investment properties            2,320,845   978,125   187,824   -   -   6,851   3,493,645 
Property, plant and equipment            48,345   30,599   1,242   175,386   1,319   -   256,891 
Trading properties           1,484   -   134,600   -   -   -   136,084 
Goodwill                                                                        13,719   6,180   4,541   -   -   -   24,440 
Units to be received under barters         -   -   90,486   -   -   -   90,486 
Inventories                                                                        15,711   -   497   6,926   -   -   23,134 
Investments in associates and joint ventures   -   20,746   46,555   -   909,911   1,404,458   2,381,670 
Total segment assets (ii)  2,400,104   1,035,650   465,745   182,312   911,230   1,411,309   6,406,350 
(i)     Of all of the Company’s revenues corresponding to urban properties and investment business, Ps. 2,522 million is originated in Argentina and Ps. 26 million in United States.
(ii)    Of all of the Company’s assets included in urban properties and investment business, Ps. 5,389 million is located in Argentina and Ps. 1,639 million in other countries, principally in Israel for Ps. 907.0 million and Uruguay for Ps. 106.0 million, respectively.
105



  June 30, 2014 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  
Financial operations
and others
  Total Urban Properties and Investments 
Revenues (i)  1,383,008   271,159   85,531   331,562   83,926   574   2,155,760 
Costs                                                                        (296,688)  (45,367)  (34,963)  (216,768)  (53,510)  (983)  (648,279)
Gross Profit / (Loss)  1,086,320   225,792   50,568   114,794   30,416   (409)  1,507,481 
Gain from disposal of investment properties  (82)  -   231,000   -   -   -   230,918 
General and administrative expenses           (101,538)  (41,945)  (37,466)  (59,585)  (59,476)  (56)  (300,066)
Selling expenses             (73,427)  (20,751)  (13,706)  (42,335)  -   110   (150,109)
Other operating results, net        (46,568)  (3,060)  8,137   (2,680)  (895)  (2,856)  (47,922)
Profit / (Loss) from Operations                  864,705   160,036   238,533   10,194   (29,955)  (3,211)  1,240,302 
Share of profit / (loss) of associates and joint ventures  -   (895)  6,368   789   (616,313)  173,285   (436,766)
Segment Profit / (Loss)  864,705   159,141   244,901   10,983   (646,268)  170,074   803,536 
                             
Investment properties            2,275,053   834,480   423,442   -   -   7,462   3,540,437 
Property, plant and equipment             20,455   36,415   3,744   175,745   1,501   -   237,860 
Trading properties          1,484   -   141,575   -   -   -   143,059 
Goodwill                                                                        8,582   11,661   4,541   -   -   -   24,784 
Units to be received under barters        -   -   85,077   -   -   -   85,077 
Assets held for sale (iii)  -   -   -   -   1,357,866   -   1,357,866 
Inventories                                                                        10,625   -   584   6,011   -   -   17,220 
Investments in associates and joint ventures       -   23,208   38,289   22,129   628,658   1,253,735   1,966,019 
Total segment assets (ii)  2,316,199   905,764   697,252   203,885   1,988,025   1,261,197   7,372,322 

(i)  Of all of the Company’s revenues corresponding to urban properties and investment business, Ps. 2,072 million is originated in Argentina and Ps. 84 million in United States.
(ii)  Of all of the Company’s assets included in urban properties and investment business, Ps. 5,273 million is located in Argentina and Ps. 2,099 million in other countries, principally in United States for Ps. 1,988 million.
(iii)  See Note 44 to the Audited Consolidated Financial Statements for details.


106



  June 30, 2013 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  Financial operation and others  Total Urban Properties and Investments 
Revenues (i)  1,103,044   217,171   141,996   225,836   38,998   1,203   1,728,248 
Costs  (245,528)  (46,975)  (106,558)  (169,071)  (31,587)  (1,517)  (601,236)
Gross Profit / (Loss)  857,516   170,196   35,438   56,765   7,411   (314)  1,127,012 
Gain from disposal of investment properties  -   -   177,999   -   -   -   177,999 
General and administrative expenses  (67,597)  (34,984)  (32,901)  (49,883)  (13,158)  (250)  (198,773)
Selling expenses  (58,907)  (11,360)  (16,456)  (28,919)  -   (1,588)  (117,230)
Other operating results, net  (45,020)  (247)  6,342   (369)  135,082   (3,363)  92,425 
Profit / (Loss) from Operations  685,992   123,605   170,422   (22,406)  129,335   (5,515)  1,081,433 
Share of profit / (loss) of associates and joint ventures  -   (2,514)  1,569   83   (82,552)  62,550   (20,864)
Segment Profit / (Loss)  685,992   121,091   171,991   (22,323)  46,783   57,035   1,060,569 
                             
Investment properties  2,249,180   857,782   447,363   -   744,587   8,072   4,306,984 
Property, plant and equipment  17,385   29,830   3,972   180,348   199   -   231,734 
Trading properties  1,484   106   128,087   -   -   -   129,677 
Goodwill  8,582   11,661   4,540   -   51,069   -   75,852 
Units to be received under barters  -   -   93,225   -   -   -   93,225 
Inventories  10,003   -   463   5,962   -   -   16,428 
Investments in associates and joint ventures  -   23,385   32,759   21,339   802   1,076,545   1,154,830 
Total segment assets (ii)  2,286,634   922,764   710,409   207,649   796,657   1,084,617   6,008,730 

(i)  Of all of the Company’s revenues corresponding to urban properties and investment business, Ps. 1,689 million is originated in Argentina and Ps. 39 million in United States, respectively.
(ii)  Of all of the Company’s assets included in the urban properties and investment business, Ps. 5,131 million is located in Argentina and Ps. 877 million in other countries, principally in United States for Ps. 797 million.

107


The agricultural business, which includes cattle, dairy cattle and agroindustrial activities are mainly concentrated in Argentina. The crop activities of the Company are primarily concentrated in Argentina, Brazil, Bolivia and Paraguay, while sugar cane production is developed in Brazil and Bolivia.
The shopping center properties of the Company are all located in Argentina, the country of domicile of the Company. Substantially, offices and other rental properties of the Company are located in Argentina. Properties of the Company located in the United States, are disclosed in column "International". Hotels of the Company are located in Argentina and the United States. The trading properties of the Company are also located in Argentina and Uruguay.
During the fiscal years ended as of June 30, 2015, 2014 and 2013, the “Office” segment revenues include Ps.52,693 million, Ps.44,067 million and Ps.34,229 million, which represent 16% of the segment’s total revenues in the three fiscal years and are derived from activities of a single tenant.
Starting in the fourth quarter of the 2015 fiscal year, the Company modified the presentation of the income statement with respectline-by-line based on the percentage held in joint ventures rather than in a single item as required by IFRS. Management believes that the proportional consolidation method provides more useful information to understand the financial information by segments,business return. Moreover, operating results of EHSA joint venture is accounted for better alignment and consistency withunder the current business model and metrics used by the CODM and how they consider and analyse segmentequity method. Management believes that, in this case, this method provides more adequate information for purposesthis type of assessing operating performance by segment. This change in segment information presentation affectedinvestment, given its low materiality and considering it is a company without direct trade operations, where the presentationmain asset consists of information relating toan indirect interest of 25% of LRSA.
Operating results from the shopping centers and offices segments. This revised form of presentation excludes fromdo not include the income statement by segment the common maintenanceamounts attributable to building arrangement expenses and expenses relating to the collective promotion fundfunds ("FPC", as per its Spanish acronym) as well as any revenues relating tototal recovered costs, whether by way of building administration expenses or other concepts included under financial results (for example default interest and other concepts). The CODM examines the recovery of such expenses. Only thenet amount from both concepts (total surplus or deficit represented by the net amount between suchbuilding administration expenses and related revenues is included in the income statement by segment.

The Company has used this revised segment presentation in the comparative discussion of the results of operations for the fiscal years included below.
In addition, in the fourth quarter of the 2015 fiscal year, the Company has modified how it presents the gain/loss on the sale of investment property in segment information, which is revised by CODM. The information revised by CODM includes the gain/loss on the sale of investment properties within salesFPC and development segment, regardless of the segment where the property would have been originally located. These modifications affected the segments of sales and development and international. Considering that in the comparative periods presented there were not sales of investment properties in the international segment, it was not necessary to retroactively adjust the amounts pertaining to prior fiscal years.  
recoverable expenses).
 
The asset categories examined by the CODM regularly reviews the following categories of assets:are: investment properties;properties, property, plant and equipment;equipment, trading properties; goodwill; rightsproperties, inventories, right to receive future units under barter agreements; inventories; biological assets; investments in associates; and theagreements, investment in the Entertainment Holding S.A. joint venture.associates and goodwill. The aggregatesum of these assets, classified by business segment, is reported under “assets by segment”. Assets are disclosed in these financial statements as “operatingallocated to each segment assets”. The measurement principles for the operating segment assets are based on the IFRS principles adoptedoperations and/or their physical location.
Within the operations center in Argentina, most revenue from its operating segments is derived from, and their assets are located in, Argentina, except for earnings of associates included in the preparation“International” segment located in United States.
Revenues for each reporting segments derive from a large and diverse client base and, therefore, there is no revenue concentration in any particular segment.
Operations Center in Israel
Within this center, IRSA operates in the following segments:
·  
The “Real Estate” segment includes assets and operating income derived from business related to the subsidiary PBC. Through PBC, we operate rental properties and residential properties in Israel, United States and other parts of the consolidated financial statements, exceptworld and carries out commercial projects in Las Vegas.
·  
The “Supermarkets” segment includes assets and operating income derived from the business of Shufersal which operates a supermarket chain in Israel.
·  
The “Agrochemicals” segment includes income derived from the activities of Adama which is accounted for as an associate using the equity method of accounting Adama is specialized in agrochemicals, particularly for the Company’s shareproduction of crops for consumption.
·  
The “Telecommunications” segment includes assets and operating income from the business of Cellcom which is telecommunication service provider that offers mobile phone services, fixed line phone services, data and Internet, among others.
·  
The “Insurance” segment includes the operations of Clal which is one of the joint ventures Cresca S.A., CYRSA S.A., Nuevo Puerto Santa Fe S.A., Puerto Retiro S.A., Baicom Networks S.A.,most important insurance groups in Israel, and Quality Invest S.A., which are all reportedis mainly engaged in pension and social security insurance, among others. As indicated in Note 16 to the CODM under the proportionate consolidation method. Under this method, eachour Audited Consolidated Financial Statements, 51% of the operatingcontrolling shares of Clal are held in trust as specified in a judicial order of the Israel Securities Commission in order to comply with the requirement that the controlling shares of Clal be offered for sale to a third party; as a result, the Company is not fully consolidated on a line-by-line basis but rather in a single line as a financial instrument at fair value, as required by IFRS.
·  
The “Others” segment assets reported to the CODM includes the proportionate share of the Company in the same operating assets of these joint ventures. As an example, the investment properties amount reported to the CODM includes (i) the investment property balanceand income derived from other diverse business activities, such as per the statement of financial position plus (ii) the Company’s share of the investment properties of these joint ventures. Under IFRS 11, the investment properties of these joint ventures are included together with all other of the joint ventures’ nettechnological developments, tourism, oil and gas assets, in the single line item titled “Investments in associateselectronics, and joint ventures” in the statement of financial position.others.
 
The CODM evaluatesperiodically reviews the results and certain asset categories and assesses performance of business segmentsthis operating segment based on segment profit, defined as profit or loss from operations before financing and taxes. The measurement principles for the Company’s segment reporting structure are based on the IFRS principles adopted in the Consolidated Financial Statements, except for the Company’s sharea measure of profit or loss of the segment composed by the operating income plus the equity in earnings of joint ventures.ventures and associates. The valuation criteria used in preparing this information are consistent with IFRS standards used for the preparation of the Audited Consolidated Financial Statements.
 
At the timeAs indicated under Note 2 of assessing the performance of business segments and deciding upon the allocation of resources, the Executive Committee uses information on operating income assets and liabilities of each such segment In theour Audited Consolidated Financial Statements, the transactionsCompany decided to consolidate income derived from its operations center in Israel with a three month lag, as adjusted for the effects of significant transactions; hence, operating results of IDBD for the period extending from October 11, 2015 (the date of acquisition of control) through March 31, 2016 are included in the Company’s comprehensive income for the fiscal year ended June 30, 2016.
Furthermore, comparative information has not been modified for as of that date the Company did not exercise control over IDBD. The assessment of this investment was part of the international segment of the urban properties and balances between related parties which may affect more than one segment are eliminated.investment business in the operations center in Argentina.
 
Goods and services exchanged between segments are calculated on the basis of market prices. Intercompany transactions between segments, if any, are eliminated.
 
Business segments involving the urban properties and investments business from the operations center in Argentina where the CODM evaluated assets under the proportional consolidation method, each reported asset includes the proportional share of the Company in the same class of assets of the associates and/or joint ventures. Only as an example, the investment properties amount reported to the CODM includes (i) the balance investment properties as per the statement of financial position plus (ii) the Company’s share of the investment properties of these joint ventures.
Within the agricultural business, most revenue from its operating segments are generated from and their assets are located in Argentina and Brazil, mainly.
Within the operations center in Israel, most revenue from its operating segments are derived from, and their assets are located in, Israel, except for part of earnings from the Real Estate segment, which are generated from activities outside Israel, mainly in United States.
Within the agricultural business and the urban properties and investments business from the operations center in Argentina, the assets categories reviewed by the CODM are: investment properties, property, plant and equipment, trading properties, inventories, biological assets, right to receive future units under barter agreements, investment in joint ventures and associates and goodwill. The aggregate of these assets, classified by business segment, are disclosed as “segment assets”. Assets are allocated to each segment based on the operations and/or their physical location.
113
Below is a summarized analysis of the lines of business of the Company for the year ended June 30, 2016:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina 
Operations Center in
Israel
 Subtotal  
     (in million of Ps.)    
Revenues                                                                   2,912 3,284 28,229 31,513 34,425
Costs                                                                   (3,821) (839) (20,481) (21,320) (25,141)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,717 - - - 1,717
Changes in the net realizable value of agricultural produce after harvest208 - - - 208
Gross profit                                                                   1,016 2,445 7,748 10,193 11,209
Gain from disposal of investment properties- 1,056 45 1,101 1,101
Loss from disposal of farmlands                                                                   (2) - - - (2)
General and administrative expenses                                                                   (314) (554) (1,387) (1,941) (2,255)
Selling expenses                                                                   (338) (264) (5,686) (5,950) (6,288)
Other operating results, net                                                                   (70) 32 - 32 (38)
Profit from operations 292 2,715 720 3,435 3,727
Share of profit / (loss) of joint ventures and associates 
23 96 338 434 457
Segment profit 315 2,811 1,058 3,869 4,184
          
Investment properties 
11 3,340 - 3,340 3,351
Property, plant and equipment 
2,736 244 - 244 2,980
Trading properties 
- 253 - 253 253
Goodwill 
10 25 - 25 35
Rights to receive future units under barter agreements 
- 90 - 90 90
Biological assets 
1,144 - - - 1,144
Inventories 
660 28 - 28 688
Interests in joint ventures and associates 
54 964 - 964 1,018
Operating assets from Operations Center in Israel 
- - 146,989 146,989 146,989
Total segment assets 
4,615 4,944 146,989 151,933 156,548
          
Operating liabilities from Operations Center in Israel 
- - 132,865 132,865 132,865
114
Below is a summarized analysis of the lines of business of the Company for the year ended June 30, 2015:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina  
       (in million of Ps.)  
Revenues                                                                                        2,395 2,547 4,942
Costs                                                                                        (3,419) (633) (4,052)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 - 1,347
Changes in the net realizable value of agricultural produce after harvest(34) - (34)
Gross profit                                                                                        289 1,914 2,203
Gain from disposal of investment properties                                                                                        - 1,150 1,150
Gain from disposal of farmlands                                                                                        570 - 570
General and administrative expenses                                                                                        (247) (378) (625)
Selling expenses                                                                                        (286) (195) (481)
Other operating results, net                                                                                        (19) 29 10
Profit from operations 307 2,520 2,827
Share of profit / (loss) of joint ventures and associates                                                                                        1 (1,037) (1,036)
Segment profit 308 1,483 1,791
      
Investment properties                                                                                        77 3,494 3,571
Property, plant and equipment                                                                                        2,079 256 2,335
Trading properties                                                                                        - 136 136
Goodwill                                                                                        8 25 33
Rights to receive future units under barter agreements                                                                                        - 90 90
Biological assets                                                                                        588 - 588
Inventories                                                                                        496 23 519
Interests in joint ventures and associates                                                                                        33 2,382 2,415
Total segment assets                                                                                        3,281 6,406 9,687
115
Below is a summarized analysis of the lines of business of the Company for the year ended June 30, 2014:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina  
       (in million of Ps.)  
Revenues                                                                                        1,813 2,157 3,970
Costs                                                                                        (2,617) (649) (3,266)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 - 1,172
Changes in the net realizable value of agricultural produce after harvest(17) - (17)
Gross profit                                                                                        351 1,508 1,859
Gain from disposal of investment properties                                                                                        - 231 231
Gain from disposal of farmlands                                                                                        91 - 91
General and administrative expenses                                                                                        (241) (300) (541)
Selling expenses                                                                                        (210) (150) (360)
Other operating results, net                                                                                        (29) (49) (78)
(Loss) / Profit from operations (38) 1,240 1,202
Share of profit / (loss) of joint ventures and associates                                                                                        11 (437) (426)
Segment (loss) / profit (27) 803 776
      
Investment properties                                                                                        51 3,539 3,590
Property, plant and equipment                                                                                        2,417 238 2,655
Trading properties                                                                                        - 143 143
Goodwill                                                                                        11 26 37
Rights to receive future units under barter agreements                                                                                        - 85 85
Assets held for sale                                                                                        - 1,358 1,358
Biological assets                                                                                        652 - 652
Inventories                                                                                        433 18 451
Interests in joint ventures and associates                                                                                        37 1,966 2,003
Total segment assets                                                                                        3,601 7,373 10,974
116
Agriculture line of business:
The following tables present the reportable segments of the agriculture line of business:
 June 30, 2016
 Agricultural production 
Land
transformation
and sales
 Others 
Total
 Agricultural
business (i)
 (in million of Ps.)
Revenues                                                             1,689 - 1,223 2,912
Costs                                                             (2,727) (9) (1,085) (3,821)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,717 --- 1,717
Changes in the net realizable value of agricultural produce
after harvest                                                             
208 --- 208
Gross profit / (loss)                                                             887 (9) 138 1,016
Loss from disposal of farmlands                                                             - (2) - (2)
General and administrative expenses                                                             (256) (1) (57) (314)
Selling expenses                                                             (247) - (91) (338)
Other operating results, net                                                             (72) - 2 (70)
Profit / (Loss) from operations 312 (12) (8) 292
Share of profit / (loss) of associates                                                             26 - (3) 23
Segment profit / (loss) 338 (12) (11) 315
        
Investment properties                                                             --- 11 11
Property, plant and equipment                                                             2,673 13 50 2,736
Goodwill                                                             10 - - 10
Biological assets                                                             1,144 - - 1,144
Inventories                                                             499 - 161 660
Investments in associates                                                             54 - - 54
Total segment assets (ii)                                                             4,380 13 222 4,615
(i)  
From all of the Company’s revenues corresponding to Agricultural Business, Ps. 2,212 million are originated in Argentina and Ps. 700 million in other countries, principally in Brazil for Ps. 503 million.
(ii)  
From all of the Company’s assets included in the segment corresponding to Agricultural Business, Ps. 2,062 million are located in Argentina and Ps. 2,556 million in other countries, principally in Brazil for Ps. 1,470 million.
117
 June 30, 2015
 Agricultural production 
Land
transformation
and sales
 Others 
Total
Agricultural
business (i)
 (in million of Ps.)
Revenues                                                             1,400 - 995 2,395
Costs                                                             (2,545) (9) (865) (3,419)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 - - 1,347
Changes in the net realizable value of agricultural produce
after harvest                                                             
(34) - - (34)
Gross profit / (loss)                                                             168 (9) 130 289
Gain from disposal of farmlands                                                             - 570 - 570
General and administrative expenses                                                             (210) (2) (35) (247)
Selling expenses                                                             (193) (2) (91) (286)
Other operating results, net                                                             (15) (5) 1 (19)
(Loss) / Profit from operations (250) 552 5 307
Share of profit of associates                                                             1 - - 1
Segment (loss) / profit (249) 552 5 308
        
Investment properties                                                             - - 77 77
Property, plant and equipment                                                             1,997 13 69 2,079
Goodwill                                                             7 - 1 8
Biological assets                                                             587 - 1 588
Inventories                                                             370 - 126 496
Investments in associates                                                             33 - - 33
Total segment assets (ii)                                                             2,994 13 274 3,281
(i)  
From all of the Company’s revenues corresponding to Agricultural Business, Ps. 1,679 million are originated in Argentina and Ps. 716 million in other countries, principally in Brazil for Ps. 578 million.
(ii)  
From all of the Company’s assets included in the segment corresponding to Agricultural Business, Ps. 1,379 million are located in Argentina and Ps. 1,902 million in other countries, principally in Brazil for Ps. 1,186 million.
118
 June 30, 2014
 Agricultural production 
Land
transformation
and sales
 Others 
Total
Agricultural
business (i)
 (in million of Ps.)
Revenues                                                             1,105 - 708 1,813
Costs                                       ��                     (2,011) (8) (598) (2,617)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 - - 1,172
Changes in the net realizable value of agricultural produce
after harvest                                                             
(17) - - (17)
Gross profit / (loss)                                                             249 (8) 110 351
Gain from disposal of farmlands                                                             - 91 - 91
General and administrative expenses 
(208) (1) (32) (241)
Selling expenses                                                             (139) (4) (67) (210)
Other operating results, net                                                             (29) - - (29)
 (Loss) / Profit  from operations (127) 78 11 (38)
Share of profit of associates                                                             11 - - 11
Segment (loss) / profit (116) 78 11 (27)
        
Investment properties                                                             - - 51 51
Property, plant and equipment                                                             2,365 7 45 2,417
Goodwill                                                             10 - 1 11
Biological assets                                                             647 - 5 652
Inventories                                                             334 - 99 433
Investments in associates                                                             34 - 3 37
Total segment assets (ii)                                                             3,390 7 204 3,601
(i)  
From all of the Company’s revenues corresponding to Agricultural Business, Ps. 1,279 million are originated in Argentina and Ps. 534 million in other countries, principally in Brazil for Ps. 415 million.
(ii)  
From all of the Company’s assets included in the segment corresponding to Agricultural Business, Ps. 1,252 million are located in Argentina and Ps. 2,348 million in other countries, principally in Brazil for Ps. 1,727 million.
119
Urban properties line of business and investments
 The following tables present the reportable segments from the Operations Center in Argentina:
 June 30, 2016
 Shopping Center Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
 
(in million of Ps.)
Revenues (i)                                                            
2,406
 
340
 
3
 
534
 
-
 
1
 
3,284
Costs                                                            
(403)
 
(53)
 
(20)
 
(362)
 
-
 
(1)
 
(839)
Gross profit / (loss)                                                            
2,003
 
287
 
(17)
 
172
 
-
 
-
 
2,445
Gain from disposal of investment properties
-
 
-
 
1,056
 
-
 
-
 
-
 
1,056
General and administrative expenses                                                            
(179)
 
(50)
 
(131)
 
(103)
 
(91)
 
-
 
(554)
Selling expenses                                                            
(145)
 
(12)
 
(36)
 
(69)
 
-
 
(2)
 
(264)
Other operating results, net                                                            
(42)
 
(6)
 
(8)
 
(2)
 
89
 
1
 
32
Profit / (Loss) from operations                                                            
1,637
 
219
 
864
 
(2)
 
(2)
 
(1)
 
2,715
Share of profit / (loss) of joint ventures and associates
-
 
14
 
5
 
-
 
(154)
 
231
 
96
Segment profit / (loss)                                                            
1,637
 
233
 
869
 
(2)
 
(156)
 
230
 
2,811
              
Investment properties                                                            
2,282
 
879
 
173
 
-
 
-
 
6
 
3,340
Property, plant and equipment                                                            
49
 
25
 
2
 
166
 
2
 
-
 
244
Trading properties                                                            
1
 
-
 
252
 
-
 
-
 
-
 
253
Goodwill                                                            
14
 
6
 
5
 
-
 
-
 
-
 
25
Rights to receive future units under barter agreements
-
 
-
 
90
 
-
 
-
 
-
 
90
Inventories                                                            
19
 
-
 
1
 
8
 
-
 
-
 
28
Investment in joint ventures and associates
-
 
31
 
62
 
-
 
(832)
 
1,703
 
964
Total segment assets (ii)                                                            
2,365
 
941
 
585
 
174
 
(830)
 
1,709
 
4,944
(i)  
From all our revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 3,284 million are originated in Argentina. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)  
From all our assets included in the segment corresponding to the urban properties and investment business of the operations Center in Argentina, Ps. 5,618 million are located in Argentina and Ps. (674) million in other countries, principally in United States for Ps. (832) million and Uruguay for Ps. 158 million, respectively.
120
 June 30, 2015
 Shopping Center Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
 (in million of Ps.)
Revenues (i)                                                            1,778 333 14 396 26 - 2,547
Costs                                                            (291) (36) (19) (279) (7) (1) (633)
Gross profit / (loss)                                                            1,487 297 (5) 117 19 (1) 1,914
Gain from disposal of investment properties- - 1,150 - - - 1,150
General and administrative expenses                                                            (135) (59) (50) (78) (56) - (378)
Selling expenses                                                            (113) (21) (9) (52) - - (195)
Other operating results, net                                                            (49) (118) 13 - 185 (2) 29
Profit / (Loss) from operations                                                            1,190 99 1,099 (13) 148 (3) 2,520
Share of (loss) / profit of joint ventures and associates- (3) (2) 1 (1,191) 158 (1,037)
Segment profit / (loss)                                                            1,190 96 1,097 (12) (1,043) 155 1,483
              
Investment properties                                                            2,321 978 188 - - 7 3,494
Property, plant and equipment                                                            48 31 1 175 1 - 256
Trading properties                                                            1 - 135 - - - 136
Goodwill                                                            14 6 5 - - - 25
Rights to receive future units under barter agreements- - 90 - - - 90
Inventories                                                            16 - - 7 - - 23
Interests in joint ventures and associates- 21 47 - 910 1,404 2,382
Total segment assets (ii)                                                            2,400 1,036 466 182 911 1,411 6,406
(i)  
From all our revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 2,521 million are originated in Argentina and Ps. 26 million in United States. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)  
From all our assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 4,767 million are located in Argentina and Ps. 1,639 million in other countries, principally in United States for Ps. 1,533 million and Uruguay for Ps. 106 million, respectively.
121
 June 30, 2014
 Shopping Center Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
 (in million of Ps.)
Revenues (i)                                                            1,383 271 86 332 84 1 2,157
Costs                                                            (297) (45) (35) (217) (54) (1) (649)
Gross profit                                                            1,086 226 51 115 30 - 1,508
Gain from disposal of investment properties- - 231 - - - 231
General and administrative expenses                                                            (102) (42) (37) (60) (59) - (300)
Selling expenses                                                            (73) (21) (14) (42) - - (150)
Other operating results, net                                                            (47) (3) 8 (3) (1) (3) (49)
Profit / (Loss) from operations                                                            864 160 239 10 (30) (3) 1,240
Share of (loss) / profit of joint ventures and associates- (1) 6 1 (616) 173 (437)
Segment profit / (loss)                                                            864 159 245 11 (646) 170 803
              
Investment properties                                                            2,275 834 423 - - 7 3,539
Property, plant and equipment                                                            20 36 4 176 2 - 238
Trading properties                                                            1 - 142 - - - 143
Goodwill                                                            9 12 5 - - - 26
Rights to receive future units under barter agreements- - 85 - - - 85
Assets held for sale                                                            - - - - 1,358 - 1,358
Inventories                                                            11 - 1 6 - - 18
Interests in joint ventures and associates- 23 38 22 629 1,254 1,966
Total segment assets (ii)                                                            2,316 905 698 204 1,989 1,261 7,373
(i)  
From all our revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 2,073 million are originated mainly in Argentina and Ps. 84 million in United States. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)  
From all our assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 5,274 million are located in Argentina and Ps. 2,099 million in other countries, principally in United States for Ps. 1,988 million.
122
The following table presents the reportable segments of the Operations Center in Israel:
 June 30, 2016
 Real Estate Supermarkets Agrochemicals Telecommunications Insurance Others Total
 
(in million of Ps.)
Revenues (i)                                       
1,538
 
18,610
 
-
 
6,655
 
-
 
1,426
 
28,229
Costs                                       
(837)
 
(13,925)
 
-
 
(4,525)
 
-
 
(1,194)
 
(20,481)
Gross profit                                       
701
 
4,685
 
-
 
2,130
 
-
 
232
 
7,748
Gain from disposal of investment properties
45
 
-
 
-
 
-
 
-
 
-
 
45
General and administrative expenses
(100)
 
(203)
 
-
 
(708)
 
-
 
(376)
 
(1,387)
Selling expenses                                       
(29)
 
(4,058)
 
-
 
(1,493)
 
-
 
(106)
 
(5,686)
Profit / (Loss) from operations 
617
 
424
 
-
 
(71)
 
-
 
(250)
 
720
Share of profit / (loss) of joint ventures and associates
97
 
-
 
334
 
-
 
-
 
(93)
 
338
Segment profit / (loss)                                       
714
 
424
 
334
 
(71)
 
-
 
(343)
 
1,058
              
Operating assets (ii)                                       
60,197
 
29,440
 
-
 
27,345
 
4,602
 
25,405
 
146,989
Operating liabilities                                       
(49,452)
 
(23,614)
 
-
 
(21,657)
 
-
 
(38,142)
 
(132,865)
 
10,745
 
5,826
 
-
 
5,688
 
4,602
 
(12,737)
 
14,124
(i)  
From all our revenues corresponding to the urban properties and investment business of the Operations Center in Israel, Ps. 512 million are originated in United States and Ps. 27,717 million in Israel. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)  
From all our assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Israel, Ps. 14,070 million are located in United States, Ps. 786 million in India and the remaining in Israel.
123
The following tables present a reconciliation between the total results of segment operations and the results of operations as per the income statements.segment information and the profit from operation as per the statement of income. The adjustments relate to the presentation of the results of operations of joint ventures accounted for under the equity method under IFRS.IFRS and the non-elimination of the inter-segment transactions.
 

108

June 30, 2016
 June 30, 2015 
Total
segment information
 Adjustment for share of profit / (loss) of joint ventures 
Expenses
and collective promotion
funds
 
Adjustment to
income for
elimination of
 inter-segment  transactions
 
Total
statement of income
 
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Common maintenance expenses and collective promotion fund  Total Income Statements (in million of Ps.)
Revenues   4,908,072   (53,473)  (90,002)  887,208   5,651,805 34,425 (89) 1,194 (146) 35,384
Costs   (4,019,142)  62,335   88,375   (901,283)  (4,769,715)(25,141) 111 (1,207) 147 (26,090)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,347,447   (23,295)  -   -   1,324,152 1,717 (57) - - 1,660
Changes in the net realizable value of agricultural produce after harvest  (34,471)  -   -   -   (34,471)208 - - - 208
Gross Profit / (Loss)   2,201,906   (14,433)  (1,627)  (14,075)  2,171,771 
Gross profit / (loss)
11,209 (35) (13) 1 11,162
Gain from disposal of investment properties  1,150,230   -   -   -   1,150,230 1,101 - - - 1,101
Gain from disposal of farmlands   569,521   (19,059)  -   -   550,462 
Loss from disposal of farmlands(2) - - - (2)
General and administrative expenses   (624,595)  4,173   2,602   -   (617,820)(2,255) 5 - 6 (2,244)
Selling expenses   (480,696)  6,217   321   -   (474,158)(6,288) 8 - 1 (6,279)
Other operating results, net   10,556   2,949   (1,296)  -   12,209 (38) (2) - (3) (43)
Profit/(Loss) from Operations before share of Profit / (Loss) of Associates and Joint Ventures  2,826,922   (20,153)  -   (14,075)  2,792,694 
Share of profit / (loss) of associates and joint ventures  (1,035,410)  10,438   -   -   (1,024,972)
Profit/(Loss) from operations before Financing and Taxes  1,791,512   (9,715)  -   (14,075)  1,767,722 
Profit / (Loss) from operations before share of
Profit / (Loss) of joint ventures and associates
3,727 (24) (13) 5 3,695
Share of (loss) / profit of joint ventures and associates457 14 - - 471
Profit / (Loss) from operations before financing and taxation
4,184 (10) (13) 5 4,166
 
 
  June 30, 2014 
  
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Common maintenance expenses and collective promotion fund  Total Income Statements 
Revenues                                                                      3,967,868   (62,085)  (38,074)  736,302   4,604,011 
Costs                                                                      (3,266,251)  58,857   36,505   (743,703)  (3,914,592)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,172,739   (20,086)  -   -   1,152,653 
Changes in the net realizable value of agricultural produce after harvest  (17,447)  -   -   -   (17,447)
Gross Profit / (Loss)                                                                      1,856,909   (23,314)  (1,569)  (7,401)  1,824,625 
Gain from disposal of investment properties  230,918   -   -   -   230,918 
Gain from disposal of farmlands                                                                      91,356   -   -   -   91,356 
General and administrative expenses                                                                      (539,696)  3,423   2,334   -   (533,939)
Selling expenses                                                                      (359,041)  5,949   366   -   (352,726)
Other operating results, net                                                                      (77,462)  3,585   (1,131)  -   (75,008)
Profit/(Loss) from Operations before share of Profit / (Loss) of Associates and Joint Ventures  1,202,984   (10,438)  -   (7,401)  1,185,226 
Share of profit / (loss) of associates and joint ventures  (425,287)  16,636   -   -   (408,651)
Profit/(Loss) from operations before Financing and Taxes  777,697   6,279   -   (7,401)  776,575 

 

124
109

 
 
  June 30, 2013 
  
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Common maintenance expenses and collective promotion fund  Total Income Statements 
Revenues                                                                      3,083,678   (137,889)  (11,528)  594,290   3,528,551 
Costs                                                                      (2,647,015)  116,004   10,296   (599,780)  (3,120,495)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  888,493   (1,749)  -   -   886,744 
Changes in the net realizable value of agricultural produce after harvest  11,756   -   -   -   11,756 
Gross Profit / (Loss)                                                                      1,336,912   (23,634)  (1,232)  (5,490)  1,306,556 
Gain from disposal of investment properties  177,999   -   -   -   177,999 
Gain from disposal of farmlands                                                                      149,584   -   -   -   149,584 
General and administrative expenses                                                                      (352,448)  4,291   1,774   -   (346,383)
Selling expenses                                                                      (291,206)  11,631   112   -   (279,463)
Other operating results, net                                                                      95,770   2,952   (654)  -   98,068 
Profit/(Loss) from Operations before share of Profit / (Loss) of Associates and Joint Ventures  1,116,611   (4,760)  -   (5,490)  1,106,361 
Share of profit / (loss) of associates and joint ventures  (11,673)  1,855   -   -   (9,818)
Profit/(Loss) from operations before Financing and Taxes  1,104,938   (2,905)  -   (5,490)  1,096,543 
 
Total segment assets are allocated based on the operations of the segment and the physical location of the asset. According to the analysis above, segment assets include the proportionate share of the assets of joint ventures. The statement of financial position under IFRS shows the net investment in these joint ventures as a single item.
 June 30, 2015
 
Total
segment information
 
Adjustment for share of Profit / (Loss)
of joint ventures
 
Expenses
and collective promotion funds
 
Adjustment
to income for elimination of
 inter-segment transactions
 
Total
statement of income
 (in million of Ps.)
Revenues 
4,942 (53) 887 (124) 5,652
Costs 
(4,052) 61 (901) 122 (4,770)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 (23) - - 1,324
Changes in the net realizable value of agricultural produce after harvest(34) - - - (34)
Gross profit / (loss) 
2,203 (15) (14) (2) 2,172
Gain from disposal of investment properties1,150 - - - 1,150
Gain / (Loss) from disposal of farmlands570 (20) - - 550
General and administrative expenses(625) 4 - 3 (618)
Selling expenses 
(481) 6 - 1 (474)
Other operating results, net 
10 3 - (1) 12
Profit / (Loss) from operations before share of Profit / (Loss) of joint ventures and associates2,827 (22) (14) 1 2,792
Share of (loss) / profit of joint ventures and associates(1,036) 11 - - (1,025)
Profit / (Loss) from operations before financing and taxation 
1,791 (11) (14) 1 1,767
 June 30, 2014
 
Total
segment information
 
Adjustment for share of Profit / (Loss)
of joint ventures
 
Expenses
and collective promotion funds
 
Adjustment to
income for
elimination of
 inter-segment transactions
 
Total
statement of income
 (in million of Ps.)
Revenues 
3,970 (63) 736 (39) 4,604
Costs 
(3,266) 60 (744) 37 (3,913)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 (20) - - 1,152
Changes in the net realizable value of agricultural produce after harvest(17) - - - (17)
Gross profit / (loss) 
1,859 (23) (8) (2) 1,826
Gain from disposal of investment properties231 - - - 231
Gain from disposal of farmlands91 - - - 91
General and administrative expenses(541) 5 - 3 (533)
Selling expenses 
(360) 6 - - (354)
Other operating results, net 
(78) 4 - (1) (75)
Profit / (Loss) from operations before share of Profit / (Loss) of joint ventures and associates1,202 (8) (8) - 1,186
Share of (loss) / profit of joint ventures and associates(426) 16 - - (410)
Profit / (Loss) from operations before financing and taxation 
776 8 (8) - 776
125
 
The following tables present a reconciliation between total segment assets as per segment informationand liabilities and total assets as per the statement of financial position. Adjustments are mainly related to the filing of certain classes of assets in segment information and to the proportional consolidation of joint ventures mentioned previously.
 
  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Total Operating Assets as per Segment Information  9,686,553   10,972,702   8,388,732 
Less:            
Proportionate share in reportable assets per segment of certain joint ventures (*)  (478,107)  (442,360)  (256,962)
Plus:            
Investments in joint ventures (**)                                                                            357,673   372,034   300,809 
Other non-reportable assets                                                                            5,709,324   4,881,312   3,978,146 
Total Consolidated Assets as per Statement of financial position  15,275,443   15,783,688   12,410,725 
 June 30, 2016 June 30, 2015 June 30, 2014
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total
   Operations Center in Argentina
Operations Center  in
Israel
Subtotal     
Operations
Center  in
Argentina
     
Operations
Center  in
Argentina
  
 (in million of Ps.)
Total Assets per segment4,615 4,944146,989151,933 156,548 3,281 6,406 9,687 3,601 7,373 10,974
Less:                   
Proportionate share in reportable assets per segment of joint ventures (*)(529) (117)-(117) (646) (382) (95) (477) (294) (149) (443)
Measurement adjustments at fair value                   
Plus:                   
Investments in joint ventures (**)233 203-203 436 177 181 358 64 308 372
Other non-reportable assets (***)3,102 6,561-6,561 9,663 2,794 2,914 5,708 2,606 2,275 4,881
Total Consolidated assets as per Statement of financial position7,421 11,591146,989158,580 166,001 5,870 9,406 15,276 5,977 9,807 15,784
 
(*) The following amounts related to the proportionate share of operating segment assets of certain of The Company´s  joint ventures are reported as part of the total operating segment assets by segment.

(***) Includes deferred income tax assets, income tax credit, restricted assets, trade and other receivables, financial assets held for sale, investment in financial assets, derivative financial instruments, employee benefits, cash and cash equivalents and intangible assets except for goodwill and right to receive units.
  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Investment properties                                                                            95,888   137,253   160,900 
Property, plant and equipment                                                                            358,193   272,982   65,700 
Trading properties                                                                            3,130   5,908   20,160 
Goodwill                                                                            5,223   5,235   5,238 
Biological assets                                                                            7,970   10,899   1,902 
Inventories                                                                            7,703   10,083   3,062 
Total proportionate share in assets per segment of joint ventures  478,107   442,360   256,962 
 
(**) Represents the equity-accounted amount of those joint ventures, which were proportionate-consolidated for segment information purposes.
 
Comparability of information126
 
During
(*) Below is a detail of the proportionate share in assets by segment of joint ventures included in the information reported by segment.
 June 30, 2016 June 30, 2015 June 30, 2014
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total
   Operations Center in Argentina
Operations
Center  in
Israel
Subtotal     
Operations
Center in Argentina
     
Operations
Center in Argentina
  
 (in million of Ps.)
Investment properties 
2 115-115 117 - 96 96 - 135 135
Property, plant and equipment509 (5)-(5) 504 366 (9) 357 273 - 273
Trading properties 
- 1-1 1 - 3 3 - 6 6
Goodwill 
- 5-5 5 - 5 5 - 7 7
Biological assets 
12 --- 12 9 - 9 11 - 11
Inventories 
6 1-1 7 7 - 7 10 1 11
Total proportionate share in assets per segment of joint ventures529 117-117 646 382 95 477 294 149 443
(**)
Represents the equity-accounted amount of those joint ventures, which were proportionate-consolidated for segment information purposes.
 June 30, 2016 June 30, 2015 June 30, 2014 
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total
   Operations Center in Argentina
Operations
Center  in
Israel
Subtotal     
Operations
Center in
Argentina
     
Operations
Center in Argentina
  
 (in million of Ps.)
Total Liabilities per segment- -132,865132,865 132,865 - - - - - -
Plus:                   
Liabilities corresponding to agricultural business and urban properties and investment business of the operations center in Argentina5,323 12,581-12,581 17,904 4,209 7,165 11,374 4,213 7,136 11,349
Total Consolidated liabilities as per Statement of financial position5,323 12,581132,865145,446 150,769 4,209 7,165 11,374 4,213 7,136 11,349
127
Fiscal year ended on June 30, 2016 compared to the fiscal year ended on June 30, 2015
On October 11, 2015, we obtained control of IDBD (See Note 3 to the Consolidated Financial Statements as of June 30, 2016 and 2015). Given that we have consolidated significant figures from various industries provided by IDBD and its subsidiaries, consolidated results (Agricultural Business, Israeli Operating Center’s Real Brasileño (Rs.) has depreciated againstEstate Business and Argentine Operating Center’s Real Estate Business) exhibit significant variations in Revenues, Costs, Administrative and Selling expenses, Share of Profit / (Loss) of Associates, and Financial Results.
Operating results
REVENUES
Our total revenues rose by 596.6%, from Ps. 4,942 million in fiscal year 2015 to Ps. 34,425 million in fiscal year 2016. This was mainly due to the Argentine Peso and other currencies by around 20.0%, which affects the comparability of the figures reported21.6% increase in the current financial statements given its negative impact on the financial positionAgricultural Business, from Ps. 2,395 million in fiscal year 2015 to Ps. 2,912 million in fiscal year 2016 and results of operations of the Company, due mainly to the foreign exchange rate exposure1,137.3% increase in the Urban Properties and Investments Business, attributable to net assetsthe Ps. 28,229 in revenues from the Operation Center in Israel for fiscal year 2016, and liabilities denominatedto the increase of 28.9% in foreign currencythe Operation Center in Argentina, from Ps. 2,547 million in fiscal year 2015 to Ps. 3,284 million in fiscal year 2016.
Agricultural Business
  Fiscal year ended June 30, 2016
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                     1,101                            51-                     1,152
Cattle                          80                              9                             89                        178
Dairy                          65--                          65
Sugarcane                        294--                        294
Agricultural Production Subtotal                     1,540                            60                             89                     1,689
Land Transformation and Sales                           - -                           -
Agro-industrial                        966--                        966
Others segments                        167                             -                             12                        179
Agricultural Rental and Services                          40-                             38                          78
Subtotal Others                     1,173                             -                             50                     1,223
Total Agricultural Business                     2,713                            60                           139                     2,912
  Fiscal Year ended June 30, 2015
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                        964                            23-                        987
Cattle                          56                              3                             84                        143
Dairy                          72--                          72
Sugarcane                        198--                        198
Agricultural Production Subtotal                     1,290                            26                             84                     1,400
Land Transformation and Sales                           - - -                           -
Agro-industrial                        806--                        806
Others segments                        118                             -                             10                        128
Agricultural rental and Services                          37-                             24                          61
Subtotal Others                        961                             -                             34                        995
Total Agricultural Business                     2,251                            26                           118                     2,395
Total revenues rose by 20.5%, up from Ps. 2,251 million in fiscal year 2015 to Ps. 2,713 in fiscal year 2016. This was due to the following increases:
·  
Ps. 137 million in the Crops segment,
·  
Ps. 24 million in the Cattle segment,
·  
Ps. 96 million in the Sugarcane segment,
·  
Ps. 160 million in the Agro-industrial segment,
·  
Ps. 49 million in Others segments, and investments
·  
Ps. 3 million in the Agricultural Rental and Services segment; offset by a Ps. 7 million decrease in the Dairy segment.
In turn, revenues from our interests in joint ventures with a functional currency differentincreased by 130.8% from the Real.
During thisPs. 26 million in fiscal year ended June 30, 2014 Argentina’s Peso devalued against the U.S. Dollars and other currencies by approximately 51%, which causes an impact on the comparability2015 to Ps. 60 million in fiscal year 2016, primarily as a consequence of the figures discloseda 121.7% increase in the financial statements stemmingCrops sold to Cresca, up from exposurePs. 23 million in fiscal year 2015 to the exchange rate, above allPs. 51 million in our revenues from office rentals and our net assets and liabilities, denominated in foreign currency; as well as the Income/(loss) from our International segment.fiscal year 2016.
 

110


Shopping Center Properties
 
DuringSimilarly, inter-segment revenues rose by 17.8%, from Ps. 118 million in fiscal year 2015 we inaugurated two new shopping centers: “Distrito Arcos,” locatedup to Ps. 139 million in fiscal year 2016, mainly as a result of livestock sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agro-industrial segment and to the leases of croplands between our subsidiary Brasilagro and its subsidiaries, which were reclassified from the Crops and Sugarcane segment to the Agricultural Rental and Services segment.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, revenues increased by 21.6%, up from Ps. 2,395 million in fiscal year 2015 to Ps. 2,912 million in fiscal year 2016.
Crops
Total revenues from the Crops segment increased by 16.7%, up from Ps. 987 million in fiscal year 2015 to Ps. 1,152 million in fiscal year 2016, mainly as a consequence of:
·  
a 20.9% increase in the areaaverage price of Palermo, Citythe Crops sold, up from Ps. 1,842 per ton in fiscal year 2015 to Ps. 2,226 per ton in fiscal year 2016, partially due to the reduction of Buenos Aires,5% in December 2014export duties of soybean and “Alto Comahue,” locatedthe elimination of export duties of corn and wheat (20% and 23%, respectively);
·  
partially offset by a reduction of 18,175 tons in the Cityvolume of Neuquén, Argentine Patagonian region,Crops sold during fiscal year 2016 compared to the previous fiscal year; a 38.8% decrease in March 2015.Production volumes, from 405,882 tons in fiscal year 2015 down to 248,435 tons in fiscal year 2016.
The following table provides a breakdown of the sales of Crops:

 
Sales of Crops (in tons)
 
 Fiscal year ended June 30 
 20162015Variation 
Corn               255,162269,701      (14,539)
Soybean               198,296250,125      (51,829)
Wheat                 46,6077,083       39,524
Sorghum                    1,0071,569            (562)
Sunflower                 10,4215,181          5,240
Other                    5,8631,872          3,991
Total Sales               517,356535,531      (18,175)
Cattle
Total revenues from the Cattle segment increased 24.5%, from Ps. 143 million in fiscal year 2015 to Ps. 178 million in fiscal year 2016, mainly as a consequence of:
·  
a 31.8% increase in the average price per kilogram sold, from Ps. 16.0 million in fiscal year 2015 to Ps. 21.2 million in fiscal year 2016;
·  
offset by a 6.3% decrease in the volume of Cattle sold, down from 8,871 tons in fiscal year 2015 to 8,315 tons in fiscal year 2016.
Dairy
Total revenues from the Dairy segment dropped by 9.7%, down from Ps. 72 million in fiscal year 2015 to Ps. 65 million in fiscal year 2016, mainly as a consequence of:
·  
an 8.2% reduction in the average price of milk, down from Ps. 3.55 per liter in fiscal year 2015 to Ps. 3.26 per liter in fiscal year 2016;
·  
a 48.0% increase in the average price per kilogram sold of milking cows from Ps. 13.1 in fiscal year 2015 to Ps. 19.3 in fiscal year 2016;
·  
a 17.7% reduction in the volume of milking cows from 903 tons in fiscal year 2015 to 743 tons in fiscal year 2016;
·  
slightly offset by an 8.2% decrease in the volume of sales of milk, from 17 million liters in fiscal year 2015 to 16 million liters in fiscal year 2016.
Sugarcane
Total revenues from the Sugarcane segment increased 48.5%, from Ps. 198 million in fiscal year 2015 to Ps. 294 million in fiscal year 2016, mainly as a consequence of:
·  
an increase of 295,226 tons (31.9%) in sales of sugarcane in fiscal year 2016 compared to the previous fiscal year, primarily attributable to Brasilagro; and
·  
a 12.7% increase in the average price of sugarcane sold, from, from Ps. 214.0 per ton in fiscal year 2015 up to Ps. 241.2 per ton in fiscal year 2016.
Agricultural Rental and Services
Total revenues from the Agricultural Rental and Services segment increased by 27.9%, up from Ps. 61 million in fiscal year 2015 to Ps. 78 million in fiscal year 2016, mainly as a consequence of:

·  
a 60.2% increase in leases, due to an increase in leases in Brazil for Ps. 10 million originating primarily in the increase in the price of soybean and an increase in Income from theseleases in Argentina for Ps. 4.9 million, primarily attributable to a new developments,agreement for 1,106 hectares in La Esmeralda (Don Avelino), and an improvement in the agreement between Agro-Riego and Monsanto;
·  
a 36.5% increase in revenues from the production of seeds mainly due to an increase in the prices of Crops that took place this fiscal year;
·  
offset by a 16.5% decrease in revenues from irrigation services and agricultural management (Ps. 1 million) in the course of the current fiscal year compared to fiscal year 2015.
Agro-industrial
Total revenues from the Agro-industrial segment increased 19.9%, from Ps. 806 million in fiscal year 2015 to Ps. 966 million in fiscal year 2016, mainly as a consequence of:
·  
a 20.0% increase in exports and a 32.1% increase in sales to the domestic market. Domestic consumption prices exhibited an upward trend and were 42.3% higher than in fiscal year 2015. The price of exports rose by 0.7% in US$ in fiscal year 2016 compared to 2015,
·  
a 24.4% decrease in sales of by-products,
·  
a small 3.3% reduction in slaughtering volumes, from 6,632 head per month in fiscal year 2015 to 6,415 during fiscal year 2016.
Others segments
Total revenues from Others segments rose by 39.8%, up from Ps. 22.9128 million in fiscal year 2015 to Ps. 179 million in fiscal year 2016, mainly as a consequence of:
·  
an increase of Ps. 13 million in sales on consignment, and
·  
an increase of Ps. 26 million in commodity brokerage services.
Urban Properties and Investments Business
  Fiscal year ended June 30, 2016
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Center 3,48720                           -(1,101)2,406
Offices and Others 421                          4                          8(93)340
Sales and Developments (1)                         4--                             3
Hotels 534                          -                           --534
International                     -                          --                    -                           -
Financial Operations and Others                    1                           ---                             1
Total Operations Center in Argentina 4,44228                               8(1,194)3,284
       
Operations Center in Israel      
Real Estate 1,538---1,538
Supermarkets 18,610---18,610
Agrochemicals -----
Telecommunications 6,655---6,655
Insurance -----
Other 1,426---1,426
Total Operations Center in Israel 28,229---28,229
Total Urban Properties and Investments Business 32,671288(1,194)31,513
  Fiscal year ended June 30 2015
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Centers             2,571                        13               -      (806)               1,778
Offices and Others                397                        105       (79)                  333
Sales and Developments                    9                         5 --                    14
Hotels                396                          - --                  396
International                  28                          - -          (2)                    26
Financial Operations and Others                     -                          ---                         -
Total Urban Properties and Investments Business                  3,401                            285                (887)               2,547
        

Total revenues from the Urban Properties and Investments business increased 860.6%, from Ps. 3,401 million in fiscal year 2015 to Ps. 32,671 million in fiscal year 2016, of which Ps. 28,229 million are derived from the Israeli Operating Center, and Ps. 11.74,442 million respectively.
are derived from the Operation Center in Argentina. Considering Operation Center in Argentina variation was due to the a Ps. 916 million increase in the Shopping Center segment, a Ps. 24 million increase in the Offices and Others segment, a Ps. 138 million increase in the Hotels segment, a Ps. 1 million increase in the Financial Operations and Others segments, offset by a Ps. 28 million decrease in the International segment and a Ps. 10 million drop in the Sales and Developments segment.
 
In December 2014, there was a transfer within the Company of 83,789 sqm of rental buildingsturn, revenues from IRSA Inversiones y Representaciones S.A. to IRSA Commercial Properties This transaction, though at the consolidated level itour interests in joint ventures did not have effects becauseexhibit significant variations when considering fiscal years 2016 and 2015. Our joint venture Nuevo Puerto de Santa Fe S.A. posted an increase in revenues but it was offset by a related party transaction, was considered a business Combination for the Company, and therefore, costs related to this transaction fordecrease in revenues posted by our joint venture Quality S.A.
Inter-segment revenues rose by 60.0%, up from Ps. 110.55 million were recognized as income during fiscal year 2015 in “Other operating results, net”to Ps. 8 million during fiscal year 2016, both attributed to the Offices and Others segment.
In addition, revenues from Maintenance Fee and Common Advertising Funds rose by 34.6%, from Ps. 887 million during fiscal year 2015 (of this amount, there are Ps. 806 million attributed to the Shopping Centers segment) to Ps. 1,194 million during fiscal year 2016 (of this amount, there are Ps. 1,101 million attributed to the Shopping Centers segment).
 
DuringHence, according to business segment reporting and considering all our joint ventures, inter-segment eliminations, and maintenance fee and common advertising funds, revenues increased 1,137.3%, from Ps. 2,547 million in fiscal year 2015 to Ps. 31,513 million in fiscal year 2016 (of which Ps. 28,229 million are derived from the Operation Center in Israel and Ps. 3,284 million are derived from the Operation Center in Argentina). Without considering the revenues from the Operation Center in Israel, revenues, pursuant to business segment reporting, grew by 28.9%.
Operation Center in Argentina
Shopping Center
Revenues from the Shopping Centers segment increased 35.3%, from Ps. 1,778 million during fiscal year 2015 to Ps. 2,406 million during fiscal year 2016. Such variation was mostly attributable to:
·  
an increase of Ps. 465 million in revenues from fixed and costsvariable rentals as a result of a 34% increase in our tenants’ sales, from Ps. 21,509 million during fiscal year 2015 to Ps. 28,905 million during fiscal year 2016;
·  
a Ps. 52 million increase in revenues from admission fees;
·  
a Ps. 41 million increase in parking revenues, and
·  
a Ps. 34 million increase in revenues from commissions and other.
Offices and Others
Revenues from the Offices and Others segment increased 2.1%, up from Ps. 333 million in fiscal year 2015 to Ps. 340 million in fiscal year 2016. Such revenues were impacted by the partial sale of investment properties during fiscal year 2016, which resulted in a reduction of the segment total leasable area.
Considering comparable properties in both fiscal years, rental revenues from properties which did not experience a decrease in their leasable area increased by 34.0%, up from Ps. 200 million during the fiscal year ended on June 30, 2015 to Ps. 268 million during the fiscal year ended on June 30, 2016, mainly due to the depreciation of the peso while revenues from properties which leasable area was reduced went down by 49.5%, from Ps. 111 million during fiscal year 2015 to Ps. 56 million during fiscal year 2016.
As of year-end, the 2016 average occupancy rate of premium offices stood at 97.7% and the average rent was around US$ 27 per sqm.
Sales and Developments
There are significant variations in the revenues earned in this segment from one fiscal year to the other. Without considering our joint ventures, revenues from the Sales and Developments segment decreased by 111.1% from Ps. 9 million during fiscal year 2015 to a loss of Ps. 1 million during fiscal year 2016. Such reduction was mainly attributable to reduced revenues from the sale of the Condominios I and II (Ps. 7 million). Hence, total revenues derived from this segment fell by 78.6%, down from Ps. 14 million during fiscal year 2015 to Ps. 3 million during fiscal year 2016.
Hotels
Revenues from our OfficesHotels segment saw their comparability affectedincreased by partial sales of properties intended for lease allocated to that segment. In this respect,34.8% from Ps. 396 million during fiscal yearsyear 2015 and 2014, there were sales for 10,792 sqmto Ps. 534 million during fiscal year 2016, primarily attributable to a 34.4% increase in the average room rate of leasable surface area (approximately 8.8% of total leasable area at the beginning of the fiscal year), and 8,744 sqm of leasable surface area (approximately 6.2% of total leasable area at the beginning of the fiscal year), respectively (See Note 3)our hotels (measured in Argentine Pesos).
 
International
 
           The revenues and costsRevenues from the internationalInternational segment were mainly affecteddecreased by 100% vis-à-vis the only 3-month consolidation in thePs. 26 million posted during fiscal year 2015 compared to the 12-month consolidation in the year 2014, of the results of Rigby 183 LLC (“Rigby 183”), owner ofbecause we sold the Madison 183 building located in the City of New York, which was sold in September 2015, and to a lesser extent, by the effect of devaluation described above.during fiscal year 2015.
 
Financial Operations and Others
 
The operating result ofRevenues from the Financial Operations and Others segment primarily reflectssegments did not exhibit significant variations for the residual consumer financing activities of the Company, which have been decreasing progressively during fiscal years under discussion.periods presented.

Operations Center in Israel
Real Estate.
 
During fiscal year 2016, revenues from the Real Estate segment totaled Ps. 1,538 million.
Supermarkets.
During fiscal year 2016, revenues from the Supermarkets segment totaled Ps. 18,610 million.
Telecommunications.
During fiscal year 2016, revenues from the Telecommunications segment totaled Ps. 6,655 million.
Others.
During fiscal year 2016, revenues from the Others segment totaled Ps. 1,426 million.
COSTS
Our total costs rose by 520.5%, from Ps. 4,052 million in fiscal year 2015 the results of this segment were affected by different transactions performed by the Companyto Ps. 25,141 million in relation to the investment in Avenida, including the exercise of warrants, the dilution of part of our interest in this company in view of the entry of a new investor and the sale of 5% of our shareholding. Asfiscal year 2016. This was mainly as a result of all these transactions,an 11.8% increase in the Agriculture business, from the second quarter ofPs. 3,419 million in fiscal year 2015 we ceased to have significant influence on AvenidaPs. 3,821 million in fiscal year 2016, and therefore, we ceased to recognize it as an investment in an associate, accounted for under the equity method, and we started to recognize it as a financial asset valued at fair value through profit or loss, which are recognized in financial and holding results, net and are excluded3,268.1% increase in the segment reporting.

111

Cresud’s Results of OperationsUrban Properties and Investments Business, due to costs for Ps. 20,481 from the Operation Center in Israel for the fiscal years ended on June 30,year 2016; and a 32.5% increase in the Operation Center in Argentina, from Ps. 633 million in fiscal year 2015 2014 and 2013to Ps. 839 million in fiscal year 2016.
 
The following terms used herein have the meanings specified below:
 
Agricultural Business
 
Revenues
  Fiscal year ended June 30, 2016
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (1,698)(80)(35)(1,813)
Cattle (255)(13)                              -(268)
Dairy (135)--(135)
Sugarcane (494)-(17)(511)
Agricultural Production subtotal (2,582)(93)(52)(2,727)
Land Transformation and Sales (9) - -(9)
Agro-industrial (836)-(89)(925)
Others segments (140)                          --(140)
Agricultural rental and Services (20)--(20)
Subtotal Others (996)                          -(89)(1,085)
Total Agricultural Business (3,587)(93)(141)(3,821)
 
Sales: Our sales consist of revenue on the sales of crops, milk and cattle. Sales are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectibility is reasonably assured. Revenue from cattle feeding operations, primarily comprised of feeding, animal health and yardage, and revenue from operating leases and brokerage activities are recognized as services are performed.
  Fiscal Year ended June 30, 2015
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (1,744)(42)(33)(1,819)
Cattle (220)(5)                             -(225)
Dairy (133)--(133)
Sugarcane (368)--(368)
Agricultural Production subtotal (2,465)                            (47)                             (33)(2,545)
Land Transformation and Sales (9) - -(9)
Agro-industrial (654)-(85)(739)
Others segments (105)                             -                             -(105)
Agricultural rental and Services (21)-                             -(21)
Subtotal Others (780)                             -                             (85)(865)
Total Agricultural Business (3,254)                            (47)                           (118)(3,419)
 
Costs.Total costs increased by 10.2%, from Ps. 3,254 million in fiscal year 2015 to Ps. 3,587 million in fiscal year 2016.This was primarily attributable to the following increases:
 
Cost
·  
Ps. 35 million in the Cattle segment,
·  
Ps. 2 million in the Dairy segment,

·  
Ps. 126 million in the Sugarcane segment,
·  
Ps. 182 million in the Agro-industrial segment,
·  
Ps. 35 million in the segment Other; offset by a Ps. 46 million reduction in the Crops segment, and Ps. 1 million in the Agricultural Rental and Services segment.
In turn, the cost of Production: Ourour joint ventures experienced a net increase of Ps. 46 million, from 47 million in fiscal year 2015 up to Ps. 93 million in fiscal year 2016, mainly as a result of a Ps. 38 million increase in the costs of Cresca’s Crops, from Ps. 42 million in fiscal year 2015 to Ps. 80 million in fiscal year 2016.
Similarly, inter-segment costs rose by Ps. 23 million, up from Ps. 118 million in fiscal year 2015 to Ps. 141 million in fiscal year 2016, primarily attributable to the cost of Cattle sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agro-industrial segment and to the leases of cropland between our subsidiary Brasilagro and its subsidiaries, which are reclassified from the Crops and Sugarcane segments to the Agricultural Rental and Services segment.
Hence, according to business segment reporting and considering all our joint ventures, and the Inter-segment eliminations, costs grew by 11.8%, from Ps. 3,419 million in fiscal year 2015 to Ps. 3,821 million in fiscal year 2016.
Crops
Total costs from the Crops segment decreased by 0.4%, from Ps. 1,819 million in fiscal year 2015 to Ps. 1,813 million in fiscal year 2016. The costs from the Crops segment have been broken down in the following table:
  
 Fiscal year 2016Fiscal year 2015
 In million Pesos
Cost of sales952873
Cost of production861946
Total Costs1,8131,819
Costs of sales in the Crops segment increased by 9.0%, from Ps. 873 million in fiscal year 2015 to Ps. 952 million in fiscal year 2016, mainly as a consequence of:
·  
a 3.4% decrease in the volume of tons sold as compared to the previous fiscal year; and
·  
slightly offset by a 12.8% increase in the average cost per ton of grain sold in fiscal year 2016, up from Ps. 1,631 in fiscal year 2015 to Ps. 1,840 in fiscal year 2016, due to a higher market price in Crops.
The cost of sales as a percentage of sales was 88.5% in fiscal year 2015 and 82.6% in fiscal year 2016.
The cost of production consistsin the Crops segment fell by 9.0% from Ps. 946 million in fiscal year 2015 to Ps. 861 million in fiscal year 2016, mainly as a consequence of:
·  
an 11.0% reduction in direct production costs during this fiscal year compared to the previous fiscal year, primarily attributable to the smaller quantity of hectares sown in the 2015-2016 season (a 47.1% decrease compared to the previous season);
·  
a smaller volume of production in fiscal year 2016 compared to the fiscal year 2015;
·  
a larger number of hectares in operation in own farms in fiscal year 2016 compared to the fiscal year 2015.
Total direct production costs per ton increased by 45.4%, from Ps. 1,899 per ton in fiscal year 2015 to Ps. 2,760 per ton in fiscal year 2016, mainly as a result of decreased yields and higher production costs in fiscal year 2016 compared to the fiscal year 2015.
Cattle
Total costs in the Cattle segment rose by 19.1%, from Ps. 225 million in fiscal year 2015 to Ps. 268 million in fiscal year 2016. The following table shows the costs in the Cattle segment:
 Fiscal year 2016Fiscal year 2015
 In million Pesos
Cost of sales136122
Cost of production132103
Total Costs268225
Cost of sales increased 11.5%, from Ps. 122 million in fiscal year 2015 to Ps. 136 million in fiscal year 2016, mainly as a consequence of:
·  
an increase in the cost per kilogram sold in fiscal year 2016 (19.5%); and
·  
a 6.2% decrease in beef sales volumes in fiscal year 2016.
Costs of production in the Cattle segment rose by 28.2%, from Ps. 103 million in fiscal year 2015 to Ps. 132 million in fiscal year 2016. The higher cost of production from the Cattle segment in fiscal year 2016 was mainly attributable to:
·  
smaller payroll expenses;
·  
higher feeding costs (34.6% compared to fiscal year 2015) resulting from a higher quantity of head in the feedlot, and an 8% increase in the average cost of feedstuff.

Dairy
Total Costs in the Dairy segment rose by 1.5%, from Ps. 133 million in fiscal year 2015 to Ps. 135 million in fiscal year 2016. The following table contains a breakdown of costs directly related toin the transformation of biological assets and agricultural produce.Dairy segment:
 
 Fiscal year     2016Fiscal year    2015
 In million Pesos
Cost of sales6168
Cost of production7465
Total Costs135133
Cost of Sales: Oursales in the Dairy segment fell by 10.3%, from Ps. 68 million in fiscal year 2015 to Ps. 61 million in fiscal year 2016, mainly as a consequence of:
·  
a 42.3% increase in the cost of sales consistsof milking cows, from Ps. 10.9 per kg in fiscal year 2015 to Ps. 15.5 per kg in fiscal year 2016,
·  
offset by an 8.6% decrease in the cost of Milk, from Ps. 3.5 per liter in fiscal year 2015 to Ps. 3.2 per liter in fiscal year 2016,
·  
a 17.7% reduction in the sales volume of milking cows;
·  
an 8.2% decrease in milk sales volume.
Costs of production in the Dairy segment increased by 14.7%, from Ps. 65 million in fiscal year 2015 to Ps. 74 million in fiscal year 2016. This increase was primarily attributable to the impact of increased feeding, health and prairie costs.
Sugarcane
Total Costs in the Sugarcane segment rose by 38.9%, from Ps. 368 million in fiscal year 2015 to Ps. 511 million in fiscal year 2016. The following table contains a breakdown of costs in the Sugarcane segment:
 Fiscal year     2016Fiscal year    2015
 In million Pesos
Cost of sales263188
Cost of production248180
Total Costs511368
Costs of sales in the Sugarcane segment rose by 39.9%, de Ps. 188 million in fiscal year 2015 to Ps. 263 million in fiscal year 2016, mainly as a consequence of:
 
(i)
·  
an increase of 295,226 tons of sugarcane sold in fiscal year 2016 compared to the book valueprevious fiscal year, primarily attributable to our subsidiary Brasilagro; and
·  
an increase in the average cost per ton of sugarcane sold in fiscal year 2016, from Ps. 204 per ton in fiscal year 2015 to Ps. 216 per ton in fiscal year 2016.
Costs of sales as a percentage of sales was 94.9% in fiscal year 2015 and 89.5% in fiscal year 2016.
The cost of production of the product sold atSugarcane segment increased 37.8%, from Ps. 180 million in fiscal year 2015 to Ps. 248 million in fiscal year 2016, mainly as a result of a higher production volume in fiscal year 2016 compared to the time of sale; andfiscal year 2015.
 
(ii) certain directTotal production costs per ton increased by 4.1%, from Ps. 194 per ton in fiscal year 2015 to Ps. 202 per ton in fiscal year 2016.
Agricultural Rental and Services
Total Costs in the Agricultural Rental and Services segment shrank by 4.8%, from Ps. 21 million in fiscal year 2015 to Ps. 20 million in fiscal year 2016, mainly as a consequence of:
·  
a Ps. 2 million (42.3%) reduction in irrigation service costs, compared to Fiscal year 2015.
·  
Partially offset by an increase of Ps. 1 million in feedlot lease and services costs, in Brasilagro and Cresud, respectively.

Land Transformation and Sales
Total Costs in the Land Transformation and Sales segment remained stable at Ps. 9 million in both fiscal years.
Agro-industrial
Total Costs in the Agro-industrial segment rose by 25.2%, from Ps. 739 million in fiscal year 2015 to Ps. 925 million in fiscal year 2016, due to an inflationary context that hindered the increase in gross marginal contribution. The reason for this increase is to be found in the increase of costs to acquire Cattle and to a lesser extent in the increase in labor.
Others segments
Total Costs in the Others segments rose by 33.3%, from Ps. 105 million in fiscal year 2015 to Ps. 140 million in fiscal year 2016, primarily as a result of increased costs in the brokerage business related to commodity trading transactions through FyO, and increased costs for consignment, by 71.4% and 97.2%, respectively.
Urban Properties and Investments Business
  Fiscal year ended June 30 2016
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Centers (1,505)(5)(6)1,113(403)
Offices and Others (139)(8)-94(53)
Sales and Developments (15)(5)--(20)
Hotels (362)---(362)
International                     ---                    -                        -
Financial Operations and Others (1)---(1)
Total Operations Center in Argentina (2,022)(18)(6)1,207(839)
       
Operations Center in Israel      
Real Estate (837)---(837)
Supermarkets (13,925)---(13,925)
Agrochemicals -----
Telecommunications (4,525)---(4,525)
Insurance -----
Other (1,194)---(1,194)
Total Operations Center in Israel (20,481)---(20,481)
Total Urban Properties and Investments Business (22,503)(18)(6)1,207(21,320)
  Fiscal year ended June 30 2015
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Centers (1,103)(4)(4)820(291)
Offices and Others (110)(5)-79(36)
Sales and Developments (14)(5)--(19)
Hotels (279)---(279)
International (9)--2(7)
Financial Operations and Others (1)---(1)
Total Urban Properties and Investments Business (1,516)(14)(4)901(633)
Costs of sales in our Urban Properties and Investments Business rose by 1,384.4%, from Ps. 1,516 million in fiscal year 2015 to Ps. 22,503 million in fiscal year 2016, of which Ps. 20,481 million are derived from the Operation Center in Israel, and Ps. 2,022 million are derived from the Operation Center in Argentina. Considering Operation Center in Argentina variation was due to an increase of Ps. 402 million in the Shopping Center segment, an increase of Ps. 29 million in the Offices and Others segment, a Ps. 1 million increase in the Sales and Developments segment, an increase of Ps. 83 million in the Hotels segment, offset by a Ps. 9 million decrease in the International segment; whilst the Financial Operations and Others segments did not experience significant variations.

In turn, the costs corresponding to maintenance fees and Common Advertising Funds costs increased 34.0%, from Ps. 901 million in fiscal year 2015 to Ps. 1,207 million in fiscal year 2016 mainly due to the maintenance fees and Common Advertising Funds expenses afforded by the Shopping Center, which rose by 35.7%, from Ps. 827 million during fiscal year 2015 to Ps. 1,113 million during fiscal year 2016, as a consequence of: (i) an increase in advertising expenses of Ps. 112 million, (ii) an increased charge for salaries and wages, social security contributions and other payroll expenses amounting to Ps. 103 million; (iii) an increase in maintenance, security, cleaning, repair and similar expenses amounting to Ps. 101 million (mainly stemming from increases in security and cleaning services and in the rates for public utilities), (iv) an increase in taxes, rates and contributions and other expenses amounting to Ps. 25 million and (v) an increase in other expenses for Ps. 42 million (primarily due to the absorption of the deficit in Common Advertising Funds and common maintenance fees). In addition, the variation was due to: II) an increase in the Common maintenance fees expenses incurred by the Offices and Others segment, which rose by Ps. 54 million, up from Ps. 28 million during fiscal year 2015 to Ps. 82 million during fiscal year 2016, primarily attributable to the acquisition of new buildings (maintenance, cleaning and lease expenses and common maintenance fees and other for Ps. 36 million, expenses associated to salaries and wages and social security contributions for Ps. 11 million and taxes, rates and contributions and utilities for Ps. 9 million).
In addition, costs from our joint ventures experienced a net decrease of 28.6%, down from Ps. 14 million during fiscal year 2015 to Ps. 18 million during fiscal year 2016.
Finally, costs from inter-segment operations rose by 50.0%, up from Ps. 4 million during fiscal year 2015 to Ps. 6 million during fiscal year 2016.
Hence, according to the business segment information relayed in the framework of segment reporting and considering all our joint ventures, and the Inter-segment eliminations, costs rose by 3268.1%, up from Ps. 633 million in fiscal year 2015 to Ps. 21,320 million in fiscal year 2016 (of which Ps. 20,481 million are attributable to the Operation Center in Israel and Ps. 839 million to the Operation Center in Argentina). Without considering the costs from the Operation Center in Israel, costs rose by 32.5%.
Operation Center in Argentina
Shopping Centers
Costs in the Shopping Centers segment rose by 38.5%, from Ps. 291 million during fiscal year 2015 to Ps. 403 million during fiscal year 2016.
The reasons for this increase are to be found mainly in: (i) an increased charge for depreciations and amortizations in the amount of Ps. 56 million; (ii) an increased cost corresponding to rentals and common maintenance fees in the amount of Ps. 30 million; (iii) an increase in maintenance, security, cleaning, repair and similar expenses for Ps. 10 million (mainly stemming from increases in security and cleaning services and in the rates for public utilities); and (iv) an increase of salaries and wages, social security contributions and other payroll expenses in the amount of Ps.10 million, amongst other items.
Costs in the Shopping Centers segment, measured as a percentage of the revenues derived from this segment rose from 16.4% during fiscal year 2015 to 16.7% in the fiscal year ended on June 30, 2016.
Offices and Others
Total Costs in the Offices and Others segment rose by 47.2%, from Ps. 36 million during fiscal year 2015 to Ps. 53 million during fiscal year 2016. (i) an increase in maintenance, security, cleaning, repair and similar expenses in the amount of Ps. 7 million; (ii) an increased cost corresponding to rentals and common maintenance fees for Ps. 6 million and; (iii) an increased charge for depreciations and amortizations in the amount of Ps. 5 million. This variation is affected by the partial sales of investment properties for rental that took place during fiscal year 2016.
Costs attributable to non-comparable properties rose by 4.0%, from Ps. 9 million to Ps. 10 million. In turn, the costs that consider comparable properties in both fiscal years for failure to submit partial sales rose by 76.8%, from Ps. 24 million to Ps. 42 million, primarily attributable to increased maintenance costs.
Total Costs in the Offices and Others segment, measured as a percentage of the revenues derived from this segment, rose from 10.8% during fiscal year 2015 to 15.6% during fiscal year 2016.
Sales and Developments
Costs attributable to this segment often vary significantly period over period, given that some of the sales consummated by us are non-recurrent. Without considering our joint ventures, costs associated to our Sales and Developments segment rose by 7.1%, from Ps. 14 million during fiscal year 2015 to Ps. 15 million during fiscal year 2016.
Costs in the Sales and Developments segment, measured as a percentage of agricultural producethe revenues derived from this segment, rose from 135.7% during fiscal year 2015 to 666.7% during fiscal year 2016.
Hotels
Costs in the Hotels segment increased by 29.7%, from Ps. 279 million during fiscal year 2015 to Ps. 362 million during fiscal year 2016, mainly as a consequence of:
·  
an increase of Ps. 52 million in salaries and wages, social security contributions and other selling expenses.payroll expenses;
·  
an increase of Ps. 19 million in maintenance and repair expenses and;
·  
increased charges for Ps. 7 million and Ps. 5 million as fees for services and as food, beverages and other hotel expenses, respectively.
Costs in the Hotels segment, measured as a percentage of the revenues derived from this segment decreased from 70.5% during fiscal year 2015 to 67.8% during fiscal year 2016.
International
Costs in the International segment shrank by 100%, compared to the Ps. 7 million posted during fiscal year 2015 on account of the sale consummated in the year 2015 of the Madison 183 building which was previously held as a rental property.
Costs in the Financial Transaction and Others segments, measured as a percentage of the revenues derived from this segment do not exhibit significant percentage figures.

Financial Operations and Others
Costs in the Financial Operations and Others segments remained stable at Ps. 1 million in both fiscal years.
Costs in the Financial Operations and Others, measured as a percentage of the revenues derived from this segment do not exhibit significant percentage figures.
Operations Center in Israel
Real Estate.
During fiscal year 2016, costs from the Real Estate segment totaled Ps. 837 million. Costs, as a percentage of the revenues, amounted to 54.4%.
Supermarkets.
During fiscal year 2016, costs from the Supermarkets segment totaled Ps. 13,925 million. Costs, as a percentage of the revenues, amounted to 74.8%.
Telecommunications.
During fiscal year 2016, costs from the Telecommunications segment totaled Ps. 4,525 million. Costs, as a percentage of the revenues derived from this segment, amounted to 68.0%.
Others.
During fiscal year 2016, costs from the Others segment totaled Ps. 1,194 million. Costs, as a percentage of the revenues derived from this segment, amounted to 83.7%.
 
Initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest
  Fiscal year ended June 30, 2016
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                       1,017                              54-                    1,071
Cattle                          251                                3-                       254
Dairy                            74--                         74
Sugarcane                          318--                       318
Agricultural Production Subtotal                       1,660                              57                          -                    1,717
Land Transformation and Sales                             - - -                          -
Agro-industrial                             ---                          -
Others segments                             -                               --                          -
Agricultural rental and Services                             ---                          -
Subtotal Others                             -                               -                          -                          -
Total Agricultural Business                       1,660                              57                          -                    1,717
  Fiscal Year ended June 30, 2015
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                          897                              21-                       918
Cattle                          165                                2-                       167
Dairy                            75--                         75
Sugarcane                          187--                       187
Agricultural Production Subtotal                       1,324                              23                          -                    1,347
Land Transformation and Sales                             - -                          -
Agro-industrial                             ---                          -
Others segments                             -                               --                          -
Agricultural rental and Services                             ---                          -
Subtotal Others                             -                               -                          -                          -
Total Agricultural Business                       1,324                              23                          -                    1,347

Our revenues from Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest increased 25.4%, from Ps. 1,324 million in fiscal year 2015 to Ps. 1,660 million in fiscal year 2016.
In turn, our revenues from Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest derived from our interests in joint ventures increased 147.8% from Ps. 23 million in fiscal year 2015 to Ps. 57 million in fiscal year 2016.
In addition, there were no inter-segment eliminations in connection with revenues from Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest.
 
BiologicalHence, according to business segment reporting and considering all our joint ventures, revenues from Initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest are accountedgrew by 27.5%, from Ps. 1,347 million in fiscal year 2015 to Ps. 1,717 million in fiscal year 2016.
Crops
Income from production in the Crops segment rose by 16.7%, from Ps. 918 million in fiscal year 2015 to Ps. 1,071 million in fiscal year 2016, mainly as a consequence of:
·  
a 38.8% decrease in total production, from 405,882 tons in fiscal year 2015 down to 248,435 tons in fiscal year 2016;
·  
partially offset by a 33.8% increase in the average Price for the production of Crops; and
·  
a 654.1% increase in the expected revenues.
As of June 30, 2016, the harvested area was 97.1% of our total sown area, compared to 100% as of June 30, 2015.
The following table shows the number of tons produced and total production income as of June 30, 2016 and 2015:
Revenues from the production of Crops (in tons and million Pesos)
 Fiscal year ended June 30,
 20162015
 TonsPesosTonsPesos
Corn      55,47582      92,09384
Soybean   169,592520   279,356625
Wheat      16,18111      16,21113
Sorghum            8291        1,2021
Sunflower        3,0569      11,72027
Other        3,3028        5,30020
Total   248,435631405,882770
Estimated results from the valuation of our crops in progress at fair value lessrose by 654.1%, from Ps. 49 million in fiscal year 2015 to Ps. 369 million in fiscal year 2016, due to the cost722.4% increase in corn crops. 
Cattle
Income from production in the Cattle segment rose by 52.1%, from Ps. 167 million in fiscal year 2015 to Ps. 254 million in fiscal year 2016, mainly as a consequence of:
·  
a 19.3% increase in the average price per kilogram produced, from Ps. 14.8 per kilogram in fiscal year 2015 to Ps. 17.6 per kilogram in fiscal year 2016;
·  
a slight 1.6% decrease in beef production, from 7,905 tons in fiscal year 2015 to 7,781 tons in fiscal year 2016;
·  
offset by a 137.2% increase in holding results.
The calving rate decreased by 12.1%, whereas the death rate decreased by 4.4% during fiscal year 2016 compared to fiscal year 2015.
The number of sales, upon their initial recognitionhectares devoted to Cattle production decreased from 88,643 hectares in fiscal year 2015 to 85,392 hectares in fiscal year 2016, due to a smaller number of leased land devoted to Cattle production.
Dairy
Income from production in the Dairy segment decreased by 1.3%, from Ps. 75 million in fiscal year 2015 to Ps. 74 million in fiscal year 2016. This decrease was mainly due to:
·  
the result from holding of milking cows, which increased by 46.9%, up from a gain of Ps. 8.9 million in fiscal year 2015 to a gain of Ps. 13.1 million in fiscal year 2016, as the inflationary context led to a significant rise in prices;

·  
a 7.8% decrease in the average price of milk, from Ps. 3.42 per liter in fiscal year 2015 to Ps. 3.15 per liter in fiscal year 2016;
·  
a 6.2% decrease in the production of milking cows offset by a 78.6% increase in average price,
·  
a 7.1% decrease in the milk production volume, from 17.5 million of liters in fiscal year 2015 to 16.3 million of liters during this fiscal year. This reduction in production volume was mainly due to a lower average number of milking cows per day, from 2,189 milking cows per day in fiscal year 2015 to 1,788 milking cows per day in fiscal year 2016, partially offset by a 10.8% increase in the efficiency level of average daily milk production per cow, from 21.5 liters per cow in fiscal year 2015 to 23.8 liters per cow in fiscal year 2016.
Sugarcane
Income from production in the Sugarcane segment rose by 70.1%, from Ps. 187 million in fiscal year 2015 to Ps. 318 million in fiscal year 2016, mainly as a consequence of:
·  
a 32.4% increase in total production volume from 928,273 tons in fiscal year 2015 to 1,228,830 tons in fiscal year 2016; and
·  
a 19.0% increase in the average production price of sugarcane.
The 32.4% increase in the production volume from the Sugarcane segment was attributable to a 19.0% increase in the average price of production, which went from Ps. 199.5 per ton up to Ps. 237.4 per ton in fiscal year 2016.
The following table shows the actual tons produced and income as of each balance sheet date, except where theirJune 30, 2016 and 2015:
Revenues from the production of Sugarcane (In tons and million Pesos)
 Fiscal year ended June 30,
 20162015
 TonsPesosTonsPesos
Sugarcane1,228,830292928,273185
Estimated results from the valuation of our sugarcane crops in progress at fair value cannot be reliably measured. Biological assets and agricultural produce
Estimated results from the valuation of our sugarcane crops in progress at the point of harvest are measured at their approximate cost where few or no transformations have taken place since costs were originally incurred or where the impact on the biological transformation price is not expected to be material. Changes in fair value lessincreased significantly from a gain of Ps. 2 million in fiscal year 2015 to Ps. 27 million in fiscal year 2016 mainly generated by Brasilagro. This variation originated mainly in Brazil, and was caused by the costfollowing factors:
·  
the number of sales are chargedestimated hectares went up from a year-on-year increase of 33.4% in fiscal year 2015 to income as incurred.a year-on-year increase of 0.4% in fiscal year 2016;
·  
the estimated yields went up from a year-on-year increase of 2.4% in the fiscal year 2015 to a year-on-year increase of 3.2% for the fiscal year 2016; and
·  
the estimated unit costs went down from a year-on-year increase of 10.0% in fiscal year 2015 to a year-on-year increase of 6.4% in fiscal year 2016.
 
Changes in the net realizable value of agricultural produceproducts after harvest
 
Our gain (loss)
  Fiscal year ended June 30, 2016
Changes in the net realizable value of agricultural products after harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops 208--208
Cattle ----
Dairy ----
Sugarcane ----
Agricultural Production Subtotal                          208                          -                          -                         208
Land Transformation and Sales 
Agro-industrial ----
Others segments ----
Agricultural rental and Services ----
Subtotal Others                           -                          -                          -                          -
Total Agricultural Business                          208                          -                          -                         208
  Fiscal Year ended June 30 2015
Changes in the net realizable value of agricultural products after harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (34)--(34)
Cattle ----
Dairy ----
Sugarcane ----
Agricultural Production Subtotal                          (34)                          -                          -                         (34)
Land Transformation and Sales 
Agro-industrial ----
Others segments ----
Agricultural rental and Services ----
Subtotal Others                           -                          -                          -                          -
Total Agricultural Business                          (34)                          -                          -                         (34)

Income from holding inventories consistsChanges in the net realizable value of agricultural products after harvest increased significantly, from a loss of Ps. 34 million in fiscal year 2015 to income for Ps. 208 million in fiscal year 2016. In Argentina, it stems above all from a widespread price increase in late December caused by the suppression/reduction of withholdings on the agricultural industry, the major devaluation determined by the new government and today’s current free floating exchange rate market.
There were neither interest in joint ventures nor inter-segment eliminations in income from changes in their carrying amount.the net realizable value of agricultural products after harvest.
Gross profit
As a result of the above mentioned factors, our gross profit increased 408.8%, from Ps. 2,203 million in fiscal year 2015 to Ps. 11,209 million in fiscal year 2016, which was primarily attributable to:
·  
a 251.6% increase in the Agricultural Business, from income for Ps. 289 million in fiscal year 2015 to income for Ps. 1,016 million in fiscal year 2016;
·  
income for Ps. 7,748 provided by the Operation Center in Israel at the Urban Properties and Investments Business; and
·  
a 27.7% increase in the Operation Center in Argentina at the Urban Properties and Investments Business, from Ps. 1,914 million in fiscal year 2015 to Ps. 2,445 million in fiscal year 2016.
Agricultural Business
As a result of the above mentioned factors, gross profit increased by 251.6%, from Ps. 289 million in fiscal year 2015 to Ps. 1,016 million in fiscal year 2016.
Crops
Gross profit from this segment increased by 1,088.5%, from Ps. 52 million in fiscal year 2015 to Ps. 618 million in fiscal year 2016.
Cattle
Gross profit from this segment increased by 92.9%, from Ps. 85 million in fiscal year 2015 to Ps. 164 million in fiscal year 2016.
Dairy
Gross profit from this segment decreased by 71.4%, from Ps. 14 million in fiscal year 2015 to Ps. 4 million in fiscal year 2016.
Sugarcane
Gross profit from this segment increased by 494.1%, from Ps. 17 million in fiscal year 2015 to Ps. 101 million in fiscal year 2016.
Agricultural Rental and Services
Gross profit from this segment increased by 45.0%, from Ps. 40 million in fiscal year 2015 to Ps. 58 million in fiscal year 2016.
Land Transformation and Sales
Gross loss from this segment remained stable at Ps. 9 million in both fiscal years.
Agro-industrial
Gross profit from this segment decreased by 38.8% from Ps. 67 million in fiscal year 2015 to Ps. 41 million in fiscal year 2016.
Other
Gross profit from this segment increased by 69.6%, from Ps. 23 million in fiscal year 2015 to Ps. 39 million in fiscal year 2016.

 
Urban Properties and Investments Business
 
ShoppingGross profit in Urban Properties and Investments Business rose by 432.5% from Ps. 1,914 million in fiscal year 2015 to Ps. 10,193 million in fiscal year 2016. This was mainly due to the income obtained through the Operation Center Properties
Revenues derivedin Israel for Ps. 7,748 million and a 27.7% increase in the Operation Center in Argentina, from our shopping center development activities are mostly comprised by revenues from operation leases, admission fees, commissions and revenues from several services renderedPs. 1,914 million in fiscal year 2015 to our lessees. In addition, certain lease agreements include provisions that set forth variable rentals based on specific sales volumes or some other type of index.
Revenues include revenues from managed operations, such as, parking lots. Revenues also include revenues from property management.Ps. 2,445 million in fiscal year 2016.
 
 Offices
Operation Center in Argentina
 
Revenues from office and other property rentals include rental income from offices under operating leases, revenues
Shopping Center
Gross profit from the recoveryShopping Centers segment increased by 34.7% up from Ps. 1,487 million for the fiscal year 2015 to Ps. 2,003 million during fiscal year 2016 mainly due to an increase in our tenants’ total sales, resulting in higher lease payments as a percentage of services and expenses paid by tenants.volume sales. Gross profit from the Shopping Centers segment as a percentage of this segment’s revenues experienced a slight decline from 83.6% during fiscal year 2015 to 83.3% during fiscal year 2016.
 
Sale
Offices and Development of PropertiesOthers
 
RevenuesGross profit from the saleOffices and developmentOthers segment fell by 3.4% from Ps. 297 million for the fiscal year 2015 down to Ps. 287 million in fiscal year 2016. Gross profit for the Offices and Others segment as a percentage of properties include the gains derivedthis segment’s revenues decreased from 89.2% during fiscal year 2015 to 84.4% during fiscal year 2016.
Sales and Developments
Gross income/(loss) from the developmentsSales and the proceedsDevelopments segment rose by 240.0% from the salea loss of commercialPs. 5 million for fiscal year 2015 to a loss of Ps. 17 million during fiscal year 2016, mainly due to lower sales accounted for during fiscal year 2016 and an increase in maintenance and preservation costs in connection with these properties.
 
Hotels
 
RevenuesGross profit from hotel operations include mainly room services, cateringthe Hotels segment increased by 47.0% up from Ps. 117 million for the fiscal year 2015 to Ps. 172 million during fiscal year 2016. Gross profit for the Hotels segment, as a percentage of this segment’s revenues, rose from 29.5% during fiscal year 2015 to 32.2% during fiscal year 2016.
International
Gross profit from the International segment decreased by 100%, compared to the Ps. 19 million posted during fiscal year 2015.
Financial Operations and other services.Others
There were no significant variations between the Income/(loss) from our Financial Operations and Others segment between the periods presented.
Operations Center in Israel
Real Estate.
During fiscal year 2016, gross profit from the Real Estate segment totaled Ps. 701 million. Gross profit, as a percentage of the segment revenues, amounted to 45.6%.
Supermarkets.
During fiscal year 2016, gross profit from the Supermarkets segment totaled Ps. 4,685 million. Gross profit, as a percentage of the segment revenues, amounted to 25.2%.
Shufersal’s results in the first half of the calendar year 2016 were affected by the following key factors:
·  
Continued increased efficiency with respect to real estate.
·  
Gradual launch of the new logistical center in Shoham, which began operating in February 2016.
·  
Shufersal is continuing to prepare strategies for various scenarios in connection with the change in ownership of the Mega chain in the city centers.
·  
Continued acceleration of the development of Shufersal’s digital platform, which primarily included the Shufersal Online, including the opening of designated warehouses.
·  
Continued building of its private brand.
Telecommunications.
During fiscal year 2016, gross profit from the Telecommunications segment totaled Ps. 2,130 million. Gross profit, as a percentage of the segment revenues, amounted to 32.0%.
Others.
During fiscal year 2016, gross profit from the Others segment totaled Ps. 232 million. Gross profit, as a percentage of the segment revenues, amounted to 16.3%.
 

Gain from disposal of investment properties
Gain from disposal of investment properties derived from our Sales and Developments segment experienced a 4.3% decrease from Ps. 1,150 million during fiscal year 2015 to Ps. 1,101 million during fiscal year 2016 (of which Ps. 1,056 million are attributable to the Operation Center in Argentina and Ps. 45 million to Operation Center in Israel). Without considering the effect of the Operation Center in Israel, total gain from the disposal of investment properties fell by 8.2%.
Gain from disposal of farmlands
Gain from disposal of farmlands derived from the Land Transformation and Sales segment decreased by 100.4%, from income for Ps. 570 million in fiscal year 2015 to a loss of Ps. 2 million in fiscal year 2016, primarily as a result of the absence of sales in this fiscal year and the following transactions in the preceding fiscal year:
 
During fiscal year 2015
112

·  
On April 3, 2014, Cresca S.A. executed a deed of sale for an area of 24,624 hectares located in Chaco Paraguayo. The total price was US$ 14.7 million paid as follows: US$ 1.8 million was cashed upon the execution of the deed of sale; US$ 4.3 million at the time of the title conveyance; US$ 3.7 million on July 2015 interest-free; and US$ 4.9 million on July 2016 interest-free. Possession was surrendered upon the execution of the title deed and upon the creation of a mortgage as guarantee of the remaining balance on July 14, 2014. We recorded a gain of Ps. 19.1 million as a result of this transaction.
·  
On June 10, 2015, Brasilagro sold the remaining area of 27,745 hectares of the Cremaq farm located in the municipal district of Baixa Grande do Ribeiro (Piaui). The transaction price was Rs. 270 million (equivalent to Ps. 694 million) which was fully paid. We recorded a gain of Ps. 525.9 million as a result of this transaction.
·  
On October 17, 2013, Yuchán Agropecuaria executed an agreement providing for the sale, subject to retention of title, of a 1,643 hectare property in the “La Fon II” farm for a total price of US$ 7.21 million (equivalent to Ps. 59.0 million). As of the date of issuance of these financial statements, the amount of US$ 7.1 million was cashed, with the remaining balance of US$ 0.12 million being payable in two installments beginning in December this year and ending in December 2017. The agreement provides that title conveyance will be registered once the full price has been paid. On June 24, 2015, Yuchán Agropecuaria surrendered the possession of the property. We recorded a gain of US$ 2.7 million (equivalent to Ps. 24.6 million) as a result of this transaction in the fiscal year 2015.
General and Administrative Expenses
Our General and Administrative Expenses rose by 260.9%, from Ps. 625 million in fiscal year 2015 to Ps. 2,255 million in fiscal year 2016. This was mainly due to an increase of Ps. 67 million in the Agricultural business and an increase of Ps. 1,563 million in the Urban Properties and Investments Business. Within the Urban Properties and Investments Business the Variation is attributable to the Operation Center in Israel for Ps. 1,387 and to the Operation Center in Argentina for Ps. 176.
Agricultural Business
  Fiscal year ended June 30, 2016
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (171)(3)-(174)
Cattle (40)--(40)
Dairy (8)--(8)
Sugarcane (34)--(34)
Agricultural Production Subtotal (253)(3)                        -(256)
Land Transformation and Sales (1) - -(1)
Agro-industrial (38)--(38)
Others segments (15)--(15)
Agricultural rental and Services (4)--(4)
Subtotal Others (57)-                        -(57)
Total Agricultural Business (311)(3)                        -(314)
  Fiscal Year ended June 30, 2015
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (156)(3)                        -(159)
Cattle (26)-                        -(26)
Dairy (5)                         -                        -(5)
Sugarcane (20)                         -                        -(20)
Subtotal Agricultural production (207)(3)                        -(210)
Land Transformation and Sales (2)                         -                        -(2)
Agro-industrial (25)                         -                        -(25)
Others segments (8)-                        -(8)
Agricultural rental and Services (2)                         -                        -(2)
Subtotal Others (35)-                        -(35)
Total Agricultural Business (244)(3)                        -(247)

General and Administrative Expenses from the Agricultural business sales rose by 27.5%, from Ps. 244 million in fiscal year 2015 to Ps. 311 million in fiscal year 2016. This was due to the following increases: Ps. 14 million in the Crops segment, Ps. 15 million in the Cattle segment, Ps. 3 million in the Dairy segment, Ps. 14 million in the Sugarcane segment, Ps. 13 million in the Agro-industrial segment, Ps. 2 million in the Agricultural rental and Services segment and Ps. 7 million corresponding to Others segments.

The causes for the variation were:
·  
The variation in Cresud’s administrative expenses is mostly due to the variation in wages, salaries and social security contributions due to the allowance for bonuses payable for fiscal year 2016. In addition, the reason for the variation is to be found also in the increases exhibited by the fees of the accountants associated to the consolidation of IDBD as well as the increase in legal fees associated to the Class Action.
·  
An increase in the General and Administrative Expenses of the subsidiary Sociedad Anónima Carnes Pampeanas primarily attributable to the increases in the services hired for the project to implement the SAP system, consultancy fees and SOX standard testing and salary adjustments due to collective bargaining agreements; and
·  
an increase in expenses as a result of the inflationary context.
In turn, general and administrative expenses from our joint ventures remained stable at Ps. 3 million during fiscal years 2016 and 2015.
There were no General and Administrative Expenses incurred by reason of Inter-segment eliminations.
Hence, according to business segment reporting and considering all our joint ventures, General and Administrative Expenses grew by 27.1%, up from Ps. 247 million in fiscal year 2015 to Ps. 314 million in fiscal year 2016.
Urban Properties and Investments Business
  Fiscal year ended June 30, 2016
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Centers (178)                         -                     (1)                  -(179)
Offices and Otherss (50)                         --                   -(50)
Sales and Developments (126)(1)(4)                  -(131)
Hotels (101)-(2)                   -(103)
International (91)-                        -                  -(91)
Financial Operations and Others                   --                        -           -                    -
Total Operations Center in Argentina (546)(1)(7)                            -(554)
       
Operations Center in Israel      
Real Estate (100)---(100)
Supermarkets (203)---(203)
Agrochemicals -----
Telecommunications (708)---(708)
Insurance -----
Other (376)---(376)
Total Operations Center in Israel (1,387)---(1,387)
Total Urban Properties and Investments Business (1,933)(1)(7)-(1,941)
       
  Fiscal year ended June 30, 2015
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Operations Center in Argentina      
Shopping Centers (135)                         --                    -(135)
Offices and Others (58)                         -                        (1)                    -(59)
Sales and Developments (48)(1)                        (1)                   -(50)
Hotels (77)-(1)                   -(78)
International (56)-                        -                   -(56)
Financial Operations and Others                   --                        -                   -                    -
Total Urban Properties and Investments Business (374)(1)(3)                            -(378)

General and Administrative Expenses in connection with the sales of the Urban Properties and Investments Business segment rose by 416.8%, from Ps. 374 million in fiscal year 2015 to Ps. 1,933 million in fiscal year 2016, of which Ps. 1,387 million are derived from the Operation Center in Israel, and Ps. 546 million are derived from the Operation Center in Argentina. Considering Operation Center in Argentina variation was due to the Ps. 43 million increase in the Shopping Center segment, an increase of Ps. 78 million in the Sales and Developments segment, an increase of Ps. 24 million in the Hotels segment, an increase of Ps. 35 million in the International segment, all of which was partially offset by a decrease of Ps. 8 million in the segment Offices and Others.
In turn, the administrative expenses of our joint ventures did not exhibit variations between the fiscal years 2015 and 2016 and remained stable at Ps. 1 million.
Inter-segment eliminations increased Ps. 4 million, up from Ps. 3 million in fiscal year 2015 to Ps. 7 million in fiscal year 2016.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, administrative expenses increased by 413.5% up from Ps. 378 million in fiscal year 2015 to Ps. 1,941 million in fiscal year 2016 (of which Ps. 1,387 million are attributable to the Operation Center in Israel and Ps. 554 million to the Operation Center in Argentina). Without considering the general & administrative expenses from the Operation Center in Israel, general & administrative expenses rose by 46.6%. Furthermore, general & administrative expenses as a percentage of revenues, pursuant to business segment reporting, declined from 14.8% during fiscal year 2015 to 6.2% during fiscal year 2016. Without considering the effect of the Israeli Operation Center in Israel, total general & administrative expenses as a percentage of revenues experienced increase from 14.8% during fiscal year 2015 to 16.9% during fiscal year 2016.
Operations Center in Argentina
Shopping Centers
Administrative expenses in the Shopping Centers segment increased by 32.6%, up from Ps. 135 million during fiscal year 2015 to Ps. 179 million during fiscal year 2016, mainly as a consequence of:
·  
a Ps. 18 million increase in salaries, wages, social security contributions and other payroll expenses;
·  
an increase of Ps. 13 million in Directors’ fees;
·  
an increase of Ps. 7 million in fees and compensation for services, to name but a few items.
 Administrative expenses in the Shopping Centers segment as a percentage of revenues from the same segment decreased slightly from 7.7% during fiscal year 2015 to 7.4% during fiscal year 2016.
Offices and Others
General and Administrative Expenses in our Offices and Others segment decreased by 15.3%, from Ps. 59 million during fiscal year 2015 to Ps. 50 million during fiscal year 2016, primarily as a consequence of: (i) a Ps. 12 million decrease in salaries, wages, social security contributions and other payroll expenses; partially offset by (ii) an increase in directors’ fees in the amount of Ps. 6 million, amongst others items.
When measured as a percentage of revenues from the same segment, General and Administrative Expenses decreased by 17.7% during fiscal year 2015 to 14.7% during fiscal year 2016.
Sales and Developments
General and Administrative Expenses associated to our Sales and Developments segment rose by 162.0%, from Ps. 50 million during fiscal year 2015 to Ps. 131 million during fiscal year 2016, primarily as a consequence of: (i) an increase in salaries, wages, social security contributions and other payroll expenses of Ps. 26 million, (ii) an increase of Ps. 24 million in fees and compensation for services; (iii) and an increase in directors’ fees of Ps. 21 million, amongst others items.
Hotels
The General and Administrative Expenses associated to our Hotels segment increased by 32.1% from Ps. 78 million during fiscal year 2015 to Ps. 103 million during fiscal year 2016, mainly as a consequence of:
·  
(i) an increase of Ps. 12 million in salaries and wages, social security contributions and others payroll expenses;
·  
(ii) an increase of Ps. 6 million in the cost of fees from services, amongst other items.
The General and Administrative Expenses associated to the Hotels segment measured as a percentage of the revenues derived from this segment shrank from 19.6% in fiscal year 2015 to 19.3% in fiscal year 2016.
International
General and Administrative Expenses associated to our International segment rose by Ps. 35 million, from Ps. 56 million during fiscal year 2015 to Ps. 91 million during fiscal year 2016 primarily attributable to fees for services incurred in connection with the investment in IDBD.

Financial Operations and Others.
General and Administrative Expenses associated to our Financial Operations and Others segment did not exhibit variations for the periods disclosed.
Operations Center in Israel
Real Estate
During fiscal year 2016, general & administrative expenses associated to the Real Estate segment totaled Ps. 100 million. General & administrative expenses as a percentage of the segment revenues amounted to 6.6%.
Supermarkets
During fiscal year 2016, general & administrative expenses associated to the Supermarkets segment totaled Ps. 203 million. General & administrative expenses as a percentage of the segment revenues amounted to 1.1%.
Telecommunications
During fiscal year 2016, general & administrative expenses associated to the Telecommunications segment totaled Ps. 708 million. General & administrative expenses as a percentage of the segment revenues amounted to 10.6%.
Others
During fiscal year 2016, general & administrative expenses associated to the Others segment totaled Ps. 376 million. General & administrative expenses as a percentage of the segment revenues amounted to 26.4%.
Selling expenses
Our total selling expenses grew by 1,207.3%, from Ps. 481 million in fiscal year 2015 to Ps. 6,288 million in fiscal year 2016. This was primarily attributable to an increase of Ps. 52 million in the Agricultural business and an increase of Ps. 5,755 million in the Urban Properties and Investments Business which accounts for the Ps. 69 million increase in the Operation Center in Argentina and the Ps. 5,686 million increase in the Operation Center in Israel.
Agricultural Business
  Fiscal year ended June 30, 2016
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (209)(5)(2)(216)
Cattle (19)                             -                             -(19)
Dairy (4)                             -                             -(4)
Sugarcane (8)                             -                             -(8)
Agricultural Production Subtotal (240)(5)(2)(247)
Land Transformation and Sales --                             --
Agro-industrial (67)                             -                             -(67)
Others segments (23)                             -                             -(23)
Agricultural Rental and Services (1)                             -                             -(1)
Subtotal Others (91)                             -                             -(91)
Total Agricultural Business (331)(5)(2)(338)
  Fiscal Year ended June 30, 2015
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (157)(3)                             (1)(161)
Cattle (20)                             -                             -(20)
Dairy (4)                             -                             -(4)
Sugarcane (8)                             -                             -(8)
Agricultural Production Subtotal (189)(3)                             (1)(193)
Land Transformation and Sales (1)                             (1)                             -(2)
Agro-industrial (77)                             -                             -(77)
Others segments (13)                             -                             -(13)
Agricultural Rental and Services (1)                             -                             -(1)
Subtotal Others (91)                             -                             -(91)
Total Agricultural Business (281)(4)                             (1)(286)

The Selling expenses associated to the sales of the Agricultural business rose by 17.8%, from Ps. 281 million in fiscal year 2015 to Ps. 331 million in fiscal year 2016. This was primarily due to the Ps. 52 million increase in the Crops segment and the Ps. 10 million increase in the Others segments, partially offset by a reduction of Ps. 1 million in the Cattle segment, and the Ps. 10 million decrease in the Agro-industrial segment.
In turn, selling expenses from our interests in joint ventures rose by 25% from Ps. 4 million in fiscal year 2015 to Ps. 5 million in fiscal year 2016, in connection with our Cresca joint venture.
Besides, Inter-segment eliminations rose Ps. 1 million in the fiscal year 2016 compared to the figure posted for 2015.
Hence, according to the business segment details reported by segment and considering all our joint ventures and the Inter-segment eliminations, Selling expenses grew by 18.2%, up from Ps. 286 million in fiscal year 2015 to Ps. 338 million in fiscal year 2016.
Urban Properties and Investments Business
  Fiscal year ended June 30, 2016 
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
  (in million of Ps.) 
Operations Center in Argentina      
Shopping Centers (143)(2)                         -(145) 
Offices and Others (12)-                          -(12) 
Sales and Developments (36)-                          -(36) 
Hotels (69)-                          -(69) 
International                 - -                    -                   - 
Financial Operations and Others                 (2) -                  -                 (2) 
Total Operations Center in Argentina (262)(2)                             -(264) 
       
Operations Center in Israel      
Real Estate (29)--(29) 
Supermarkets (4,058)--(4,058) 
Agrochemicals ---- 
Telecommunications (1,493)--(1,493) 
Insurance ---- 
Other (106)--(106) 
Total Operations Center in Israel (5,686)--(5,686) 
Total Selling expenses (5,948)(2)-(5,950) 
  Fiscal year ended June 30, 2015 
   
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
  (in million of Ps.) 
Operations Center in Argentina      
Shopping Centers (112)(1)                         -(113) 
Offices and Others (21)-                         -(21) 
Sales and Developments (8)(1)                         -(9) 
Hotels (52)-                         -(52) 
International                  - -                        -                   - 
Financial Operations and Others                  - -                        -                    - 
Total Urban Properties and Investments Business (193)(2)                             -(195) 
       
The Selling expenses associated to the sales completed by the Urban Properties and Investments Business rose by 2,981.9% from Ps. 193 million in fiscal year 2015 to Ps. 5,948 million in fiscal year 2016 of which Ps. 5,686 million are derived from the Operation Center in Israel, and Ps. 262 million are derived from the Operation Center in Argentina. Considering Operation Center in Argentina variation was due to an increase of Ps. 31 million in the Shopping Center segment, an increase of Ps. 28 million in the Sales and Developments segment, an increase of Ps. 17 million in the Hotels segment and an increase of Ps. 2 million in the Financial Operations and Others segment, partially offset by a reduction of Ps. 9 million in the Offices and Others segment.
In turn, selling expenses in our joint ventures did not exhibit a decrease in the fiscal years 2016 and 2015.
Hence, according to business segment reporting, Selling expenses experienced 2,951.3% growth from Ps. 195 million during fiscal year 2015 to Ps. 5,950 million during fiscal year 2016 (of which Ps. 5,686 million are attributable to the Operation Center in Israel and Ps. 264 million to the Operation Center in Argentina). Without considering the effect of the Operation Center in Israel, selling expenses rose by 35.4%. Furthermore, selling expenses as a percentage of revenues, pursuant to business segment reporting, rose from 7.7% during fiscal year 2015 to 18.9% during fiscal year 2016. Without considering the effect of the Israeli Operating Center, selling expenses as a percentage of total revenues pursuant to business segment reporting, experienced a slight increase from 7.7% during fiscal year 2015 to 8.0% during fiscal year 2016.

Operations Center in Argentina
Shopping Centers
Selling expenses in the Shopping Centers segment increased by 28.3%, up from Ps. 113 million during fiscal year 2015 to Ps. 145 million during fiscal year 2016, primarily as a consequence of: (i) an increase in the charge for taxes, rates and contributions of Ps. 29 million, primarily generated by an increase in charges for gross income tax, amongst other items.
Selling expenses measured as a percentage of revenues from the Shopping Centers segment, went down from 6.3 % during fiscal year 2015 to 6.0% during fiscal year 2016.
Offices and Others
The Selling expenses associated to our Offices and Others segment decreased by 42.9% down from Ps. 21 million in fiscal year 2015 to Ps. 12 million in fiscal year 2016.
The Selling expenses associated to our Offices and Others segment, measured as a percentage of the revenues derived from this segment diminished by 6.3% in fiscal year 2015 to 3.5% in fiscal year 2016.
Sales and Developments
Selling expenses in the Sales and Developments segment rose by 300.0%, up from Ps. 9 million during fiscal year 2015 to Ps. 36 million during fiscal year 2016, primarily as a result of an increased charge for taxes, rates and contributions that amounts to Ps. 21 million, primarily generated by an increase in charges for gross income tax.
Hotels
The selling expenses associated to our Hotels segment rose by 32.7%, from Ps. 52 million during fiscal year 2015 to Ps. 69 million during fiscal year 2016, primarily attributable to:
·  
a Ps. 6 million increase in the charge for taxes, rates and contributions and
·  
an increase of Ps. 5 million in fees for services amongst other items.
The selling expenses associated to our Hotels segment measured as a percentage of the revenues derived from this segment fell slightly down from 13% during fiscal year 2015 to 12.9% during fiscal year 2016.
Financial Operations and Others
Selling expenses in the Financial Operations and Others segment rose by Ps. 2 million during fiscal year 2016 compared to fiscal year 2015.
Operations Center in Israel
Real Estate
During fiscal year 2016, selling expenses associated to the Real Estate segment totaled Ps. 29 million. Selling expenses as a percentage of the revenues derived from this segment amounted to 1.9%.
Supermarkets
During fiscal year 2016, selling expenses associated to the Supermarkets segment totaled Ps. 4,058 million. Selling expenses as a percentage of the revenues derived from this segment amounted to 21.8%.
Telecommunications
During fiscal year 2016, selling expenses associated to the Telecommunications segment totaled Ps. 1,493 million. Selling expenses as a percentage of the revenues derived from this segment amounted to 22.4%.
Others
During fiscal year 2016, selling expenses associated to the Others segment totaled Ps. 106 million. Selling expenses as a percentage of the revenues derived from this segment amounted to 7.4%.
Other Operating results, net
Our Other operating results, net decreased by Ps. 48 million, from income for Ps. 10 million in fiscal year 2015 to a loss for Ps. 38 million in fiscal year 2016.  This was mainly due to an increase of Ps. 3 million in the Urban Properties and Investments Business in the Argentine Operating Center, offset by a Ps. 51 million decrease in the Agricultural business.

Agricultural Business
  Fiscal year ended June 30, 2016
Other Operating results, net Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (72)(1)(1)(74)
Cattle (2)-                          -(2)
Dairy -                            -                          --
Land Transformation and Sales ----
Sugarcane 4                            -                          -4
Agricultural Production Subtotal (70)(1)(1)(72)
Agro-industrial                              1                            -                          -                              1
Others segments                          1                            -                          -                           1
Agricultural Rental and Services                             -                            -                          -                               -
Subtotal Others                     2                            -                          -                            2
Total Agricultural Business (68)(1)(1)(70)
  Fiscal Year ended June 30, 2015
Other Operating results, net Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (7)                              (1)(1)(9)
Cattle (2)                           (1)                          -(3)
Dairy                           (1)                            -                          -                           (1)
Sugarcane                           (2)                            -                          -                            (2)
Agricultural Production Subtotal (12)                              (2)(1)(15)
Land Transformation and Sales                            (5)                            -                          -                            (5)
Agro-industrial -                            -                          --
Others segments                    1                            -                          -                            1
Agricultural Rental and Services                            -                            -                          -                               -
Subtotal Others                            1                            -                          -                              1
Total Agricultural Business (16)                             (2)(1)(19)
The Other operating results, net, associated to sales in the Agricultural business increased their losses up from Ps. 16 million in fiscal year 2015 to Ps. 68 million in losses for fiscal year 2016. This was primarily due to an increase of Ps. 65 million in losses in the Crops segment, partially offset by an increase of Ps. 6 million in the Sugarcane segment, Ps. 5 million in the segment Land Transformation and Sales, and Ps. 1 million in the Dairy and Agro-industrial segments.
In turn, Other operating results, net from our interests in joint ventures experienced a decrease in loss equivalent to 50% of Ps. 2 million in fiscal year 2015 to Ps. 1 million in fiscal year 2016, associated to our joint venture Cresca.
Besides, there have not been any variations in the Inter-segment eliminations for other operating results, net which remain at a loss of Ps. 1 million for both fiscal years.
Hence, according to business segment reporting and considering all our joint ventures, Other operating results, net went from a loss of Ps. 19 million in fiscal year 2015 to a loss of Ps. 70 million in fiscal year 2016.
Crops
Other operating results, net, in the Crops segment experienced an increase in losses for Ps. 65 million, up from Ps. 9 million in losses for fiscal year 2015 to Ps. 74 million in losses for fiscal year 2016, primarily as a result of the derivatives of Brasilagro and Cresud commodities (Ps. 84 million), partially offset by the results generated by FyO (equivalent to income for Ps. 12 million).
Sugarcane
Other operating results, net in the Sugarcane segment rose by Ps. 6 million, up from a Ps. 2 million loss in fiscal year 2015 to income for Ps. 4 million in fiscal year 2016.
Land Transformation and Sales
Other operating results, net in the Land Transformation and Sales segment in fiscal year 2016 were no associated to expenses whilst losses for these expenses in fiscal year 2015 had amounted to Ps. 5 million.
The rest of the segments of the Agriculture business did not exhibit significant changes.

Urban Properties and Investments Business
  Fiscal year ended June 30, 2016 
Other Operating results, net Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
  (in million of Ps.) 
Operations Center in Argentina      
Shopping Centers (40)(2)                          -(42) 
Offices and Others (7)               -                        1(6) 
Sales and Developments (16)                      4                         4(8) 
Hotels     (2)-                     -              (2) 
International 89-                          -89 
Financial Operations and Others 1-                          -1 
Total Operations Center in Argentina 25                            2                           532 
       
Operations Center in Israel      
Real Estate ---- 
Supermarkets ---- 
Agrochemicals ---- 
Telecommunications ---- 
Insurance ---- 
Other ---- 
Total Operations Center in Israel ---- 
Total Other operating results, net 252532 
       
  Fiscal year ended June 30, 2015
Other Operating results, net Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
  (in million of Ps.) 
Operations Center in Argentina      
Shopping Centers (48)(1)                          -(49) 
Offices and Others (120)1                        1(118) 
Sales and Developments               13                     -                          -                 13 
Hotels -                      -                          -- 
International 185                         -                          -185 
Financial Operations and Others (2)                         -                          -(2) 
Total Urban Properties and Investments Business 28-                           129 
The Other operating results, net in the Urban Properties and Investments Business segment decreased by Ps. 3 million, up from a gain of Ps. 28 million in fiscal year 2015 to a gain of Ps. 25 million in fiscal year 2016 (attributable to the Operation Center in Argentina), primarily attributable to income for Ps. 113 million in the Offices and Others segment, partially offset by a reduction of Ps. 96 million in the International segment.
The effect of consolidation in our joint ventures rose by Ps. 2 million primarily due to larger operating revenues in the joint ventures Baicom and Cyrsa, partially offset by operating expenses in the Puerto Retiro joint venture.
Besides, Inter-segment eliminations rose by Ps. 4 million, up from Ps. 1 million in income for the fiscal year 2015 to Ps. 5 million in income for the fiscal year 2016.
In accordance with the details from the business segment reported by segment and considering all our joint ventures and the Inter-segment eliminations, the Other operating results, net went from income for Ps. 29 million as net income for the fiscal year 2015 to income for Ps. 32 million in the fiscal year 2016 (allocated to the Operation Center in Argentina)..
Operation Center in Argentina
Shopping Centers
The net loss stemming from Other operating results in the Shopping Centers segment shrank by 14.3%, down from Ps. 49 million during fiscal year 2015 to Ps. 42 million during fiscal year 2016, primarily as a consequence of a smaller charge for lawsuits and contingencies of Ps. 8 million.
The net loss stemming from Other operating results, measured as a percentage of revenues from the Shopping Centers segment, diminished from 2.7% during fiscal year 2015 to 1.7% during fiscal year 2016.

Offices and Others
The net loss stemming from Other operating results associated to our Offices and Others segment decreased by Ps. 112 million, down from Ps. 118 million during fiscal year 2015 to Ps. 6 million during fiscal year 2016, primarily attributable to the expenses for conveyances of assets from IRSA to IRSA CP for Ps. 111 million generated during fiscal year 2015.
Sales and Developments
Our Sales and Developments segment diminished by Ps. 21 million from income for Ps. 13 million during fiscal year 2015 to a loss of Ps. 8 million during fiscal year 2016, primarily as a consequence of the income posted during fiscal year 2015 for the sale of our shareholding in Bitania for Ps. 16 million, among other items.
Hotels
The net loss stemming from Other operating results associated to our Hotels segment rose by Ps. 2 million recorded during fiscal year 2016, primarily attributable to an increased charge for provisions for lawsuits and contingencies.
International
The Other operating results, net in this segment exhibited a Ps. 96 million decrease, down from Ps. 185 million during fiscal year 2015 to Ps. 89 million during fiscal year 2016, primarily attributable to a reduction in income caused by the partial reversal of accumulated gains/(losses) from conversion. As of June 30, 2016, this reflects primarily the reversal of the gains/(losses) for conversion before the IDBD business combination whilst as of June 30, 2015 this reflects the reversal of the reserve for conversion generated at Rigby and due to the partial repayment of the company’s principal.
Financial Operations and Others
Other operating results, net associated to our Financial Operations and Others segment rose by Ps. 3 million, up from a loss of Ps. 2 million during fiscal year 2015 to income for Ps. 1 million during fiscal year 2016.
Profit from operations
As a consequence of the factors explained above, our profit from operations rose Ps. 900 million (31.8%), up from income for Ps. 2,827 million in fiscal year 2015 to income for Ps. 3,727 million in fiscal year 2016.
Agricultural Business
Profit from operations in the Agricultural business decreased Ps. 15 million (4.9%), down from income for 307 million in fiscal year 2015 to income for Ps. 292 million in fiscal year 2016.
Crops
Profit / (loss) from operations in this segment increased Ps. 431 million (155.6%) from a loss of Ps. 277 million in fiscal year 2015 to income for Ps. 154 million in fiscal year 2016.
Cattle
Profit from operations in this segment rose by Ps. 67 million (186.1%), from income for Ps. 36 million in fiscal year 2015 to income for Ps. 103 million in fiscal year 2016.
Dairy
Profit / (loss) from operations in this segment decreased Ps. 12 million (300.0%), from income for Ps. 4 million in fiscal year 2015 to a loss of Ps. 8 million in fiscal year 2016.
Sugarcane
Profit / (loss) from operations in this segment increased Ps. 76 million (584.6%), from a loss of Ps. 13 million in fiscal year 2015 to income for Ps. 63 million in fiscal year 2016.
Agricultural Rental and Services
Profit from operations in this segment increased Ps. 16 million (43.2%), from income for Ps. 37 million in fiscal year 2015 to income for Ps. 53 million in fiscal year 2016.
Land Transformation and Sales
Profit from operations in this segment decreased by Ps. 564 million (102.2%), from income for Ps. 552 million in fiscal year 2015 to a loss of Ps. 12 million in fiscal year 2016.

Agro-industrial
Loss from operations in this segment decreased Ps. 28 million (80.0%), from a loss of Ps. 35 million in fiscal year 2015 to a loss of Ps. 63 million in fiscal year 2016.
Others
Profit from operations in this segment decreased Ps. 1 million (33.3%) from income for Ps. 3 million in fiscal year 2015 to income for Ps. 2 million in fiscal year 2016.
Urban Properties and Investments Business
Profit from operations in this segment rose by Ps. 915 million (36.3%), up from income for Ps. 2,520 million in fiscal year 2015 to income for Ps. 3,435 million in fiscal year 2016 of which Ps. 720 million are derived from the Operation Center in Israel, and Ps. 2,715 million are derived from the Operation Center in Argentina. Considering Operation Center in Argentina variation was due to an increase of Ps. 580 million in the segments Shopping Center, Offices and Others, Hotels and Financial Operations, partially offset by a Ps. 385 million reduction in the segments Sales and Developments and International.
Shopping Centers
Profit from operations in our Shopping Centers segment rose by 37.6%, from a gain of Ps. 1,190 million during fiscal year 2015 to a gain of Ps. 1,637 million during fiscal year 2016.
Profit from operations in our Shopping Centers segment, as a percentage of the segment revenues, increased from 66.9% in fiscal year 2015 to 68.0% in fiscal year 2016.
Offices and Others
Profit from operations in our Offices and Others segment rose by 121.2%, from a gain of Ps. 99 million during fiscal year 2015 to a gain of Ps. 219 million during fiscal year 2016.
Profit from operations in our Offices and Others segment, as a percentage of the revenues derived from this segment, increased from 29.7% in fiscal year 2015 to 64.4% in fiscal year 2016.
Sales and Developments
Profit from operations in our Sales and Developments segment decreased by 21.4%, from a gain of Ps. 1,099 million during fiscal year 2015 to a gain of Ps. 864 million during fiscal year 2016.
Profit from operations in our Sales and Developments segment, as a percentage of the revenues derived from this segment, increased from 7,850.0% in fiscal year 2015 to 28,800.0% in fiscal year 2016.
Hotels
Loss from operations in our Hotels segment decreased losses by 84.6% down from Ps. 13 million during fiscal year 2015 to Ps. 2 million during fiscal year 2016.
International
Profit/(loss) from operations in our International segment decreased Ps. 150 million (101.3%), from a gain of Ps. 148 million during fiscal year 2015 to a loss of Ps. 2 million during fiscal year 2016.
Financial Operations and Others
Loss from operations in our Financial Operations and Others segment experienced a 66.7% decrease in losses, down from Ps. 3 million during fiscal year 2015 to Ps. 1 million during fiscal year 2016.
Operations Center in Israel
Real Estate
During fiscal year 2016, operating income associated to the Real Estate segment totaled Ps. 617 million and, as a percentage of the revenues derived from this segment, amounted to 40.1%.
Supermarkets
During fiscal year 2016, operating income associated to the Supermarkets segment totaled Ps. 424 million and, as a percentage of the revenues derived from this segment, amounted to 2.3%.

Telecommunications
During fiscal year 2016, operating loss associated to the Telecommunications segment totaled Ps. 71 million.
Others
During fiscal year 2016, operating loss associated to the Others segment totaled Ps. 250 million.
Share of profit / (loss) of associates and joint ventures
Share of profit / (loss) of associates and joint ventures increased by Ps. 1,499 million,  up from a loss of Ps. 1,026 million in fiscal year 2015 to a gain of Ps. 473 million in fiscal year 2016. This was primarily attributable to:
·  
a Ps. 1,136 million increase in our related companies’ interest in the Urban Properties and Investments business in fiscal year 2016. Such increase was mainly attributable to the income stemming from the share in the Profit of associates and joint ventures posted by our subsidiary IDBD which amounted to Ps. 338 million during fiscal year 2016, and the profit associated to the investment in IDBD previous to the consolidation which amounts to Ps. 1,080 million, which adds to the income stemming from our investment in our related company Banco Hipotecario which exhibited a Ps. 114 million variation during fiscal year 2016. This has all been partially offset by an increase in losses of Ps. 55 million in our ownership interest in New Lipstick LLC, partially offset by increased gains from Condor for Ps. 15 million.
·  
a Ps. 22 million increase in the revenues provided by the Agricultural business, primarily attributable to the revenues earned by the Agro-Uranga investment (corresponding to the Crops segment).
In turn, share of profit of associates and joint ventures from our interests in joint ventures increased by 30.0% from Ps. 10 million in fiscal year 2015 to Ps. 13 million in fiscal year 2016, mainly as a consequence of a 298.7% increase in our Cresca joint venture, up from a loss of Ps. 2 million in fiscal year 2015 to a gain of Ps. 3 million in fiscal year 2016.
Hence, according to business segment reporting and considering all our joint ventures, share of profit / (loss) of associates and joint ventures increased by 144.4%, up from a loss of Ps. 1,036 million in fiscal year 2015 to a gain of Ps. 460 million in fiscal year 2016.
Financial results, net
We incurred a higher financial loss, net of Ps. 4,967 million, up from a loss of Ps. 1,288 million in fiscal year 2015 to a loss of Ps. 6,255 million in fiscal year 2016. This was primarily due to:
·  
a higher loss, of Ps. 2,340 million in foreign exchange, net in fiscal year 2016;
·  
a higher loss, of Ps. 1,160 million in financial interest, net recorded in fiscal year 2016;
·  
a higher loss, of Ps. 1,428 million, stemming from the fair value measurement of financial assets and liabilities in fiscal year 2016;
·  
a higher loss, of Ps. 353 million, stemming from the impairment in the investment properties of our IDBD subsidiary in fiscal year 2016; and
·  
slightly offset by a gain of Ps. 1,172 million stemming from derivative financial instruments in fiscal year 2016.
Our financial losses, net in fiscal year 2016 were primarily attributable to (i) an increase in the financial losses stemming from the consolidation of IDBD for Ps. 3,176 million; (ii) a Ps. 3,249 million loss stemming from foreign exchange primarily as a result of the depreciation sustained by the foreign exchange rate, whitout IDBD’s results; (iii) a Ps. 1,246 million loss stemming from the interest accrued on debt financing, mainly due to increased indebtedness and higher interest rates, whitout IDBD’s results; (iv) a gain of Ps. 662 million primarily attributable to the fair value measurement of financial assets, whitout IDBD’s results; and (v) a gain of Ps. 1,138 million attributable to derivative financial instruments (except commodities), whitout IDBD’s results.
There was a 65.5% variation in the U.S. Dollar buying rate during fiscal year 2016 (it increased from Ps. 9.088 on June 30, 2015 to Ps. 15.040 as of June 30, 2016) as compared to the previous fiscal year, when the U.S. Dollar quotation had experienced a variation of 11.7% (from Ps. 8.133 as of June 30, 2014 to Ps. 9.088 as of June 30, 2015).
Income tax
Our income tax expense increased Ps. 500 million, from a Ps. 303 million loss in fiscal year 2015 to a Ps. 197 million gain in fiscal year 2016. We recognize the income tax expense on the basis of the deferred tax liability method, thus recognizing temporary differences between accounting and tax assets and liabilities measurements. The main temporary differences for the Agriculture business derive from valuation of cattle stock and sale and replacement of property, plant and equipment, while those corresponding to the Urban Properties and Investments business derive from the sale and replacement of investment properties.
For purposes of determining the deferred assets and liabilities, the tax rate expected to be in force at the time of their reversion or use, according to the legal provisions enacted as of the date of issuance of these financial statements, has been applied to the identified temporary differences and tax losses.
Profit / (loss) for the Fiscal Year
Due to the above mentioned factors, our profit / (loss) for the fiscal year decreased Ps. 2,066 million (1,180.6%) from Ps. 175 million in net income for fiscal year 2015 to a net loss of Ps. 1,891 million in fiscal year 2016. Profit / (loss) for fiscal years 2016 and 2015 is attributable to the controlling company’s shareholders and non-controlling interest, as per the following detail:
·  
Loss for the fiscal year attributable to the controlling company’s shareholders went from a loss of Ps. 250 million in fiscal year 2015 to a loss of Ps. 1,038 million in fiscal year 2016; and
·  
Profit / (loss) attributable to the non-controlling interest in controlled companies went from a gain of Ps. 425 million in fiscal year 2015 to a loss of Ps. 853 million in fiscal year 2016, primarily due to the consolidation of our subsidiary IDBD.

Fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014
 
Operating Results
REVENUES
 
Total salesOur total revenues of the Company increased 23.7%24.5%, from Ps. 3,967.93,970 million for fiscal year 2014 to Ps. 4,908.14,942 million for fiscal year 2015. This was mainly due to a 30.3%32.1% increase in the Agricultural business, from Ps.1,812.1Ps.1,813 million in fiscal year 2014 to Ps. 2,361.02,395 million in fiscal year 2015 and a 18.2%18.1% increase in the Urban Properties and Investments business, from Ps. 2,155.82,157 million in fiscal year 2014 to Ps. 2,547.12,547 million in fiscal year 2015.

Agricultural Business
 
  Fiscal year ended on June 30, 2015 
Revenues Income statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  963,300   23,417   -   986,717 
Cattle  56,650   2,524   84,388   143,562 
Dairy  71,940   -   -   71,940 
Sugarcane  197,828   -   -   197,828 
Agricultural rental and services  37,048   -   127   37,175 
Agricultural Subtotal  1,326,766   25,941   84,515   1,437,222 
Land transformation and sales  -   -   -   - 
Agro-industrial  806,018   -   -   806,018 
Other segments  117,770   -   -   117,770 
Total Agricultural Business Revenues  2,250,554   25,941   84,515   2,361,010 

  Fiscal year ended on June 30, 2014 
Revenues Income statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  817,702   19,120   -   836,822 
Cattle  61,691   2,242   26,382   90,315 
Dairy  53,935   -   -   53,935 
Sugarcane  123,851   -   -   123,851 
Agricultural rental and services  29,044   -   98   29,142 
Agricultural Subtotal  1,086,223   21,362   26,480   1,134,065 
Land transformation and sales  -   -   -   - 
Agro-industrial  548,740   -   5,344   554,084 
Other segments  123,872   87   -   123,959 
Total Agricultural Business Revenues  1,758,835   21,449   31,824   1,812,108 
Agricultural Business
 
Sales
Fiscal year ended June 30, 2015
RevenuesStatement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                        964                            23-                        987
Cattle                          56                              3                             84                        143
Dairy                          72--                          72
Sugarcane                        198--                        198
Subtotal Agricultural Business                     1,290                            26                             84                     1,400
Land Transformation and Sales                           - - -           ��               -
Agro-industrial                        806--                        806
Others segments                        118                             -                             10                        128
Agricultural Rental and Services                          37-                             24                          61
Other Subtotal                        961                             -                             34                        995
Total Agricultural Business                     2,251                            26                           118                     2,395
  Fiscal year ended June 30, 2014
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                        818                            19-                        837
Cattle                          62                              2                             26                          90
Dairy                          54--                          54
Sugarcane                        124--                        124
Subtotal Agricultural Business                     1,058                            21                             26                     1,105
Land Transformation and Sales                           - - -                           -
Agro-industrial                        549-                               5                        554
Others segments                        124                             -                               1                        125
Agricultural Rental and Services                          28-                               1                          29
Other Subtotal                        701                             -                               7                        708
Total Agricultural Business                     1,759                            21                             33                     1,813
Total revenues increased 28%28.0%, from Ps. 1,758.81,759 million in fiscal year 2014 to Ps. 2,250.62,251 in fiscal year 2015. This was due to an increase of of:
·  
Ps. 149.9 million146 in the Crops segment, an increase of segment;
·  
Ps. 53.2 million in the Cattle segment, an increase of Ps. 18.018 million in the Dairy segment, an increase of segment;
·  
Ps. 74 million in the Sugarcane segment, an increase of segment;
·  
Ps. 8257 million in the Agroindustrial segment; and
·  
Ps. 9 million in the Agricultural rentalRental and services segment, an increaseServices segment.
These increases were offset by a reduction of Ps. 251.96 million in the Agroindustrial segment, offset by a decrease of Ps. 6.2 million in Other segments.Cattle and Others segments, respectively.
 
In turn, revenues from our interests in joint ventures increased 20.9%23.8% from Ps. 21.421 million in fiscal year 2014 to Ps. 25.926 million in fiscal year 2015, mainly as a result of a 22.5%21.1% increase in Cropscrops sold toin Cresca, from Ps. 19.119 million in fiscal year 2014 to Ps. 23.423 million in fiscal year 2015.
 
Similarly, inter-segment revenues increased 165.6%257.6%, from Ps. 31.833 million in fiscal year 2014 to Ps. 84.5118 million in fiscal year 2015, mainly as a result of livestock sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agroindustrial segment, and the leases of farmlands between our subsidiary Brasilagro and its subsidiaries, which were reclassified from the Crops segment to the Agricultural Rental and Services segment.
��
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, sales revenues increased 30.3%, from Ps. 1,812.1 million in fiscal year 2014 to Ps. 2,361.0 million in fiscal year 2015.
 
Crops
 
Total sales revenuesRevenues from the Crops segment increased 17.9%, from Ps. 836.8837 million in fiscal year 2014 to Ps. 986.7987 million in fiscal year 2015, mainly as a result of:
 
·  an increase of  102,129 tons in the volume of Crops sold during fiscal year 2015 compared to the previous fiscal year; and
·  
a reduction of 4.6% in the average price of sold crops, from Ps. 1,931 per ton in fiscal year 2014 to Ps. 1,842 per ton in fiscal year 2015;
 
·  partially offset by a reduction of 4.6% in the average price of sold Crops, from Ps. 1,931 per ton in fiscal year 2014 to Ps. 1,843 per ton in fiscal year 2015 mainly due to lower prices of wheat and sunflower.
·  
offset by an increase of  102,130 tons in the volume of crops sold during fiscal year 2015 compared to the previous fiscal year, a 17.9% increase in production volume, from 344,165 tons in fiscal year 2014 to 405,882 tons in fiscal year 2015.
 
The following table shows the sales of Cropscrops in detail:
 
 Sale of Crops (in tons) 
Sale of Crops  (in tons)
 Fiscal year ended June 30, Fiscal year ended June 30,
 2015  2014  Variation 20152014Variation
Corn  269,701   179,893   89,808 269,701179,89389,808
Soybean  250,125   222,051   28,074 250,125222,05128,074
Wheat  7,083   11,359   (4,276)7,08311,359(4,276)
Sorghum  1,569   3,843   (2,274)1,5693,843(2,274)
Sunflower  5,181   9,745   (4,564)5,1819,745(4,564)
Other  1,872   6,509   (4,637)1,8726,509(4,637)
Total Sales  535,531   433,400   102,129 535,531433,400(102,131)

Cattle

Total sales revenues
Revenues from the Cattle segment increased 59.0%58.9%, from Ps. 90.390 million in fiscal year 2014 to Ps. 143.6143 million in fiscal year 2015, mainly as a result of:
 
·  a 59%
·  
a 57.8% increase in the average price per kilogram sold, from Ps. 10.1 per kilogram in fiscal year 2014 to Ps. 16 per kilogram in fiscal year 2015.
·  a 0.3% in the cattle sales volume, from  8,842 tons in fiscal year 2014 to 8,871 tons in fiscal year 2015.
Dairy
Total sales revenues from the Dairy segment increased 33.4%, from Ps. 53.910.2 million in fiscal year 2014 to Ps. 71.916.1 million in fiscal year 2015;
·  
a slight decrease of 0.3% in the cattle sales volume, from  8,842 tons in fiscal year 2014 to 8,871 tons in fiscal year 2015; and
·  
a 12.1% increase in the cattle production volume, from 6,970 tons in fiscal year 2014 to 7,812 tons in fiscal year 2015.
Dairy
Revenues from the Dairy segment increased 33.3%, from Ps. 54 million in fiscal year 2014 to Ps. 72 million in fiscal year 2015, mainly as a result of:
 
·  a 42.8% increase in the average price of milk, from Ps. 2.49 per liter in fiscal year 2014 to Ps. 3.55 per ton in fiscal year 2015;
·  
a 31.0% increase in the average price of milk, from Ps. 2.70 per liter in fiscal year 2014 to Ps. 3.55 per liter in fiscal year 2015;
 
·  a 149% increase in the average price per kilogram sold of milking cows from Ps. 5.24 per kilogram in fiscal year 2014 to Ps. 13.06 per kilogram in fiscal year 2015;
·  
a 10.3% decrease in the average amount number of milking cows; and
 
·  a 94.3% increase in the volume of sales of milking cows, from 465 tons in fiscal year 2014 to 903 tons in fiscal year 2015;
o  
a 9.9% decrease in the volume of sales, from 18.8 million liters in fiscal year 2014 to 16.9 million liters in fiscal year 2015.
 
·  partially offset by a 9.9% decrease in the volume of sales of milk, from 18.7 million liters in fiscal year 2014 to 16,9 million liters in fiscal year 2015.
 
Sugarcane
 
Total sales revenues
Revenues from the Sugarcane segment increased 59.7%, from Ps. 123.9124 million in fiscal year 2014 to Ps. 197.8198 million in fiscal year 2015, mainly as a result of:
 
·  248,808 (36.8%) more tons of sugarcane sold in fiscal year 2015 as compared to the previous fiscal year, mainly by BrasilAgro; and
·  
248,808 more tons of sugarcane sold in fiscal year 2015 as compared to the previous fiscal year (36.8%), mainly by Brasilagro; and
 
·  a 16,7% increase in the average price of sugarcane sold, from Ps. 183.3 per ton in fiscal year 2014 to Ps. 214 per ton in fiscal year 2015.
·  
a 16.7% increase in the average price of sugarcane sold, from Ps. 183.3 per ton in fiscal year 2014 to Ps. 214.0 per ton in fiscal year 2015.
 
Agricultural rentalRental and servicesServices
 
Total revenues
Revenues from the Agricultural rentalRental and servicesServices segment increased by 27.6%110.3%, from Ps. 29.129 million in fiscal year 2014 to Ps. 37.261 million in fiscal year 2015, mainly as a result of:
 
·  a 58% increase in leases, due to machinery rentals from Brasilagro and new lease agreements from Bolivia;
·  
a 232.0% increase in leases due to higher leases and machinery rentals from Brasilagro for Ps. 2 and Ps. 35 million in 2015, respectively, as compared to no transactions in the previous fiscal year, and new lease agreements in Bolivia in San Rafael (900 hectares), 4 Vientos (169 hectares) and Primavera (92 hectares) farms from January to May 2015, which generated revenues of Ps. 1 million;
 
·  a 3.7 % increase in revenues from production of seeds mainly due to an increase in the production volume of soybean; and
·  
a 18.2% increase in revenues from irrigation services (Ps. 1 million) originated in a 57% increase in the price, offset by a 25% reduction in irrigation volume;
 
·  a decrease of 2.6 % in revenues from irrigation services due to a decrease of 136 % in total milliliters sold compared to fiscal year 2014.
·  
partially offset by a 71.4% reduction in revenues from agricultural management services (Ps. 1 million) due to the fact that in the previous fiscal year cotton management services had been rendered to Iazfin in La Suiza, whereas such agreement was discontinued in this fiscal year.
 
Agro-industrial
 
Total revenues
Agro-industrial Activities
Revenues from the Agro-industrial Activities increased 45.5%, from Ps. 554.1554 million in fiscal year 2014 to Ps. 806.0806 million in fiscal year 2015, mainly as a result of:
 
·  a 17% increase in slaughtering volumes and the differential resulting from the higher price of beef and sub-products; and
·  
a 50% increase in sales to the domestic market and by-products. Domestic market prices showed an upward trend of 15% for fiscal year 2015 as compared to fiscal year 2014, while export sales fell 3.2% in fiscal year 2015 as compared to fiscal year 2014; and
 
·  a 50% increase in sales to the domestic market with upward price trend, offset by
·  
in fiscal year 2015 average slaughtering stood at 6,398 heads per month, compared to 5,472 in fiscal year 2014.
 
·  a 3.18% reduction in exports.
 
Other Segmentssegment
 
Total revenues
Revenues from the Other segments decreased 5.0%segment increased 2.4%, from Ps. 124.0125 million in fiscal year 2014 to Ps. 117.8128 million in fiscal year 2015, mainly as a result of:
 
·  an increase of Ps. 21.1 million in sales on consignment, offset by
·  
an increase of Ps. 19 million in revenues from consignment; and
 
·  a reduction of Ps. 15.1 million in commodity brokerage services.
·  
offset by a reduction of Ps. 6 million and Ps. 9 million in the sale of inputs and commodity brokerage services, respectively.
 


113

Urban Properties and Investments Business
 
   Fiscal year ended on June 30, 2015 
 
Revenues
  
Income Statement(1)
   Interests in joint ventures   Inter-segment eliminations   
Common maintenance expenses
and collective promotion fund
   Segment reporting 
Shopping Center Properties  2,570,868   13,069   -   (805,627)  1,778,310 
Offices  397,326   9,238   5,487   (79,323)  332,728 
Sales and Developments  8,482   5,225   -   -   13,707 
Hotels  396,297   -   -   -   396,297 
International  28,131   -   -   (2,258)  25,873 
Financial operations and Others  147   -   -   -   147 
Total Urban Properties and Investments Business Revenues  3,401,251   27,532   5,487   (887,208)  2,547,062 
(1)Includes revenues from sales, leases and services (Ps. 2,514.0 million) and revenues from expenses and collective promotion funds (Ps. 887.2 million).
�� Fiscal year ended on June 30, 2014 
Revenues 
Income statement(1)
  Interests in joint ventures  Inter-segment eliminations  
Common maintenance expenses
and collective
promotion fund
  Segment reporting 
Shopping Center Properties  2,031,625   9,280   1,808   (659,705)  1,383,008 
Offices  327,954   8,466   4,442   (69,703)  271,159 
Sales and Developments  62,641   22,890   -   -   85,531 
Hotels  331,562   -   -   -   331,562 
International  90,820   -   -   (6,894)  83,926 
Financial operations and Others  574   -   -   -   574 
Total Urban Properties and Investments Business Revenues  2,845,176   40,636   6,250   (736,302)  2,155,760 
                     
(1)  Includes revenues from sales, leases and services (Ps. 2,108.9 million) and revenues from expenses and collective promotion funds (Ps. 736.3 million)
  Fiscal year ended June 30, 2015
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Shopping Centers             2,571                        13               -      (806)               1,778
Offices and Others                397                        105       (79)                  333
Sales and Developments                    9                         5 --                    14
Hotels                396                          - --                  396
International                  28                          - -          (2)                    26
Financial Operations and Others                     -                          ---                         -
Total Urban Properties and Investments Business                  3,401                            285                (887)               2,547
       
  
 
Fiscal year ended June 30, 2014
Revenues Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Shopping Centers     2,032             9               2      (660)               1,383
Offices and Others        327               10               4       (70)                  271
Sales and Developments             63             23 --                    86
Hotels         332 - --                  332
International          90 - -          (6)                    84
Financial Operations and Others                1 ---                         1
Total Urban Properties and Investments Business             2,845             426                (736)               2,157
        
 
Total revenues from the Urban Properties and Investments business increased 19.5%, from Ps. 2,845.22,845 million in fiscal year 2014 to Ps. 3,401.33,401 million in fiscal year 2015. This was mainly due to an increase of Ps. 395.3395 million in the Shopping Center PropertiesCenters segment, an increase of Ps. 61.662 million in the Offices and Others segment, and an increase of Ps. 64.764 million in the Hotel segment, offset by a decrease of Ps. 0.41 million in the Financial Operations and Others segment, a decrease of Ps. 58.158 million in the International segment, and a decrease of Ps. 71.872 million in the Sales and Developments segment.
 
In turn, revenues from our interests in joint ventures decreased by 32.2%33.3%, from Ps. 40.642 million in fiscal year 2014 to Ps. 27.528 million in fiscal year 2015, mainly2015. Such decrease is mostly attributable to a reduction in sales revenues derived from the Horizons development, from our joint venture with CYRSA S.A.
 
Similarly, inter-segment revenues decreased 12.2%16.7%, from Ps. 6.26 million in fiscal year 2014 (of(out of which Ps. 4.44 million is attributable to the Offices and Others segment) to Ps. 5.55 million in fiscal year 2015 (attributable to the Offices and Others segment).
 
On the other hand, revenues from expensesMaintenance Fee and collective promotion fundCommon Advertising Funds increased by 20.5%, from Ps. 736.3736 million in fiscal year 2014 (of(out of which Ps. 659.7660 million is attributable to the Shopping Center PropertiesCenters segment) to Ps. 887.2887 million in fiscal year 2015 (of(out of which Ps. 805.6806 million is attributable to the Shopping Center PropertiesCenters segment).
 
Hence, according to business segment reporting and considering all our joint ventures, inter-segment eliminations, and maintenance fee and common advertising funds, sales revenues increased 18.1%, from Ps. 2,155.82,157 million in fiscal year 2014 to Ps. 2,547.12,547 million in fiscal year 2015.
 

Shopping Center PropertiesCenters
 
Revenues from the Shopping Center PropertiesCenters segment increased 28.6%, from Ps. 1,383.01,383 million in fiscal year 2014 to Ps. 1,778.31,778 million in fiscal year 2015. Such variation was mostly attributable to:
 
·  an increase of Ps. 317.7 million in revenues from base and contingent rent
·  
an increase of Ps. 317 million in revenues from fixed and variable rentals as a result of a 33.3% rise in our tenants’ sales, from Ps. 16,132.8 million in fiscal year 2014 to Ps. 21,508.7 million in fiscal year 2015;
·  an increase of Ps. 30.0 million in revenues from admission fees;
·  an increase of Ps. 30.6 million in parking fees; and
·  an increase of Ps. 17.0 million in revenues from property letting fees, management fees and other.
Offices
Revenues from the Offices segment increased 22.7%, from Ps. 271.216,133 million in fiscal year 2014 to Ps. 332.721,509 million in fiscal year 2015;
·  
an increase of Ps. 30 million in revenues from admission fees;
·  
an increase of Ps. 31 million in parking revenues; and
·  
an increase of Ps. 17 million in revenues from commissions, management fees and others.
Offices and Others
Revenues from the Offices and Others segment increased 22.9%, from Ps. 271 million in fiscal year 2014 to Ps. 333 million in fiscal year 2015. Such revenues were impacted by the partial sale of investment properties in fiscal year 2015, which resulted in a reduction of the segment total leasable area.
 
 Considering comparable properties in both fiscal years, rental revenues from properties which did not experience a decrease in their leasable area increased by 30.6%30.8%, from Ps. 214.0214 million in fiscal year 2014 to Ps. 279.6280 million in fiscal year 2015, mostly as a result of the currency devaluation and improved occupancy, whereas rental revenues from properties whichwhose leasable area was reduced went down by 45%44.4%, from Ps. 45.545 million in fiscal year 2014 to Ps. 25.025 million in fiscal year 2015.

114

 
As of year-end, the 2015 average occupancy rate of premium offices stood at 98.1% and the average rent was around 26 US$ 26 per m2.sqm.
 
Sales and Developments
 
Revenues attributable to this segment often vary significantly period over period. Without considering our joint ventures, revenues from the Sales and Developments segment decreased by 86.4%85.7% from Ps. 62.663 million in fiscal year 2014 to Ps. 8.59 million in fiscal year 2015. Such reduction was mainly attributable to reduced revenues from the sale of the Condominios I and II (Ps. 45.346 million) and El Encuentro (Ps. 7.58 million) developments. On the other hand, revenues from ourout joint ventures (Horizons) fell by 77.2%78.3%, accounting for a decrease of Ps. 17.718 million. Hence, total revenues derived from this segment fell by 84.0%83.7%, from Ps. 85.586 million in fiscal year 2014 to Ps. 13.714 million in fiscal year 2015.
 
Hotels
 
Revenues from our Hotels segment increased by 19.5%19.3% from Ps. 331.6332 million in fiscal year 2014 to Ps. 396.3396 million in fiscal year 2015, mainly as a result of a 34.2% increase in the average room rate of our hotels (in terms of Argentine Pesos)pesos), partially offset by a 67.2% decrease in the average occupancy rate from 67.2% in fiscal year 2014 to 65.7% in fiscal year 2015 (mainly at our Llao Llao hotel).
 
International
 
Revenues from the International segment decreased by 69.2%69.0% from Ps. 83.984 million in fiscal year 2014 to Ps. 25.926 million in fiscal year 2015, mostly due to the fact that the results of Rigby 183 LLC – owner of the rental building Madison 183 building - were consolidated for only 3 months only in fiscal year 2015 because it was sold in September 2014, whereas such results were consolidated for 12 months in fiscal year 2014. This building was sold in September 2014.
 
Financial operationsOperations and Others
 
Revenues from the Financial Operations and Others segment decreased from Ps. 0.61 million in fiscal year 2014 to Ps. 0.10 million in fiscal year 2015, as a result of reduced revenues from the Company’sour personal financing residual activity.
 
COSTS
 
TotalOur total costs of the Company increased 23.1%24.1%, from Ps. 3,266.33,266 million in fiscal year 2014 to Ps. 4,019.14,052 million in fiscal year 2015. This was mainly as a result of a 29.3%30.6% increase in costs associated with the Agricultural business, from Ps. 2,618.02,617 million in fiscal year 2014 to Ps. 3,385.73,419 million in fiscal year 2015 and a 2.3%2.5% decrease in costs associated with the Urban Properties and Investments business from Ps. 648.3649 million in fiscal year 2014 to Ps. 633.5633 million in fiscal year 2015.
 
Agricultural Business
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (1,752,576)  (42,867)  -   (1,795,443) (1,744)(42)(33)(1,819)
Cattle  (135,452)  (4,716)  (84,388)  (224,556) (220)(5)                             -(225)
Dairy  (133,259)  -   -   (133,259) (133)-(133)
Sugarcane  (368,172)  -   -   (368,172) (368)-(368)
Agricultural rental and services  (19,201)  -   -   (19,201)
Agricultural Subtotal  (2,408,660)  (47,583)  (84,388)  (2,540,631)
Land transformations and sales  (9,002)  -   -   (9,002)
Subtotal Agricultural Production (2,465)                            (47)                             (33)(2,545)
Land Transformation and Sales (9) -(9)
Agro-industrial  (739,074)  -   (127)  (739,201) (654)-(85)(739)
Other Segments  (96,841)  -   -   (96,841)
Total Agricultural Business Costs  (3,253,577)  (47,583)  (84,515)  (3,385,675)
Others segments (105)                             -(105)
Agricultural rental and Services (21)-                             -(21)
Subtotal Others (780)                             -                             (85)(865)
Total Agricultural Business (3,254)                            (47)                           (118)(3,419)

  Fiscal year ended on June 30, 2014 
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (1,509,500)  (31,181)  -   (1,540,681)
Cattle  (150,810)  (4,408)  (5,442)  (160,660)
Dairy  (104,334)  -   -   (104,334)
Sugarcane  (206,751)  -   -   (206,751)
Agricultural rental and services  (17,374)  -   -   (17,374)
Agricultural Subtotal  (1,988,769)  (35,589)  (5,442)  (2,029,800)
Land transformations and sales  (8,228)  -   -   (8,228)
Agro-industrial Activities  (453,307)  -   (26,382)  (479,689)
Other Segments  (100,170)  (85)  -   (100,255)
Total Agricultural Business Costs  (2,550,474)  (35,674)  (31,824)  (2,617,972)
  Fiscal year ended June 30, 2014
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (1,506)(32)(1)(1,539)
Cattle (152)(4)                             (5)(161)
Dairy (104)--(104)
Sugarcane (207)--(207)
Subtotal Agricultural Production (1,969)(36)(6)(2,011)
Land Transformation and Sales (8) - -(8)
Agro-industrial (454)-(26)(480)
Others segments (101)                             -                             -(101)
Agricultural rental and Services (17)-                             -(17)
Subtotal Others (572)                             -                             (26)(598)
Total Agricultural Business (2,549)                            (36)                           (32)(2,617)
 
Total costs increased by 27.6%27.7% from Ps. 2,550.52,549 million in fiscal year 2014 to Ps. 3,253.63,254 million in fiscal year 2015. This was caused mainly by an increase of of:
·  
Ps. 254.8238 million in the Crops segment, an increase of segment;
·  
Ps. 63.968 million in the Cattle segment, an increase of segment;
·  
Ps. 28.929 million in the Dairy segment, an increase of segment;
·  
Ps. 161.4161 million in the Sugarcane segment, an increase of segment;
·  
Ps. 1.84 million in the Agricultural rentalRental and services segment, an increase of Services segment;
·  
Ps. 0.81 million in the Land transformationsTransformation and sales segment, and an increase ofSales segment;
·  
 Ps. 259.5200 million in the Agro-industrial segment, offset by a decrease of and
·  
Ps. 3.44 million in the Other segments.segment.
 
In turn, the cost of our joint ventures experienced a net increase of Ps. 11.911 million, from 35.636 million in fiscal year 2014 to Ps. 47.647 million in fiscal year 2015, mainly as a result of an increase of Ps. 11.712 million in the cost of Cresca’s Crops,crops, from Ps. 31.231 million in fiscal year 2014 to Ps. 42.943 million in fiscal year 2015.
 
Similarly, inter-segment costs rose by Ps. 52.786 million from Ps. 31.832 million in fiscal year 2014 to Ps. 84.5118 million in fiscal year 2015, mainly as a result of the cost of Cattle sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agro-industrial segment and the leases of farmlands between our subsidiary Brasilagro and its subsidiaries, reclassified from the Agricultural Rental and Services segment to the Crops segment.

115

 
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, costs increased by 29.3%30.6%, from Ps. 2,618.02,617 million in fiscal year 2014 to Ps. 3,385.73,419 million in fiscal year 2015.
 
Crops
 
Costs from the Crops segment increased by 16.5%18.2%, from Ps. 1,540.71,539 million in fiscal year 2014 to Ps. 1,795.41,819 million in fiscal year 2015. Costs from the Crops segment are detailed in the following table:
 
   
 Fiscal year 2015  Fiscal year 2014 Fiscal year     2015Fiscal year     2014
 Thousands of Ps. In Millions of Ps.
Cost of sales  873,118   778,362 873787
Cost of production  922,325   752,319 946752
Total Costs  1,795,443   1,540,681 1,8191,539

The cost of sales from the Crops segment increased by 10.8%10.9%, from Ps. 778.4787 million in fiscal year 2014 to Ps. 873.1873 million in fiscal year  2015, mainly as a result of:
 
·  a 23.6% increase in the volume of tons sold as compared to the previous fiscal year; and

 
·  partially offset by a 10.4% decrease in the average cost per ton of crops sold in fiscal year 2015, from Ps. 1,819 per ton in fiscal year 2014 to Ps. 1,630 per ton in fiscal year 2015, due to an increase in the average crops domestic market price.
·  
a 23.6% increase in the volume of tons sold as compared to the previous fiscal year;
·  
partially offset by a 10.2% decrease in the average cost per ton of grain sold in fiscal year 2015, from Ps. 1,816 in fiscal year 2014 to Ps. 1,631 in fiscal year 2015, due to an increase in the average grain domestic market price.
 
The cost of sales as a percentage of sales was 93.0%94.1% in fiscal year 2014 and 88.5% in fiscal year 2015.
 
The cost of production from the Crops segment increased by 22.6%25.8%, from Ps. 752.3752 million in fiscal year 2014 to Ps. 922.3946 million in fiscal year 2015, mainly as a result of:
 
·  a 14.3% increase in direct production costs during this fiscal year as compared to the previous one, mainly affected by the inflationary context that impacts both on the prices of leases and supplies used (agrochemicals and seeds);
·  
a 17.6% increase in direct production costs during this fiscal year as compared to the previous one, mainly affected by the inflationary context that impacts both on the prices of leases and supplies used (agrochemicals and seeds);
 
·  higher production volumes in fiscal year 2015 as compared to fiscal year 2014; and
·  
higher production volumes in fiscal year 2015 as compared to fiscal year 2014;
 
·  a larger number of hectares in operation in our own farms in fiscal year 2015 as compared to fiscal year 2014.
·  
a larger number of hectares in operation in own farms in fiscal year 2015 as compared to fiscal year 2014.
 
Total cost ofdirect production costs per ton increased 3.0%decreased 0.3%, from Ps. 1,8631,904 per ton in fiscal year 2014 to Ps. 1,8081,899 per ton in fiscal year 2015, mainly as a result of higher yields and higher costs in fiscal year 2015 as compared to fiscal year 2014, exceeding the increase in costs.2014.
 
Cattle
 
Costs of the Cattle segment increased 39.8%, from Ps. 160.7161 million in fiscal year 2014 to Ps. 224.6225 million in fiscal year 2015. Costs from the Cattle segment are detailed in the following table:
 
 Fiscal year 2015  Fiscal year 2014 Fiscal year 2015Fiscal year 2014
 Thousands of Ps. In Millions of Ps.
Cost of sales  121,580   76,734 12277
Cost of production  102,976   83,926 10384
Total Costs  224,556   160,660 225161
 
The cost of sales increased by 58.4%, from Ps. 76.777 million in fiscal year 2014 to Ps. 121.6122 million in fiscal year 2015, mainly as a result of:
 
·  a 57.3% increase in the cost per kilogram sold in fiscal year 2015; and
·  
a 57.3% increase in the cost per kilogram sold in fiscal year 2015; and
 
·  a 0.7% increase in cattle sales volumes in fiscal year 2015.
·  
a 0.7% increase in beef sales volumes in fiscal year 2015.
 
The cost of production from the Cattle segment rose by 22.7%22.6%, from Ps. 83.984 million in fiscal year 2014 to Ps. 103.0103 million in fiscal year 2015. The higher cost of production from the Cattle segment in fiscal year 2015 was mainly attributable to:
 
·  an in increase of Ps. 13.5 million in feeding costs due to the rise in prices and higher feed costs due to the increase of animals in our own farms fattened in feedlots;
·  
higher payroll expenses;
 
·  an increase of Ps. 3.9 million in payroll expense.
·  
higher feeding costs due to the rise in prices and higher feed costs due to the increase of animals in our own farms fattened in feedlots.
 
Dairy
 
Costs of the Dairy segment increased 27.7%27.9%, from Ps. 104.3104 million in fiscal year 2014 to Ps. 133.3133 million in fiscal year 2015. Costs from the Dairy segment are detailed in the following table:
 
 Fiscal year 2015  Fiscal year 2014 Fiscal year     2015Fiscal year     2014
 Thousands of Ps. In Millions of Ps.
Cost of sales  68,359   51,686 6852
Cost of production  64,900   52,648 6552
Total Costs  133,259   104,334 133104
 
The cost of sales from the Dairy segment increased by 32.3%30.8%, from Ps. 51.752 million in fiscal year 2014 to Ps. 68.468 million in fiscal year  2015, mainly as a result of:
 
·  an increase of 32% and 119% in milk and milking cows price levels, respectively; and
·  
an increase of 32% and 119% in milk and milking cows price levels, respectively;
 
·  a 94.3% increase in the sales volume of milking cows, partially offset by
·  
a 94.3% increase in the sales volume of milking cows, offset by
 
·  a 9.9% reduction in milk sales volume.
·  
a 9.9% reduction in milk sales volume.

 
Cost of production of the Dairy segment increased 23%25.0%, from Ps. 52.652 million in fiscal year 2014 to Ps. 64.965 million in fiscal year 2015. This increase was mainly due to the impact of increased feeding, health and payroll costs.
 
116

Sugarcane
 
Costs of the Sugarcane segment increased 78.1%77.8%, from Ps. 206.8207 million in fiscal year 2014 to Ps. 368.2368 million in fiscal year 2015. Costs from the Sugarcane segment are detailed in the following table:
 
 Fiscal year 2015  Fiscal year 2014 Fiscal year     2015Fiscal year     2014
 Thousands of Ps. In Millions of Ps.
Cost of sales  188,432   105,618 188106
Cost of production  179,740   101,133 180101
Total Costs  368,172   206,751 368207
 
The cost of sales from the Sugarcane segment increased by 78.4%77.4%, from Ps. 105.6106 million in fiscal year 2014 to Ps. 188.4188 million in fiscal year  2015, mainly as a result of:
 
·  an increase of 248,808 tons of sugarcane sold in fiscal year 2015 compared to the previous fiscal year, mainly in our subsidiary Brasilagro; and
·  
an increase of 248,808 tons of sugarcane sold in fiscal year 2015 compared to the previous fiscal year, mainly in our subsidiary Brasilagro; and
 
·  an increase in the average cost per ton of sugarcane sold in fiscal year 2015, from Ps. 156 per ton in fiscal year 2014 to Ps. 204 per ton in fiscal year 2015.
·  
an increase in the average cost per ton of sugarcane sold in fiscal year 2015, from Ps. 156 per ton in fiscal year 2014 to Ps. 204 per ton in fiscal year 2015.
 
The cost of sales as a percentage of sales was 85.3% in fiscal year 2014 and 95.3%94.9% in fiscal year 2015.
 
The cost of production of the Sugarcane segment increased 77.7%78.2%, from Ps. 101.1101 million in fiscal year 2014 to Ps. 179.7180 million in fiscal year 2015, mainly as a result of a higher production volume in fiscal year 2015 compared to fiscal year 2014.
 
The total cost of production per ton increased 25.9%, from Ps. 154 per ton in fiscal year 2014 to Ps. 184194 per ton in fiscal year 2015.
 
Agricultural rentalRental and servicesServices
 
The cost of sales from the Agricultural rentalRental and servicesServices segment increased by 10.5%23.5%, from Ps. 17.417 million in fiscal year 2014 to Ps. 19.221 million in fiscal year  2015, mainly as a result of:
 
·  higher lease costs in Brasilagro, due to the amortization of new soil improvement works and structural expenses in the Preferencia, Chaparral, Jatobá and Araucaria lands;
·  
higher lease costs in Brasilagro, which rose by 28.8%, due to the amortization of new soil improvement works and structural expenses in the Preferencia, Chaparral, Jatobá and Araucaria farms;
 
·  lower costs from seed production services by 2.8%; and
·  
lower costs from seed production services by 2.8%; and
 
·  a 3.9% increase in irrigation service costs.
·  
a 3.9% increase in irrigation service costs.
 
Land transformationsTransformation and salesSales
 
Cost of sales from the Land transformationsTransformation and salesSales segment increased 9.4%12.5%, from Ps. 8.28 million in fiscal year 2014 to Ps. 9.09 million in fiscal year 2015. Such increase is mainly attributable to a reclassification due to discontinued activities at the feedlot land and, to a lesser extent, to increases in salary-related items in particular the share incentive plan.and fees.
 
Agro-industrial
 
Costs of the Agro-industrial segment increased 54.1%54.0%, from Ps. 479.7480 million in fiscal year 2014 to Ps. 739.2739 million in fiscal year 2015, due to an inflationary context that hindered the increase in the gross marginal contribution:contribution.
 
Other Segments
Others segments
 
The cost of sales of the Other segments decreased 3.4%segment increased 4.0%, from Ps. 100.3101 million in fiscal year 2014 to Ps. 96.8105 million in fiscal year 2015, mainly as a result of a 16% reduction12% increase in the costs from the brokerage business related to commodity trading transactions through our subsidiary FyO and lowerhigher costs generatedof consignment transactions (versus no such transactions in fiscal year 2014) offset by a reduction in the costs of resale of suppliesinputs and others by 8%.of 12% and 65%, respectively.

 
Urban Properties and Investments Business
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  
Common maintenance expenses
and collective promotion funds
  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
Shopping Center Properties  (1,103,042)  (3,983)  (3,860)  819,702   (291,183)
Offices  (110,443)  (5,248)  -   79,323   (36,368)
 (in million of Ps.)
Shopping Centers (1,103)(4)(4)820(291)
Offices and Others (110)(5)-79(36)
Sales and Developments  (13,936)  (5,521)  -       (19,457) (14)(5)--(19)
Hotels  (278,672)  -   -       (278,672) (279)---(279)
International  (9,379)  -   -   2,258   (7,121) (9)--2(7)
Financial operations and Others  (666)  -   -       (666)
Total Urban Properties and Investments Business Costs  (1,516,138)  (14,752)  (3,860)  901,283   (633,467)
Financial Operations and Others (1)---(1)
Total Urban Properties and Investments Business (1,516)(14)(4)901(633)
 
117

  Fiscal year ended June 30, 2014
Costs Statement of IncomeInterests in joint venturesInter-segment eliminationsMaintenance Fee and Common Advertising FundsSegment reporting
  (in million of Ps.)
Shopping Centers (955)(4)(5)667(297)
Offices and Others (111)(4)                           -70(45)
Sales and Developments (19)(16)--(35)
Hotels (217)---(217)
International (61)--                   7(54)
Financial Operations and Others (1)---(1)
Total Urban Properties and Investments Business (1,364)(24)(5)744(649)
 
  Fiscal year ended on June 30, 2014 
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  
Common maintenance expenses
and collective promotion funds
  Segment reporting 
Shopping Center Properties  (956,719)  (2,754)  (4,321)  667,106   (296,688)
Offices  (110,273)  (4,437)  (360)  69,703   (45,367)
Sales and Developments  (18,971)  (15,992)          (34,963)
Hotels  (216,768)              (216,768)
International  (60,404)          6,894   (53,510)
Financial operations and Others  (983)              (983)
Total Urban Properties and Investments Business Costs  (1,364,118)  (23,183)  (4,681)  743,703   (648,279)

Cost of sales from our Urban Properties and Investments business increased 11.1%, from Ps. 1,364.11,364 million in fiscal year 2014 to Ps. 1,516.11,516 million in fiscal year 2015. This was mainly due to an increase of Ps. 61.962 million in the HotelHotels segment, slightly offset by a decrease of Ps. 9.09 million in the Offices and Others segment, a decrease of 5.56 million in the Shopping Center PropertiesCenters segment, a decrease of Ps. 15.516 million in the Sales and Developments segment, a decrease of Ps. 0.3 million in the Financial Operations and Others segment, and a decrease of Ps. 46.447 million in the International segment.
 
On the other hand, expensesmaintenance fees and collective promotion fundsCommon Advertising Funds costs increased 21.2%21.1%, from Ps. 743.7744 million in fiscal year 2014 to Ps. 901.3901 million in fiscal year 2015, mainly due to expensesmaintenance fees and collective promotion fundsCommon Advertising Funds expenses from Shopping Center Properties,Centers, which increased by 22.9%, from Ps. 667.1667 million in fiscal year 2014 to Ps. 819.7820 in fiscal year 2015, as a result of: (i) an increase of Ps. 59.860 million in maintenance, security, cleaning, repair and similar expenses (mainly attributable to increases in security and cleaning services and utility rates), (ii) an increase of Ps. 27.928 million in advertising expenses, (iii) an increase of Ps. 30.130 million in salaries and wages, social security contributions and other payroll expenses; (iv) an increase of Ps. 20.821 million in taxes, rates and contributions and other expenses, and (v) an increase of Ps. 14.014 million in other items (mostly as a result of travel and office supplies expenses).
 
In addition, costs from our joint ventures experienced a net decrease of 36.6%41.7%, from Ps. 23.224 million in fiscal year 2014 to Ps. 14.714 million in fiscal year 2015, mainly as a result of lower costs resulting from reduced sales of the Horizons development.
 
Finally, costs from inter-segment operations decreased by 17.0%20.0%, from Ps. 4.75 million in fiscal year 2014 to Ps. 3.94 million in fiscal year 2015, mainly as a result of a change in the cost allocation of our Shopping Center Properties.Centers.
 
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, costs decreased by 2.3%2.5%, from Ps. 648.3649 million in fiscal year 2014 to Ps. 633.5633 million in fiscal year 2015.
 
Shopping Center PropertiesCenters
 
Costs from the Shopping Center PropertiesCenters segment decreased by 1.9%2.0%, from Ps. 296.7297 million in fiscal year 2014 to Ps. 291.2291 million in fiscal year 2015. This reduction is mainly attributable to:
 
·  a reduction of Ps. 35.9 million in costs from a deficit in expenses and collective promotion funds from our Shopping Centers Properties; and
·  
a reduction of Ps. 36 million in costs from a deficit in maintenance fees and  Common Advertising Funds from our Shopping Centers; and
 
·  a decrease of Ps. 4.2 million in our depreciation and amortization expense;
·  
 a decrease of Ps. 4 million in our depreciation and amortization expense;
 
·  partially offset by increased costs resulting from: an increase of Ps. 12.9 million in maintenance, security, cleaning, repair and similar expenses (mainly attributable to increases in security and cleaning services and utility rates); an increase of Ps. 10.0 million in salaries and wages, social security contributions and other payroll expenses; an increase of Ps. 8.7 million in taxes, rates and contributions and other expenses (mostly attributable to an increase in provincial property taxes and municipal utility rates, among other things), and an increase of Ps. 5.6 million in fees and compensation from services.
·  
partially offset by increased costs resulting from: an increase of Ps. 13 million in maintenance, security, cleaning, repair and similar expenses (mainly attributable to increases in security and cleaning services and utility rates); an increase of Ps. 10 million in salaries and wages, social security contributions and other payroll expenses; an increase of Ps. 9 million in taxes, rates and contributions and other expenses (mostly attributable to an increase in provincial property taxes and municipal utility rates, among other things), and an increase of Ps. 5 million in fees and compensation from services.
 
Costs from the Shopping Center PropertiesCenters segment, as a percentage of revenues derived from this segment, decreased from 21.5% in fiscal year 2014 to 16.4% in fiscal year 2015.
 
Offices and Others
 
Costs from the Offices and Others segment decreased by 19.8%20.0%, from Ps. 45.445 million in fiscal year 2014 to Ps. 36.436 million in fiscal year 2015. Such decrease was attributable to the partial sales of investment property for rental completed in fiscal year 2015.
 
Costs attributable to non-comparable properties decreased by 44.3%, from Ps. 5.55 million to Ps. 3.03 million, mainly as a result of the above mentioned sales.
 
In the absence of partial sales, costs - considering comparable properties in both fiscal years - decreased by 19.3%, from Ps. 36.637 million to Ps. 30.430 million, mainly as a result of a lower amortization and depreciation expense.
 

Costs from the Offices and Others segment, as a percentage of segment revenues, derived from this segment, decreased from 16.7%16.6% in fiscal year 2014 to 10.9%10.8% in fiscal year 2015.
 
Sales and Developments
 
Costs attributable to this segment often vary significantly period over period, given that the several sales completed by the Companyus over the time are not recurring. Without considering our joint ventures, costs from our Sales and Developments segment decreased by 22.3%26.3% from Ps. 17.519 million in fiscal year 2014 to Ps. 13.614 million in fiscal year 2015. Such reduction was mainly attributable to lower costs from the sale of units of Condominios I and II (Ps. 6.87 million), partially offset by higher costs from maintenance of land reserves and real property for sale (Ps. 4.75 million).
 
On the other hand, costsCosts from our joint ventures (Horizons) went down by 78.1%68.8%, accounting for a decrease of Ps. 11.011 million. Hence, total costs from this segment fell by 44.3%45.7%, from Ps. 35.035 million in fiscal year 2014 to Ps. 19.519 million in fiscal year 2015.
 
Costs from the Sales and Developments segment, as a percentage of revenues derived from this segment, increased by 40.9%40.7% in fiscal year 2014 to 141.9%135.7% in fiscal year 2015.
 

118


Hotels
 Hotels
 
Costs from the Hotels segment increased by 28.6%, from Ps. 216.8217 million in fiscal year 2014 to Ps. 278.7279 million in fiscal year 2015, mainly as a result of:
 
·  an increase of Ps. 41.1 million in salaries and wages, social security contributions and other payroll expenses;
·  
an increase of Ps. 41 million in salaries and wages, social security contributions and other payroll expenses;
 
·  an increase of Ps. 11.1 million in the cost of food, beverages and other hotel-related expenses; and
·  
an increase of Ps. 11 million in the cost of food, beverages and other hotel-related expenses; and
 
·  an increase of Ps. 7.7 million in maintenance and repair expenses, among other items.
·  
an increase of Ps. 8 million in maintenance and repair expenses, among other items.
 
Costs from the Hotels segment, as a percentage of revenues derived from this segment, increased from 65.4% in fiscal year 2014 to 70.3%70.5% in fiscal year 2015.
 
International
 
Costs from the International segment decreased by 86.7%87.0%, from Ps. 53.554 million in fiscal year 2014 to Ps. 7.17 million in fiscal year 2015 mostly due to the fact that the results of Rigby 183 LLC – owner of the rental building Madison 183 building - were consolidated for only 3 months in fiscal year 2015 whereas such results were consolidated for 12 months in fiscal year 2014. This building was sold in September 2014. In addition, the three-month period in fiscal year 2015 does not include amortization and depreciation since the property had been classified as available for sale as of June 30, 2014.
 
Costs from the International segment, as a percentage of revenues derived from this segment, decreased from 63.8%64.3% in fiscal year 2014 to 27.5%26.9% in fiscal year 2015.
 
Financial Operations and Others
 
Costs from the Financial Operations  and OthersOther segment decreased by 32.2% fromremained stable at Ps. 1.01 million induring fiscal yearyears 2014 to Ps. 0.7 million in fiscal year 2015, as a result of lower costsand 2015.
Costs from the Company’s personal financing residual activity. AsFinancial Operations and Other segment, as a percentage of revenues derived from this segment, it increased from 171.3% in fiscal year 2014 to 453.1% in fiscal year 2015.do not reflect any significant percentage amounts.
 
Initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest.harvest
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  897,498   20,821   -   918,319                           897                              21-                       918
Cattle  164,260   2,474   -   166,734                           165                                2-                       167
Dairy  74,919   -   -   74,919                             75-                         75
Sugarcane  187,475   -   -   187,475                           187-                       187
Agricultural rental and services  -   -   -   - 
Agricultural Subtotal  1,324,152   23,295   -   1,347,447 
Land transformations and sales  -   -   -   - 
Subtotal Agricultural Production                       1,324                              23                          -                    1,347
Land Transformation and Sales                             - -                          -
Agro-industrial  -   -   -   -                              --                          -
Other Segments  -   -   -   - 
Others segments                             -                               --                          -
Agricultural rental and Services                             --                          -
Subtotal Others                             -                               -                          -                          -
Total Agricultural Business  1,324,152   23,295   -   1,347,447                        1,324                              23                          -                    1,347

  Fiscal year ended on June 30, 2014 
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  848,578   19,773   -   868,351 
Cattle  145,008   313   -   145,321 
Dairy  62,840   -   -   62,840 
Sugarcane  96,227   -   -   96,227 
Agricultural rental and services  -   -   -   - 
Agricultural Subtotal  1,152,653   20,086   -   1,172,739 
Land transformations and sales  -   -   -   - 
Agro-industrial  -   -   -   - 
Other Segments  -   -   -   - 
Total Agricultural Business  1,152,653   20,086   -   1,172,739 

 
The Company’s
  Fiscal year ended June 30, 2014
Initial recognition and changes in the fair value of biological assets and agricultural products at the point of harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops                          848                              20                          -                       868
Cattle                          145                               --                       145
Dairy                            63--                         63
Sugarcane                            96-                          -                         96
Subtotal Agricultural Production                       1,152                              20                          -                    1,172
Land Transformation and Sales                             - - -                          -
Agro-industrial                             ---                          -
Others segments                             -                               --                          -
Agricultural rental and Services                             ---                          -
Subtotal Others                             -                               -                          -                          -
Total Agricultural Business                       1,152                              20                          -                    1,172
Our revenues from initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest increased 14.9%, from Ps. 1,152.71,152 million in fiscal year 2014 to Ps. 1,324.21,324 million in fiscal year 2015.
 
In turn, the Company’sour revenues from initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest derived from our interests in joint ventures increased 16.0%15.0%, from Ps. 20.120 million in fiscal year 2014 to Ps. 23.323 million in fiscal year 2015.
 
On the other hand, there were no inter-segment eliminations in connection with revenues from initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest.

119

 
Hence, according to business segment reporting and considering all our joint ventures, revenues from initial recognition and changes in the fair value of biological assets and agricultural produceproducts at the point of harvest increased by 14.9%, from Ps. 1,172.71,172 million in fiscal year 2014 to Ps. 1,347.41,347 million in fiscal year 2015.
 
Crops
 
Production income from the Crops segment increased by 5.8%, from Ps. 868.4868 million in fiscal year 2014 to Ps. 918.3918 million in fiscal year  2015, mainly as a result of:
 
·  a 17.8% increase in the total production volume from 351,759 tons in fiscal year 2014 to 414,331 tons in fiscal year 2015;
·  
a 17.9% increase in the total production volume from 344,165 tons in fiscal year 2014 to 405,882 tons in fiscal year 2015;
 
·  partially offset by a 3.3% decrease in crops production average price; and
·  
a 3.3% decrease in grain production average price; and
 
·  a 68.5% decrease in expected revenues.
·  
partially offset by a 71.1% decrease in expected revenues.
 
As of June 30, 2015 the harvested area was 98.3%100% of our total sown area, compared to 95.7%98.9% as of June 30, 2014.
 
The following table shows the number of tons produced and total production income as of June 30, 2015 and 2014:
 
  Crops Production Income (in tons and thousands of Ps.) 
  Fiscal year ended on June 30, 
  2015  2014 
  Tons  Ps.  Tons  Ps. 
Corn  100,543   83,565   86,300   79,475 
Soybean  279,356   625,511   241,205   563,639 
Wheat  16,211   12,688   12,373   11,929 
Sorghum  1,202   694   4,058   1,468 
Sunflower  11,720   26,967   5,883   15,657 
Other  5,300   20,420   1,940   3,390 
Total  414,331   769,846   351,759   675,559 

Crops Production Income (in tons and millions of Ps.)
 Fiscal year ended June 30
 20152014
 TonsPs.TonsPs.
Corn      92,09384     79,23979
Soybean   279,356625   241,205564
Wheat      16,21113      12,37312
Sorghum        1,2021        4,0581
Sunflower      11,72027        5,88416
Other        5,30020        1,4063
Total     405,882770344,165675
Estimated results from the valuation of our crops in progress at fair value decreased 68.5%71.2%, from Ps. 168.0170 million in fiscal year 2014 to Ps. 52.949 million in fiscal year 2015, mainly due to a reduction of 65.4%68.4% in corn crops.

 
Cattle
 
Production income from the Cattle segment increased by 14.7%15.2%, from Ps. 145.3145 million in fiscal year 2014 to Ps. 166.7167 million in fiscal year  2015, mainly as a result of:
 
·  a 51.8% increase in the average price per kilogram produced, from Ps. 9.7 per kilogram in fiscal year 2014 to Ps. 14.8 per kilogram in fiscal year 2015; and
·  
a 51.8% increase in the average price per kilogram produced, from Ps. 9.7 per kilogram in fiscal year 2014 to Ps. 14.8 per kilogram in fiscal year 2015;
 
·  a 12.1% increase in cattle production volume from 6,948 tons in fiscal year 2014 to 7,905 tons in fiscal year 2015;
·  
a 13.8% increase in cattle production volume from 6,948 tons in fiscal year 2014 to 7,905 tons in fiscal year 2015;
 
·  offset by a 36% reduction in holding gains.
·  
offset by a 36.5% reduction in holding gains.
 
The calving rate decreased slightly (3.6%)3.6%, whereas the death rate decreased by 27.2% during fiscal year 2015 as compared to fiscal year 2014. This variation in the death rates of calves was mainly due to a 73.7% reduction in sheep deaths, partially offset by 21.6% increase in death of beef cattle.
 
The number of hectares devoted to cattleCattle production decreased from 95,16095,745 hectares in fiscal year 2014 to 88,643 hectares in fiscal year 2015 due to a smaller number of leased land devoted to cattleCattle production.
 
Dairy
 
Production income from the Dairy segment increased by 19.2%19.0%, from Ps. 62.863 million in fiscal year 2014 to Ps. 74.975 million in fiscal year 2015, mainly as a result of:
 
·  the result from holding of milking cows, which increased 3.0%, from a gain of Ps. 8.6 million in fiscal year 2014 to a gain of Ps. 8.9 million in fiscal year 2015, as the inflationary context led to a significant rise in prices;
·  
the result from holding of milking cows, which increased 3.0%, from a gain of Ps. 8.6 million in fiscal year 2014 to a gain of Ps. 8.9 million in fiscal year 2015, as the inflationary context led to a significant rise in prices;
 
·  a 31.9% increase in the average price of milk, from Ps. 2.59 per liter in fiscal year 2014 to Ps. 3.42 per liter in fiscal year 2015; and
·  
a 31.9% increase in the average price of milk, from Ps. 2.59 per liter in fiscal year 2014 to Ps. 3.42 per liter in fiscal year 2015; and
 
·  an increase of 7.1% in milk production volumes and a 41.6% increase in the average price, partially offset by
·  
an increase of 7.1% in milk production volumes and a 41.6% increase in the average price, offset by
 
·  a 9.3% decrease in the milk production volume, from 19.3 million of liters in fiscal year 2014 to 17.5 million of liters in fiscal year 2015. This reduction in production volume was mainly due to a lower average number of milking cows per day, from 2,439 in fiscal year 2014 to 2,189 in fiscal year 2015, partially offset by a 9.1% increase in the efficiency level of average daily milk production per cow, from 19.7 liters in fiscal year 2014 to 21.5 liters in fiscal year 2015.
·  
a 9.3% decrease in the milk production volume, from 19.3 million of liters in fiscal year 2014 to 17.5 million of liters in fiscal year 2015. This reduction in production volume was mainly due to a lower average number of milking cows per day, from 2,439 in fiscal year 2014 to 2,189 in fiscal year 2015, partially offset by a 9.1% increase in the efficiency level of average daily milk production per cow, from 19.7 liters in fiscal year 2014 to 21.5 liters in fiscal year 2015.
 
Sugarcane
 
Production income from the Sugarcane segment increased by 94.8%, from Ps. 96.296 million in fiscal year 2014 to Ps. 187.5187 million in fiscal year  2015, mainly as a result of:
 
·  a 41.2% increase in total production volume from 657,547 tons in fiscal year 2014 to 928,273 tons in fiscal year 2015; and
·  
a 41.2% increase in total production volume from 657,547 tons in fiscal year 2014 to 928,273 tons in fiscal year 2015; and
 
·  an 8.0%
·  
a 23.1% increase in the average production price of sugarcane.

120

 
The 41.2% increase in the production volume from the Sugarcane segment was attributable to a 12.3% increase in our average yield from 81.2 ton/ha to 91.2 ton/ha mainly due to higher harvested hectares in fiscal year 2015.ha.
 
The following table shows the actual tons produced and income as of June 30, 2015 and 2014:
 
  Sugarcane Production Income (in tons and thousands of Ps.) 
  Fiscal year ended on June 30, 
  2015  2014 
  Tons  Ps.  Tons  Ps. 
Sugarcane  928,273   178,802   657,547   117,250 
Sugarcane Production Income (in tons and millions of Ps.)
 
 Fiscal year ended June 30
 20152014
 TonsPs.TonsPs.
Sugarcane928,273185657,547106
Estimated results from the valuation of our sugarcane crops in progress at fair value
 
Estimated results from the valuation of our sugarcane crops in progress at fair value increased significantly from a loss of 10.310 million in fiscal year 2014 to a gain of Ps. 8.72 million in fiscal year 2015 mainly generated by Brasilagro. This variation originated mainly in Brazil, and was caused by the following factors:
 
·  an increase in the number of estimated hectares from a year-on-year decrease of 13% in fiscal year 2014 to a year-on-year increase of 25% in fiscal year 2015;
·  
the number of estimated hectares went up from a year-on-year decrease of 13.0% in fiscal year 2014 to a year-on-year increase of 33.4% in fiscal year 2015;
 
·  an increase in the estimated yields from a from a year-on-year decrease of 2% in fiscal year 2014 to a year-on-year increase of 2% in fiscal year 2015; and
·  
the estimated yields went up from a from a year-on-year decrease of 2.0% in fiscal year 2014 to a year-on-year increase of 2.4% in fiscal year 2015; and
 
·  a decrease in the estimated unit costs from a year-on-year increase of 15% in fiscal year 2014 to a year-on-year increase of 9% in fiscal year 2015.
·  
the estimated unit costs went down from a year-on-year increase of 15.0% in fiscal year 2014 to a year-on-year increase of 10.0% in fiscal year 2015.

 
Changes in the net realizable value of agricultural produceproducts after harvest
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Changes in the net realizable value of agricultural produce after harvest Income statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Changes in the net realizable value of agricultural products after harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (34,474)  -   -   (34,474) (34)-(34)
Cattle  3   -   -   3  ---
Dairy  -   -   -   -  ---
Sugarcane  -   -   -   -  ---
Agricultural rental and services  -   -   -   - 
Agricultural Subtotal  (34,471)  -   -   (34,471)
Land transformations and sales  -   -   -   - 
Subtotal Agricultural Production                          (34)                          -                         (34)
Land Transformation and Sales 
Agro-industrial  -   -   -   -  ---
Other Segments  -   -   -   - 
Others segments ---
Agricultural rental and Services ---
Subtotal Others                           -                          -                          -
Total Agricultural Business  (34,471)  -   -   (34,471)                          (34)                          -                         (34)

 Fiscal year ended on June 30, 2014  Fiscal year ended June 30, 2014
Changes in the net realizable value of agricultural produce after harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Changes in the net realizable value of agricultural products after harvest Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (17,624)  -   -   (17,624) (17)-(17)
Cattle  177   -   -   177  ---
Dairy  -   -   -   -  ---
Sugarcane  -   -   -   -  ---
Agricultural rental and services  -   -   -   - 
Agricultural Subtotal  (17,447)  -   -   (17,447)
Land transformations and sales  -   -   -   - 
Subtotal Agricultural Production                          (17)                          -                         (17)
Land Transformation and Sales 
Agro-industrial  -   -   -   -  ---
Other Segments  -   -   -   - 
Others segments ---
Agricultural rental and Services ---
Subtotal Others                           -                          -                          -
Total Agricultural Business  (17,447)  -   -   (17,447)                          (17)                          -                         (17)
Income from changes in the net realizable value of agricultural produceproducts after harvest decreased significantly, from a loss of Ps. 17.417 million in fiscal year 2014 to a loss of Ps. 34.434 million in fiscal year 2015.  This was caused mainly by a reduction of Ps. 16.817 million in the Crops segment (mainly due to the first quarter’s 21% reduction in the net realizable value of corn in Argentina) and, to a lesser extent, by a Ps. 0.2 million increase in the Cattle segment..
 
No interest in joint ventures or inter-segment elimination was recorded in income from changes in the net realizable value of agricultural produceproducts after harvest.
 
GROSS PROFIT
Gross Profit
 
As a result of the above mentioned factors, the Company’sour gross profit increased 18.6%18.5%, from Ps. 1,857.01,859 million in fiscal year 2014 to Ps. 2,201.92,203 million in fiscal year 2015. This was caused mainly by:
 
·  a 17.5% decrease in the Agricultural Business, from Ps. 349.4 million income in fiscal year 2014 to Ps. 288.3 million income in fiscal year 2015; and
·  
a 17.7% decrease in the Agricultural Business, from Ps. 351 million income in fiscal year 2014 to Ps. 289 million income in fiscal year 2015; and
 
·  a 26.9% increase in the Urban Properties and Investments business, from a Ps. 1,507.5 million income in fiscal year 2014 to a Ps. 1,913.6 million income in fiscal year 2015.
·  
a 26.9% increase in the Urban Properties and Investments business, from a Ps. 1,508 million income in fiscal year 2014 to a Ps. 1,914 million income in fiscal year 2015.
 

121



Agricultural Business
 
As a result of the above mentioned factors, gross profit decreased 17.5%17.7%, from Ps. 349.4351 million in fiscal year 2014 to Ps. 288.3289 million in fiscal year 2015.
 
Crops
 
Gross profit from this segment decreased by 48.9%65.1%, from Ps. 146.9149 million in fiscal year 2014 to Ps. 75.152 million in fiscal year 2015.
 
Cattle
 
Gross profit from this segment increased by 14.1%14.9%, from Ps. 75.274 million in fiscal year 2014 to Ps. 85.785 million in fiscal year 2015.

 
Dairy
 
Gross profit from this segment increased by 9.3%7.7%, from Ps. 12.413 million in fiscal year 2014 to Ps. 13.614 million in fiscal year 2015.
 
Sugarcane
 
Gross profit from this segment increased by 28.5%30.8%, from Ps. 13.313 million in fiscal year 2014 to Ps. 17.117 million in fiscal year 2015.
 
Agricultural rentalRental and servicesServices
 
Gross profit from this segment increased by 52.7%233.3%, from Ps. 11.812 million in fiscal year 2014 to Ps. 18.040 million in fiscal year 2015.
 
Land transformationsTransformation and salesSales
 
Gross loss from this segment increased by 9.4%12.5%, from Ps. 8.28 million in fiscal year 2014 to Ps. 9.09 million in fiscal year 2015.
 
Agro-industrial
 
Gross profit from this segment decreased by 10.2%9.5%, from Ps. 74.474 million in fiscal year 2014 to Ps. 66.867 million in fiscal year 2015.
 
Other Segments
 
Gross profit from this segment decreased by 11.7%4.2%, from Ps. 23.724 million in fiscal year 2014 to Ps. 20.923 million in fiscal year 2015.
 
Urban Properties and Investments Business
 
Gross profit from the Urban Properties and Investments business increased 26.9% from Ps. 1,507.51,508 million in fiscal year 2014 to Ps. 1,913.61,914 million in fiscal year 2015. This was mainly due to an increase of Ps. 400.8401 million in the Shopping Center PropertiesCenters segment; an increase of Ps. 70.671 million in the Offices and Others segment; an increase of Ps. 2.82 million in the Hotels segment, partially offset by a reduction of Ps. 56.356 million in the Sales and Developments segment, a reduction of Ps. 11.711 million in the International segment and a reduction of Ps. 0.11 million in the Financial Operations and Others segment.
 
Shopping Center PropertiesCenters
 
Gross profit from the Shopping Center PropertiesCenters segment increased by 36.9%, from Ps. 1,086.31,086 million in fiscal year 2014 to Ps. 1,487.11,487 million in fiscal year 2015.
 
Offices and Others
 
Gross profit from the Offices and Others segment increased by 31.3%31.4%, from Ps. 225.8226 million in fiscal year 2014 to Ps. 296.4297 million in fiscal year 2015.
 
Sales and Developments
 
Gross profit from the Sales and Developments segment fell by 111.4%109.8% from a gain of Ps. 50.651 million in fiscal year 2014 to a loss of Ps. 5.75 million in fiscal year 2015.
 
Hotels
 
Gross profit from the Hotels segment increased by 2.5%1.7%, from Ps. 114.8115 million in fiscal year 2014 to Ps. 117.6117 million in fiscal year 2015.
 
International
 
Gross profit from the International segment decreased by 38.3%36.7%, from Ps. 30.430 million in fiscal year 2014 to Ps. 18.819 million in fiscal year 2015.
 
Financial operationsOperations and Others
 
Gross loss from the Financial operationsOperations and Others segment increased by Ps. 0.1 million, from a loss of Ps. 0.4 million in fiscal year 2014 to a loss of Ps. 0.51 million in fiscal year 2015.
 
Income
Gain from saledisposal of investment properties
 
IncomeGain from saledisposal of investment properties derived from the Urban PropertiesSales and Investments businessDevelopments segment increased 398.1%397.8%, from a Ps. 230.9231 million income in fiscal year 2014 to a Ps. 1,150.21,150 million income in fiscal year 2015, mainly as a result of the sale of functional units at:at Maipu 1300, Intercontinental Plaza, (Ps. 338.4 million), Madison Ave. office building (Ps. 296.5 million), an increase in sales of Bouchard 551 (Ps. 308.4 million) and Maipú 1300 (Ps. 25.3 million); partially offset by reduced sales from: Av. de Mayo 595 (Ps. 19.2 million), Constitución 1159 (Ps. 13.4 million) and Costeros Dique IV (Ps. 10.6 million), among other transactions.the sale of the 183 Madison building.
 
Gain from disposal of farmlands
 
Gain from disposal of farmlands derived from the Land transformationsTransformation and salesSales segment increased 523.4%526.4%, from Ps. 91.491 million income in fiscal year 2014 to Ps. 569.5570 million income in fiscal year 2015, mainly as a result of:
 

 
122


During fiscal year 2015
·  
On April 3, 2014, Cresca S.A. executed a deed of sale for an area of 24,624 hectares located in Chaco Paraguayo. The total price was U$SUS$ 14.7 million payable as follows: U$SUS$ 1.8 million was cashed upon the execution of the deed of sale; U$SUS$ 4.3 million at the time of the title conveyance; U$SUS$ 3.7 million on July 2015 interest-free; and U$SUS$ 4.9 million on July 2016 interest-free. Possession was surrendered upon the execution of the title deed and upon the creation of a mortgage as guarantee of the remaining balance on July 14, 2014. The CompanyWe recorded a gain of Ps. 19.1 million as a result of this transaction.
·  
On June 10, 2015, Brasilagro sold the remaining area of 27,74427,745 hectares of the Cremaq farm located in the municipal district of Baixa Grande do Ribeiro (Piaui). The transaction price was RS.Rs. 270 million (equivalent to Ps. 694694.0 million), out of which RSRs. 67.5 million was cashed (equivalent to Ps. 196.8 million), with the balance being payable in an estimated term of 90 days. The CompanyWe recorded a gain of Ps. 525.9 million as a result of this transaction.
·  
On October 17, 2013, Yuchán Agropecuaria executed an agreement providing for the sale, subject to retention of title, of an 1,643 hectare property in the “La Fon Fon II” farm for a total price of U$SUS$ 7.21 million (equivalent to Ps. 59.0 million). As of the date of issuance of these financial statements, the amount of US$ 1.5 million was cashed, with the remaining balance of US$ 5.71 million being payable in six semi-annual installments beginning in December this year and ending in June 2018. The agreement provides that title conveyance will be registered once the full price has been paid. On June 24, 2015, Yuchán Agropecuarria surrendered the possession of the property. The CompanyWe recorded a gain of US$ 2.7 million (equivalent to Ps. 24.6 million) as a result of this transaction in this fiscal year.
 
During fiscal year 2014
·  
On June 27, 2014, Brasilagro sold a fraction of 1,164 hectares in the “Araucaria” farm located in the municipal district of Mineiros, State of Goias, Brazil, that had been purchased in 2007. After the sale, the farm has a total area of 8,178 hectares, out of which approximately 5,982 hectares are arable land. The sale price was RS.Rs. 32.5 million (equivalent to Ps. 117.5 million). In July 2014, the buyer made an initial payment of RS.Rs. 4.5 million, and the remaining balance is payable in five installments, the first of which, for RS.Rs. 4.5 million, matures in November 2014 and the last one at the time of execution of the title deed, in August 2018. The CompanyWe recorded a gain of RS.Rs. 21.0 million (equivalent to Ps. 75.8 million) fromfor the sale of the Araucaria farm.
·  
On May 27, 2014, Ombú Agropecuaria Argentina S.A. executed an agreement providing for the sale, subject to retention of title, of an 882.96 hectare property in the “San Cayetano I” farm for a total price of US$ 4.2 million. Out of this amount, the sum of US$ 1 million has been already collected and the balance is payable in 5 consecutive semi-annual installments, the last of which falls due in November 2016. The agreement provides that title conveyance will be registered once the full price has been paid. Possession was surrendered on the date of execution of the agreement. The CompanyWe recorded a gain of US$ 1.8 million for this sale.
GENERAL AND ADMINISTRATIVE EXPENSES
 
Total
General and Administrative Expenses
Our total general and administrative expenses of the Company increased 15.7%15.5%, from Ps. 539.7541 million for fiscal year 2014 to Ps. 624.6625 million for fiscal year 2015. This was mainly due to an increase of Ps. 6.86 million in the Agricultural business and an increase of Ps. 78.178 million in the Urban Properties and Investments business.
 
Agricultural Business
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (155,733)  (3,303)  -   (159,036) (156)(3)-(159)
Cattle  (25,925)  172   -   (25,753) (26)-(26)
Dairy  (4,920)  -   -   (4,920) (5)-(5)
Sugarcane  (19,821)  -   -   (19,821) (20)-(20)
Agricultural rental and services  (2,140)  -   -   (2,140)
Agricultural Subtotal  (208,539)  (3,131)  -   (211,670)
Land transformations and sales  (2,106)  -   -   (2,106)
Subtotal Agricultural Production (207)(3)                        -(210)
Land Transformation and Sales (2) -(2)
Agro-industrial  (25,334)  -   -   (25,334) (25)-(25)
Other Segments  (7,360)  -   -   (7,360)
Total Agricultural Business General and Administrative Expenses   (243,339     (3,131   -    (246,470
Others segments (8)-(8)
Agricultural rental and Services (2)-(2)
Subtotal Others (35)-                        -(35)
Total Agricultural Business (244)(3)                        -(247)
 
  Fiscal year ended June 30, 2014
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (146)(1)                        -(147)
Cattle (26)(1)                        -(27)
Dairy (6)                         -                        -(6)
Sugarcane (28)                         -                        -(28)
Subtotal Agricultural Production (206)(2)                        -(208)
Land Transformation and Sales (1)                         -                        -(1)
Agro-industrial (17)                         -                        -(17)
Others segments (9)(2)                        -(11)
Agricultural rental and Services (4)                         -                        -(4)
Subtotal Others (30)(2)                        -(32)
Total Agricultural Business (237)(4)                        -(241)

  Fiscal year ended on June 30, 2014 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (146,512)  (681)  -   (147,193)
Cattle  (27,118)  (65)  -   (27,183)
Dairy  (5,746)  -   -   (5,746)
Sugarcane  (28,261)  -   -   (28,261)
Agricultural rental and services  (2,603)  (66)  -   (2,669)
Agricultural Subtotal  (210,240)  (812)  -   (211,052)
Land transformations and sales  (1,130)  -   -   (1,130)
Agro-industrial  (16,880)  -   -   (16,880)
Other Segments  (8,761)  (1,807)  -   (10,568)
Total Agricultural Business General and Administrative Expenses  (237,011)  (2,619)  -   (239,630)


123

 
General and administrative expenses from our Agricultural business increased 2.7%.1.7%, from Ps. 237.0237 million in fiscal year 2014 to Ps. 243.3244 million in fiscal year 2015. This was mainly due to an increase of Ps. 11.810 million in the Crops segment, an increase of Ps. 1.01 million in the Land transformationsTransformation and salesSales segment, and an increase of Ps. 8.58 million in the Agro-industrial segment, slightly offset by a reduction of Ps. 1.41 million in the Cattle segment, a reduction of Ps. 0.81 million in the Dairy segment, a reduction of Ps. 8.48 million in the Sugarcane segment, a reduction of Ps. 0.52 million in the Agricultural rentalRental and servicesServices segment, and a reduction of Ps. 3.21 million in the Other segments.segment. The main causes of this variation were:
 
·  the changes in Doneldon’s administrative expenses from Bolivia since a severance payment was accrued for (HF) and bonus allowances started to be set up (US); bonuses for fiscal year 2014 were paid for (which had not been accrued for because of a subsequent change in the Company’s policy) and bonuses for fiscal year 2015 were accrued for in fiscal year 2015;
·  
the changes in Doneldon’s administrative expenses from Bolivia since a severance payment was accrued for (HF) and bonus allowances started to be set up (US); bonuses for fiscal year 2014 were paid for (which had not been accrued for because of a subsequent change in the Company’s policy) and bonuses for fiscal year 2015 were accrued for in fiscal year 2015;
 
·  an increase in Carnes Pampeanas S.A.’s headcount to support the increase in operation volume and overtime; and
·  
an increase in Carnes Pampeanas S.A.’s headcount to support the increase in operation volume and overtime; and
 
·  a 26% increase in expenses as a result of the effects of inflation.
·  
a 26% rise in expenses as a result of the inflationary context.
 
In turn, general and administrative expenses from our joint ventures increaseddecreased by 19.5%,Ps. 1 million, from Ps. 2.64 million in fiscal year 20142015 to Ps. 3.13 million in fiscal year 2015.2016.
 
On the other hand, no general and administrative expenses arose from inter-segment eliminations.
 
Hence, according to business segment reporting and considering all our joint ventures, general and administrative expenses increased by 2.9%3.0%, from Ps. 239.6241 million in fiscal year 2014 to Ps. 246.5247 million in fiscal year 2015.

 
Urban Properties and Investments Business
   Fiscal year ended June 30, 2015
General and Administrative Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Shopping Centers (135)                         -                        -(135)
Offices and Others (58)                         -(1)(59)
Sales and Developments (48)(1)(1)(50)
Hotels (77)-(1)(78)
International (56)-                        -(56)
Financial Operations and Others                   --                        -                    -
Total Urban Properties and Investments Business (374)(1)(3)(378)
 Fiscal year ended on June 30, 2015   Fiscal year ended June 30, 2014
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
Shopping Center Properties  (135,512)  (233)  (406)  (136,151)
Offices  (58,202)  (279)  (490)  (58,971)
 (in million of Ps.)
Shopping Centers (101)                         -(1)(102)
Offices and Others (42)                         -                        -(42)
Sales and Developments  (48,750)  (530)  (410)  (49,690) (36)(1)                        -(37)
Hotels  (76,271)  -   (1,296)  (77,567) (59)-(1)(60)
International  (55,746)  -   -   (55,746) (59)-                        -(59)
Financial operations and Others  -   -   -   - 
Total Urban Properties and Investments Business General and Administrative Expenses  (374,481)  (1,042)  (2,602)  (378,125)
Financial Operations and Others                   --                        -                    -
Total Urban Properties and Investments Business (297)(1)(2)(300)
  Fiscal year ended on June 30, 2014 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (100,710)  (148)  (680)  (101,538)
Offices  (41,169)  (145)  (631)  (41,945)
Sales and Developments  (36,955)  (511)  -   (37,466)
Hotels  (58,562)  -   (1,023)  (59,585)
International  (59,476)  -   -   (59,476)
Financial operations and Others  (56)  -   -   (56)
Total Urban Properties and Investments Business General and Administrative Expenses  (296,928)  (804)  (2,334)  (300,066)

General and administrative expenses from our Urban Properties and Investments Business increased 26.1%.25.9%, from Ps. 296.9297 million in fiscal year 2014 to Ps. 374.5374 million in fiscal year 2015. This was mainly due to an increase of Ps. 34.634 million in the Shopping Center PropertiesCenters segment; an increase of Ps. 17.016 million in the Offices and Others segment; an increase of Ps. 18.018 million in the Hotels segment, an increase of Ps. 12.212 million in the Sales and Developments segment, partially offset by a reduction of Ps. 3.73 million in the International segment and a reduction of Ps. 0.1 million in the Financial operations and Others segment.
 
On the other hand, administrative expenses from our joint ventures increased by 30.0%, from Ps. 0.8 milliondid not change in fiscal year 20142015 compared to Ps. 1.0 million in fiscal year 2015.2014, remaining stable at Ps. 1 million.
 
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, administrative expenses increased by 26.0%, from Ps. 300.1300 million in fiscal year 2014 to Ps. 378.1378 million in fiscal year 2015. Based on the reported business segment reporting and considering our joint ventures and inter-segment eliminations, administrative expenses as a percentage of sales increased from 13.9% in fiscal year 2014 to 14.8% in fiscal year 2015.
 
Shopping Center PropertiesCenters
 
Administrative expenses from the Shopping Center PropertiesCenters segment increased by 34.1%32.4%, from Ps. 101.5102 million in fiscal year 2014 to Ps. 136.2135 million in fiscal year 2015, mainly due to:
 
·  an increase of Ps. 25.7 million in Directors’ fees;
·  
an increase of Ps. 25 million in Directors’ fees;
 
·  an increase of Ps. 3.3 million in fees and compensation from services;
·  
an increase of Ps. 3 million in fees and compensation from services;
 
·  an increase of Ps. 1.9 million in amortization and depreciation, and
·  
an increase of Ps. 2 million in amortization and depreciation, and
 
·  an increase of Ps. 3.8 million in other miscellaneous items, such as, maintenance, security, cleaning, repair and similar expenses, and taxes, rates and contributions.
·  
an increase of Ps. 3 million in other miscellaneous items, such as, maintenance, security, cleaning, repair and similar expenses, and taxes, rates and contributions.
 
Administrative expenses from the Shopping Center PropertiesCenters segment as a percentage of revenues derived from that segment slightlyrevenues increased from 7.3% in fiscal year 2014 to 7.7% in fiscal year 2015.
 

124

Offices and Others
 
Administrative expenses from the Offices and Others segment increased by 40.6%40.5%, from Ps. 41.942 million in fiscal year 2014 to Ps. 59.059 million in fiscal year 2015, mainly due to: (i) an increase of Ps. 5.35 million in fees and compensation from services; (ii) an increase of Ps. 5.25 million in salaries and wages, social security contributions and other payroll expenses; (iii) an increase of Ps. 2.42 million in Directors’ fees; (iv) an increase of Ps. 2.02 million in travel and office supplies expenses, and (v) an increase of Ps. 1.52 million in bank expenses.
 
As a percentage of segment revenues, derived from the Offices segment, general and administrative expenses increased from 15.5%15.4% in fiscal year 2014 to 17.7% in fiscal year 2015.
 
Sales and Developments
 
General and administrative expenses from the Sale and Developments segment increased by 32.6%35.1%, from Ps. 37.537 million in fiscal year 2014 to Ps. 49.750 million in fiscal year 2015, mainly due to: (i) an increase of Ps. 4.44 million in fees and compensation from services; (ii) an increase of Ps. 2.02 million in salaries and wages, social security contributions and other payroll expenses; (iii) an increase of Ps. 2.02 million in Directors’ fees; (iv) an increase of Ps. 1.72 million in travel and office supplies expenses, and (v) an increase of Ps. 1.31 million in bank expenses. General and administrative expenses from the Sales and Developments segment, as a percentage of revenues derived from this segment, increased from 43.8%43.9% in fiscal year 2014 to 362.5% in fiscal year 2015.
 
Considering the gain from disposal of investment properties, such percentages decreased from 16.2 %4% in fiscal year 2014 to 4.3%0.5% in fiscal year 2015.
 
Hotels
 
General and administrative expenses from the Hotels segment increased by 30.2%30%, from Ps. 59.660 million in fiscal year 2014 to Ps. 77.678 million in fiscal year 2015, mainly due to:
 
·  an increase of Ps. 9.5 million in salaries and wages, social security contributions and other payroll expenses;
·  
an increase of Ps. 10 million in salaries and wages, social security contributions and other payroll expenses;
 
·  an increase of Ps. 3.3 million in maintenance and repair expenses, and
·  
an increase of Ps. 3 million in maintenance and repair expenses, and
 
·  an increase of Ps. 2.0 million in the cost of fees from services and an increase of Ps. 1.5 million in the cost of food, beverages and other hotel-related expenses, among other items.
·  
an increase of Ps. 2 million in the cost of fees from services and an increase of Ps. 1 million in the cost of food, beverages and other hotel-related expenses, among other items.
 
General and administrative expenses from the Hotels segment, as a percentage of revenues derived from this segment, increased from 18.0% in fiscal year 2014 to 19.6% in fiscal year 2015.
 
International
 
General and administrative expenses from the International segment decreased by Ps. 3.73 million from Ps. 59.559 million in fiscal year 2014 to Ps. 55.756 million in fiscal year 2015, mostly due to the fact that the results of Rigby 183 LLC – owner of the rental building Madison 183 which was sold in September 2014- were consolidated for only 3three months in fiscal year 2015 whereas such results were consolidated for 12 months in fiscal year 2014, and to lower expenses incurred in connection with our interest in IDBD.
 
General and administrative expenses from the International segment, as a percentage of revenues derived from this segment, increased from 70.9% in fiscal year 2014 to 215.5% in fiscal year 2015.
 
Financial Operations and Others
Selling expenses
 
General and administrative expenses associated to our Financial Operations and Others segment did not show significant changes for the fiscal years under discussion.
SELLING EXPENSES
TotalOur total selling expenses of the Company increased 33.9%33.6%, from Ps. 359.0360 million for fiscal year 2014 to Ps. 480.7481 million for fiscal year 2015. This was mainly due to an increase of Ps. 75.976 million in the Agricultural business and an increase of Ps. 45.845 million in the Urban Properties and Investments business.
 
Agricultural Business
 
  Fiscal year ended June 30, 2015
Selling Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Crops (157)(3)(1)(161)
Cattle (20)                             -                             -(20)
Dairy (4)                             -                             -(4)
Sugarcane (8)                             -                             -(8)
Subtotal Agricultural Production (189)(3)(1)(193)
Land Transformation and Sales (1)(1)                             -(2)
Agro-industrial (77)           ��                 -                             -(77)
Others segments (13)                             -                             -(13)
Agricultural rental and Services (1)                             -                             -(1)
Subtotal Others (91)                             -                             -(91)
Total Agricultural Business (281)(4)(1)(286)
 Fiscal year ended on June 30, 2015   Fiscal year ended June 30, 2014 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting Selling Expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
 (in million of Ps.) 
Crops  (157,541)  (2,837)  -   (160,378)Crops (113)(2)                             -(115) 
Cattle  (20,084)  (25)  -   (20,109)Cattle (14)                             -                             -(14) 
Dairy  (3,667)      -   (3,667)Dairy (2)                             -                             -(2) 
Sugarcane  (7,770)      -   (7,770)Sugarcane (8)                             -                             -(8) 
Agricultural rental and services  (717)  -   -   (717)
Agricultural Subtotal  (189,779)  (2,862)  -   (192,641)
Land transformations and sales  (1,103)  (1,280)  -   (2,383)
Subtotal Agricultural ProductionSubtotal Agricultural Production (137)(2)                             -(139) 
Land Transformation and SalesLand Transformation and Sales (4)                             -                             -(4) 
Agro-industrial  (77,146)      -   (77,146)Agro-industrial (55)                             -                             -(55) 
Other Segments  (12,660)  -   -   (12,660)
Total Agricultural Business Selling Expenses  (280,688)  (4,142)  -   (284,830)
Others segmentsOthers segments (11)                             -                             -(11) 
Agricultural rental and ServicesAgricultural rental and Services (1)                             -                             -(1) 
Subtotal OthersSubtotal Others (67)                             -                             -(67) 
Total Agricultural BusinessTotal Agricultural Business (208)(2)                             -(210) 

  Fiscal year ended on June 30, 2014 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (115,497)  (2,332)  -   (117,829)
Cattle  (13,769)  (85)  -   (13,854)
Dairy  (2,249)  -   -   (2,249)
Sugarcane  (4,871)  -   -   (4,871)
Agricultural rental and services  (754)  (25)  -   (779)
Agricultural Subtotal  (137,140)  (2,442)  -   (139,582)
Land transformations and sales  (3,873)  -   -   (3,873)
Agro-industrial  (54,751)  -   -   (54,751)
Other Segments  (10,726)  -   -   (10,726)
Total Agricultural Business Selling Expenses  (206,490)  (2,442)  -   (208,932)
125


 
Selling expenses from our Agricultural business increased 35.9%35.1% from Ps. 206.5208 million in fiscal year 2014 to Ps. 280.7281 million in fiscal year 2015. This was caused mainly by an increase of Ps. 42.544 million in the Crops segment, an increase of Ps. 6.36 million in the Cattle segment, an increase of Ps. 1.42 million in the Dairy segment, an increase of Ps. 2.9 million in the Sugarcane segment, an increase of Ps. 22.422 million in the Agro-industrial segment, and an increase of Ps. 1.92 million in the Other segments,segment, partially offset by a reduction of Ps. 0.1 million in the Agricultural rental and services segment and a reduction of Ps. 1.53 million in the Land transformationTransformation and salesSales segment.
 
In turn, selling expenses from our interests in joint ventures increased by 69.6%100% from Ps. 2.42 million in fiscal year 2014 to Ps. 4.14 million in fiscal year 2015, in connection with our Cresca joint venture.
 
On the other hand, inter-segment eliminations increased by Ps. 1 million in fiscal year 2015 compared to fiscal year 2014, in which there had been no inter-segment eliminations arose from selling expenses.
 
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, selling expenses increased by 36.3%36.2%, from Ps. 208.9210 million in fiscal year 2014 to Ps. 284.8286 million in fiscal year 2015.
 
Urban Properties and Investments Business
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (111,922)  (783)  (120)  (112,825)
Offices  (20,633)  (497)  -   (21,130)
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Shopping Centers (112)(1)                         -(113)
Offices and Others (21)-                          -(21)
Sales and Developments  (8,351)  (795)  -   (9,146) (8)(1)                          -(9)
Hotels  (52,185)  -   (201)  (52,386) (52)-                          -(52)
International  -   -   -   -                  - -                    -                   -
Financial Operations and Others  (379)  -   -   (379)                 - -                  -                 -
Total Urban Properties and Investments Business Selling Expenses  (193,470)  (2,075)  (321)  (195,866)
Total Urban Properties and Investment Business (193)(2)                             -(195)
  Fiscal year ended June 30, 2014
Selling expenses Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
  (in million of Ps.)
Shopping Centers (72)(1)                         -(73)
Offices and Others (21)-                         -(21)
Sales and Developments (11)(3)                         -(14)
Hotels (42)-                         -(42)
International                  - -                        -                   -
Financial Operations and Others                  - -                        -                    -
Total Urban Properties and Investment Business (146)(4)                             -(150)

  Fiscal year ended on June 30, 2014 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (72,531)  (687)  (209)  (73,427)
Offices  (20,307)  (444)  -   (20,751)
Sales and Developments  (11,330)  (2,376)  -   (13,706)
Hotels  (42,178)  -   (157)  (42,335)
International  -   -   -   - 
Financial operations and Others  110   -   -   110 
Total Urban Properties and Investments Business Selling Expenses  (146,236)  (3,507)  (366)  (150,109)

Selling expenses from our Urban Properties and Investments business increased 32.3%32.2%, from Ps. 146.2146 million in fiscal year 2014 to Ps. 193.5193 million in fiscal year 2015. This was mainly due to an increase of Ps. 39.440 million in the Shopping Center PropertiesCenters segment, an increase of Ps. 10.110 million in the Hotels segment, an increase of Ps. 0.4 million in the Offices segment, and an increase of Ps. 0.5 million in the Financial Operations and Others segment, partially offset by a reduction of Ps. 4.63 million in the Sales and Developments segment.
 
On the other hand, selling expenses from our joint ventures went down by 40.8%50%, from Ps. 3.54 million in fiscal year 2014 (out of which Ps. 2.42 million was allocated to the Sales and Developments segment) to Ps. 2.12 million (out of which Ps. 0.81 million was allocated to the Sales and Developments segment) in fiscal year 2015. This reduction is mainly attributable to lower expenses from our Cyrsa S.A. joint venture as a result of the recognition of fewer sales from the Horizons development in fiscal year 2015.
 
Hence, based on the information by segment, selling expenses increased by 30.5%30.0% from Ps. 150.1150 million in fiscal year 2014 to Ps. 195.9195 million in fiscal year 2015. Based on the information by segment, selling expenses as a percentage of revenues experienced a slight increase from 7.0% in fiscal year 2014 to 7.7% in fiscal year 2015.
 
Shopping Center PropertiesCenters
 
Selling expenses from the Shopping Center PropertiesCenters segment increased by 53.7%54.8%, from Ps. 73.473 million in fiscal year 2014 to Ps. 112.8113 million in fiscal year 2015, mainly due to:
·  
·  an increase of Ps. 18.1 million in taxes, rates and contributions, mainly due to a higher turnover tax liability;
an increase of Ps. 18 million in taxes, rates and contributions, mainly due to a higher turnover tax liability;
 
·  an increase of Ps. 7.7 million in advertising expenses;
·  
an increase of Ps. 8 million in advertising expenses;
 
·  an increase of Ps. 5.1 million in bad debtors; and
·  
an increase of Ps. 5 million in bad debtors; and
 
·  an increase of Ps. 6.1 million in salaries and wages, social security contributions and other payroll expenses.
·  
an increase of Ps. 6 million in salaries and wages, social security contributions and other payroll expenses.
 
Selling expenses from the Shopping Center PropertiesCenters segment as a percentage of revenues derived from that segment increased from 5.3 % in fiscal year 2014 to 6.3% in fiscal year 2015.
 

126


Offices and Others
 
Selling expenses from our Offices and Others segment increased by 1.8%, from Ps. 20.8 million inremained stable during fiscal yearyears 2015 and 2014, amounting to Ps. 21.1 million in fiscal year 2015, mainly as a result of an increase in the turnover tax liability due to the transfer of buildings, offset by a reduction in bad debtors.21 million.
 
Selling expenses from the Offices and Others segment, as a percentage of revenues derived from this segment, decreased from 7.6% in fiscal year 2014 to 6.3% in fiscal year 2015.
 
Sales and Developments
 
Selling expenses from the Sales and Developments segment decreased by 33.3%35.7%, from Ps. 13.714 million in fiscal year 2014 to Ps. 9.19 million in fiscal year 2015, mainly as a result of a reduction in expenses directly related to the sales volume: taxes, rates and contributions by Ps. 3.43 million and sales commissions by Ps. 1.11 million.
 
Selling expenses from the Sales and Developments segment, as a percentage of revenues derived from this segment, increased from 16.0% in fiscal year 2014 to 66.7% in fiscal year 2015.
 
Hotels
 
Selling expenses from our Hotels segment increased by 23.7%23.8%, from Ps. 42.342 million in fiscal year 2014 to Ps. 52.452 million in fiscal year 2015, mainly due to:
 
·  an increase of Ps. 3.1 million in advertising and other selling expenses;
·  
an increase of Ps. 3 million in advertising and other selling expenses;
 
·  an increase of Ps. 2.6 million in taxes, rates and contributions; and
·  
an increase of Ps. 3 million in taxes, rates and contributions; and
 
·  an increase of Ps. 2.6 million in salaries and wages, social security contributions and other payroll expenses, among other items.
·  
an increase of Ps. 3 million in salaries and wages, social security contributions and other payroll expenses, among other items.
 
Selling expenses from our Hotels segment as a percentage of revenues derived from this segment stood at approximatelyaround 13% in both fiscal years.
 
Financial operationsOperations and Others
 
Selling expenses from our Financial operationsOperations and Others segment increased by Ps. 0.5 million, from a gain of Ps. 0.1 milliondid not suffer significant changes in fiscal year 2014 to a loss of Ps. 0.4 million in fiscal yearyears 2015 mainly as a result of an increase in bad debtors in connection with the Company’s personal financing residual activity.and 2014.
 
OTHER OPERATING RESULTS, NET
 
Other operating results, net of the Company
Our other operating results, net increased Ps. 88.088 million, from a Ps. 77.578 million loss in fiscal year 2014 to ana Ps. 10 million income of Ps. 10.6 million in fiscal year 2015.  This was mainly due to a Ps. 10 million increase in the Agricultural business and a Ps. 78 million increase in the Urban Properties and Investment business.

 
Agricultural Business
 

 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (7,708)  (928)  -   (8,636) (7)(1)(9)
Cattle  (2,242)  (916)  -   (3,158) (2)(1)                          -(3)
Dairy  (773)  -   -   (773) (1)                            -                          -(1)
Sugarcane  (1,669)  -   -   (1,669) (2)                            -                          -(2)
Agricultural rental and services  (336)  -   -   (336)
Agricultural Subtotal  (12,728)  (1,844)  -   (14,572)
Land transformations and sales  (4,601)  -   -   (4,601)
Subtotal Agricultural Production (12)(2)(1)(15)
Land Transformation and Sales (5)                            -                          -(5)
Agro-industrial  (288)  -   -   (288)                              -                            -                          -                               -
Other Segments  1,338   -   -   1,338 
Total Agricultural Business Other operating results, net  (16,279)  (1,844)  -   (18,123)
Others segments                          1                            -                          -                           1
Agricultural rental and Services                             -                            -                          -                               -
Subtotal Others                     1                            -                          -                            1
Total Agricultural Business (16)(2)(1)(19)
 
 Fiscal year ended on June 30, 2014  Fiscal year ended June 30, 2014
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Crops  (28,992)  (363)  -   (29,355) (27)                              1(1)(27)
Cattle  (1,955)  (44)  -   (1,999) (2)                            -                          -(2)
Dairy  (417)  -   -   (417)                            -                            -                          -                               -
Sugarcane  104   -   -   104                              -                            -                          -                               -
Agricultural rental and services  (189)  (33)  -   (222)
Agricultural Subtotal  (31,449)  (440)  -   (31,889)
Land transformations and sales  (82)  -   -   (82)
Subtotal Agricultural Production (29)                              1(1)(29)
Land Transformation and Sales                             -                            -                          -                               -
Agro-industrial  (868)  -   -   (868) (1)                            -                          -(1)
Other Segments  3,261   38   -   3,299 
Total Agricultural Business Other operating results, net  (29,138)  (402)  -   (29,540)
Others segments                    1                            -                          -                            1
Agricultural rental and Services                            -                            -                          -                               -
Subtotal Others                             -                            -                          -                               -
Total Agricultural Business (29)                              1(1)(29)
 
Other operating results, net from the Agricultural business increased from a loss of Ps. 29.129 million in fiscal year 2014 to a loss of Ps. 16.316 million in fiscal year 2015, mainly as a result of a Ps. 20.720 million decrease in the CropsCroops segment, partially offset by a Ps. 1.82 million increase in the Sugarcane segment, Ps. 4.55 million in the Land transformationTransformation and sales segment and Ps. 2.0 million in the Other segments.Sales segment.
 
In turn, other operating results, net from our interests in joint ventures decreasedincreased by 358.7%300% from a Ps. 0.41 million lossincome in fiscal year 2014 to a Ps. 1.82 million loss in fiscal year 2015, in connection with our Cresca joint venture.

127

 
On the other hand, no inter-segment eliminations arose from operating results, net.
 
Hence, according to business segment reporting and considering all our joint ventures, other operating results, net increased from a Ps. 29.529 million loss in fiscal year 2014 to a Ps. 18.119 million loss in fiscal year 2015.
 
Crops
 
Other operating results, net of the Crops segment decreased Ps. 20.720 million, from a Ps. 29.427 million loss in fiscal year 2014 to a Ps. 8.67 million loss in fiscal year 2015, mainly as a result of the commodity derivatives held by Brasilagro and Cresud (Ps. 23.123 million), partially offset by the charge to income of the reversal of Brasilagro’s labor and legal contingency liability in fiscal year 2014.
 
Sugarcane
 
Other operating results, net of the Sugarcane segment increased by Ps. 1.82 million, from a Ps. 0.1 million gain in fiscal year 2014 to a Ps. 1.72 million loss in fiscal year 2015.
Other Segments
Other operating results, net of the Other segments decreased by Ps. 1.9 million, from a Ps. 3.3 million gain in fiscal year 2014 to a Ps. 1.3 million gain in fiscal year 2015.
 
The rest of the segments of the Agricultural business did not record significant changes.
 
Urban Properties and Investments Business
 
 Fiscal year ended on June 30, 2015  Fiscal year ended June 30, 2015 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting  Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting 
Shopping Center Properties  (47,650)  (1,160)  -   (48,810)
Offices  (118,371)  56   705   (117,610)
 (in million of Ps.) 
Shopping Centers (48)(1)                          -(49) 
Offices and Others (120)               1                        1(118) 
Sales and Developments  12,503   (1)  591   13,093  13                      -                         -13 
Hotels  (461)  -   -   (461)     --                     -              - 
International  184,886   -   -   184,886  185-                          -185 
Financial operations and Others  (2,419)  -   -   (2,419)
Total Urban Properties and Investments Business other operating results, net  28,488   (1,105)  1,296   28,679 
Financial Operations and Others (2)-                          -(2) 
Total Urban Properties and Investments Business 28                            -                           129 
 Fiscal year ended on June 30, 2014
Other operating results, netOther operating results, net Statement of IncomeInterests in joint venturesInter-segment eliminationsSegment reporting
 (in million of Ps.)
Shopping CentersShopping Centers (46)(1)                          -(47)
Offices and OthersOffices and Others (1)(3)                        1(3)
Sales and DevelopmentsSales and Developments               8                     -                          -                  8
HotelsHotels (3)                      -                          -(3)
InternationalInternational (1)                         -                          -(1)
Financial Operations and OthersFinancial Operations and Others (3)                         -                          -(3)
Total Urban Properties and Investments BusinessTotal Urban Properties and Investments Business (46)(4)                           1(49)

  Fiscal year ended on June 30, 2014 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (45,953)  (723)  108   (46,568)
Offices  (1,786)  (2,297)  1,023   (3,060)
Sales and Developments  8,300   (163)  -   8,137 
Hotels  (2,680)  -   -   (2,680)
International  (895)  -   -   (895)
Financial operations and Others  (2,856)  -   -   (2,856)
Total Urban Properties and Investments Business other operating results, net  (45,870)  (3,183)  1,131   (47,922)
 
Other operating results, net from the Urban Properties and Investments business increased by Ps. 74.474 million from a Ps. 45.946 million loss in fiscal year 2014 to a Ps. 28.528 million gain in fiscal year 2015, mainly as a result of a Ps. 184.9185 million gain derived from the International segment.
 
The effect from the consolidation of our joint ventures is not material on this line. According to business segment reporting and considering all our joint ventures and inter-segment eliminations, other operating results, net improved from a Ps. 47.949 million loss in fiscal year 2014 to a Ps. 28.729 million gain in fiscal year 2015.
 
Shopping Center PropertiesCenters
 
The net loss from other operating results of the Shopping Center PropertiesCenters segment increased by 4.8%4.3%, from Ps. 46.646 million in fiscal year 2014 to Ps. 48.848 million in fiscal year 2015, mainly as a result of a Ps. 2.73 million increase in the donation charge.
 
The net loss from other operating results, as a percentage of revenues derived from the Shopping Center PropertiesCenters segment, decreased from 3.4%3.3% in fiscal year 2014 to 2.7% in fiscal year 2015.
 
Offices and Others
 
The net loss from other operating results of our Offices and Others segment increased Ps. 114.5119 million from Ps. 3.11 million in fiscal year 2014 to Ps. 117.6120 million in fiscal year 2015, mainly as a result of expenses incurred in the transfer of assets from IRSA to IRSA Commercial PropertiesCP for Ps. 110.5.111 million.
 
The net loss from operating results of our Offices and Others segment, as a percentage of revenues derived from this segment, increased from 1.1% in fiscal year 2014 to 35.3% in fiscal year 2015.
 
Sales and Developments
 
The net gain from other operating results of our Sales and Developments segment increased Ps. 4.95 million from Ps. 8.18 million in fiscal year 2014 to Ps. 13.113 million in fiscal year 2015, mainly due to:
 
·  the gain recorded in fiscal year 2015 from the sale of our equity interest in Bitania for Ps. 16.1 million;
·  a reduction of Ps. 2.1 million in the reserve for lawsuits and contingencies; and
·  the non-recurrence in fiscal year 2015 of an “admission fee” charged in connection with the sale of a hotel plot in Neuquén recorded in fiscal year 2014.
 
 
·  
the gain recorded in fiscal year 2015 from the sale of our interest in Bitania for Ps. 16 million;
128

·  
a reduction of Ps. 2 million in the provisions for lawsuits and contingencies; partially offset by
·  
the non-recurrence, during fiscal year 2015, of a fee charged as “fee for admission to the undertaking” in connection with the sale of the Neuquén lot for development of a hotel that took place in fiscal year 2014.
 
Hotels
The net loss from operating results of our HotelHotels segment decreased by Ps. 2.33 million, from Ps. 2.73 million in fiscal year 2014 to Ps. 0.50 million in fiscal year 2015, mainly as a result of a reduction in the reserve for lawsuits and other contingencies.
 
The net loss from operating results of our Hotels segment, as a percentage of revenues derived from this segment, decreased from 0.8% in fiscal year 2014 to 0.1% in fiscal year 2015.
 
International
 
Other operating results, net from this segment increased from a net loss of Ps. 0.91 million in fiscal year 2014 to a net gain of Ps. 184.9185 million in fiscal year 2015, mainly as a result of the gain from the partial reversal of accumulated translation differences following Rigby 183 LLC’s partial liquidation.
 
Financial operationsOperations and Others
 
Other operating results, net from our Financial operationsOperations and Others segment decreased by Ps. 0.51 million from Ps. 2.93 million in fiscal year 2014 to Ps. 2.42 million in fiscal year 2015, mainly due to lower taxes deducted by BHSA on lower dividends distributed in fiscal year 2015 to our subsidiaries Ritelco and Tyrus.
 
PROFIT
Profit / (LOSS) FROM OPERATIONS(loss) from operations
 
As a result of the above mentioned factors, the Company’sour profit / (loss) from operations increased by Ps. 1,607.51,625 million (135.6%(135.2%), from a gain of Ps. 1,185.21,202 million in fiscal year 2014 to a gain of Ps. 2,792.72,827 million in fiscal year 2015.

 
Agricultural Business
 
Profit / (loss) from operations of the Agricultural business increased by Ps. 345.7345 million (926.4%(907.9%), from a 37.3Ps. 38 million loss in fiscal year 2014 to a Ps. 308.4307 million gain in fiscal year 2015.
 
Crops
 
Profit / (loss)Loss from operations of this segment increased by Ps. 105.4137 million (71.5%(97.9%), from a 147.5Ps. 140 million loss in fiscal year 2014 to a Ps. 252.9277 million loss in fiscal year 2015.
 
Cattle
 
Profit / (loss) from operations of this segment increased by Ps. 4.65 million (14.3%(16.1%), from a Ps. 32.131 million gain in fiscal year 2014 to a Ps. 36.736 million gain in fiscal year 2015.
 
Dairy
 
Profit / (loss) from operations of this segment increaseddecreased by Ps. 0.21 million (5.2%(20.0%), from a Ps. 4.05 million gain in fiscal year 2014 to a Ps. 4.24 million gain in fiscal year 2015.
 
Sugarcane
Loss from operations of this segment decreased by Ps. 10 million (43.5%), from a Ps. 23 million loss in fiscal year 2014 to a Ps. 13 million loss in fiscal year 2015.
Agricultural Rental and Services
Profit from operations of this segment increased by Ps. 30 million (428.6%), from a Ps. 7 million gain in fiscal year 2014 to a Ps. 37 million gain in fiscal year 2015.
Land Transformation and Sales
Profit from operations of this segment increased by Ps. 474 million, from a Ps. 78 million gain in fiscal year 2014 to a Ps. 552 million gain in fiscal year 2015.
Agro-industrial
 
Profit / (loss) from operations of this segment decreased by Ps. 7.536 million, from a 19.7Ps. 1 million lossgain in fiscal year 2014 to a Ps. 12.135 million loss in fiscal year 2015.
 
Agricultural rental and services
Other
 
Profit / (loss) from operations of this segment increased by Ps. 6.7 million (82.5%), from a Ps. 8.0 million gain indid no record any changes for fiscal year 2014 to a Ps. 14.8 million gain invs. fiscal year 2015.
 
Land transformations and sales
Profit / (loss) from operations of this segment increased by Ps. 473.4 million, from a Ps. 78.0 million gain in fiscal year 2014 to a Ps. 551.4 million gain in fiscal year 2015.
Agro-industrial Activities
Profit / (loss) from operations of this segment increased by Ps. 37.8 million, from a Ps. 1.9 million gain in fiscal year 2014 to a Ps. 35.6 million gain in fiscal year 2015.
Other Segments
Profit / (loss) from operations of this segment decreased by Ps. 3.5 million, from a Ps. 5.7 million gain in fiscal year 2014 to a Ps. 2.2 million gain in fiscal year 2015.
 
Urban Properties and Investments Business
 
Profit from operations of this segment increased by Ps. 1,278.21,280 million (103.1%(103.2%), from a Ps. 1,240.31,240 million gain in fiscal year 2014 to a Ps. 2,518.52,520 million gain in fiscal year 2015. This was mainly due to an increase of Ps. 1,362.71,364 million in the Shopping Center Properties,Centers, Sales and Developments, and International segments, partially offset by a Ps. 84.584 million reduction in the Offices and Others, Hotels, and Financial Operations and Others segments.
 
Shopping Center PropertiesCenters
 
Profit / (loss) from operations of our Shopping Center PropertiesCenters segment increased by 37.5%, from a gain of Ps. 864.7864 million in fiscal year 2014 to a gain of Ps. 1,189.31,190 million in fiscal year 2015.
 
Profit from operations of our Shopping Center PropertiesCenters segment, as a percentage of the revenues derived from this segment, decreased from 79.6%62.5% in fiscal year 2014 to 66.9% in fiscal year 2015.
 
129

 
Offices and Others
 
Profit from operations of our Offices and Others segment decreased by 38.4%39.6%, from a gain of Ps. 160.0160 million in fiscal year 2014 to a gain of Ps. 98.699 million in fiscal year 2015.
 
Profit from operations of our Offices and Others segment, as a percentage of the revenues derived from this segment, decreased from 70.9%59.0% in fiscal year 2014 to 29.7% in fiscal year 2015.
 
Sales and Developments
 
Profit from operations of our Sales and Developments segment increased by 360.6%, from a gain of Ps. 238.5239 million in fiscal year 2014 to a gain of Ps. 1,098.71,099 million in fiscal year 2015.
 
Profit from operations of our Sales and Developments segment, as a percentage of the revenues derived from this segment, increased from 471.7%277.9% in fiscal year 2014 to 8,015.9%7,850.0% in fiscal year 2015.

 
Hotels
 
Profit / (loss) from operations of our Hotels segment decreased from a gain of Ps. 10.211 million in fiscal year 2014 to a loss of Ps. 12.812 million in fiscal year 2015.
 
International
 
Profit / (loss) from operations of our International segment increased from a loss of Ps. 30.030 million in fiscal year 2014 to a gain of Ps. 147.9148 million in fiscal year 2015.
 
Financial operationsOperations and othersOthers
 
Profit / (loss)Loss from operations of our Financial operationsOperations and Others segment increased fromdid not record any significant changes, amounting to a loss of Ps. 3.23 million induring fiscal yearyears 2014 to a gain of Ps. 3.3 million in fiscal yearand 2015.
 
Share of (loss) / profitloss of associates and joint ventures
 
Share of loss of associates and joint ventures increased by Ps. 616.3615 million, from a loss of Ps. 408.7410 million in fiscal year 2014 to a loss of Ps. 1,025.01,025 million in fiscal year 2015.  This was caused mainly by:
 
·  a Ps. 613.7 million increase in our related companies’ interest in the Urban Properties and Investments business in fiscal year 2015. Such increase was mainly attributable to a Ps. 25.4 million increase in losses from our interest in New Lipstick LLC and a Ps. 65.7 million increase in losses from our interest in Condor (International segment), a Ps. 41.2 million increase in gains from our investment in BHSA, offset by negative results from our investment in IDBD for Ps. 588.9
·  
a Ps. 614 million increase in our related companies’ interest in the Urban Properties and Investments business in fiscal year 2015. Such increase was mainly attributable to higher losses of Ps. 25 million from our interest in New Lipstick LLC and Ps. 66 million from our interest in Supertel (International segment), a Ps. 41 million increase in gains from our investment in BHSA, offset by negative results from our investment in IDBD for Ps. 589 million, mainly as a result of the recovery in the market value of this company’s stock; and
·  a Ps. 2.6 million reduction in revenues from the Agricultural business, mainly as a result of the revenues incurred in the investment in Agro-Uranga (Crops segment).
130

 
NET FINANCIAL RESULTS
·  
lower revenues of Ps. 3 million from the Agricultural business, mainly as a result of the revenues incurred in the investment in Agro-Uranga (Crops segment).
In turn, share of profit of associates and joint ventures decreased from our interests in joint ventures increased by 31.25% from Ps. 16 million income in fiscal year 2014 to a Ps. 11 million income in fiscal year 2015, mainly as a consequence of 83.3% increase in our Cresca joint venture, up from a loss of Ps. 10 million in fiscal year 2014 to a loss of Ps. 2 million in fiscal year 2015.
On the other hand, no inter-segment eliminations arose from share of (loss) / profit of associates and joint ventures.
Hence, according to business segment reporting and considering all our joint ventures, share of loss of associates and joint ventures increased by 143.19% from a Ps. 426 million loss in fiscal year 2014 to a Ps. 1,036 million loss in fiscal year 2015.
Financial results, net
 
We had a lower net financial loss of Ps. 1,286.21,286 million, from a loss of Ps. 2,574.42,574 million in fiscal year 2014 to a loss of Ps. 1,288.21,288 million in fiscal year 2015. This was primarily due to:
 
·  a lower loss of Ps. 1,337.5 million in net exchange differences in fiscal year 2015;
·  
a lower loss of Ps. 1,337 million in net exchange differences in fiscal year 2015;
 
·  a higher loss of Ps. 167.9 million in net financial interest recorded in fiscal year 2015;
·  
a higher loss of Ps. 168 million in net financial interest recorded in fiscal year 2015;
 
·  a higher income of Ps. 32.2 million in revaluation of receivables from sale of farms in fiscal year 2015;
·  
a higher income of Ps. 32 million in revaluation of receivables from sale of farms in fiscal year 2015;
 
·  a lower loss of Ps. 282.2 million in derivative financial instruments in fiscal year 2015; and
·  
a lower loss of Ps. 284 million in derivative financial instruments in fiscal year 2015; and
 
·  slightly offset by a gain of Ps. 1.7 million generated by the results from Financial Operations and Others in fiscal year 2015.
·  
slightly offset by a gain of Ps. 2 million generated by the results from Financial Operations and Others in fiscal year 2015.
 
Our net financial loss in fiscal year 2015 was mainly attributable to (i) a Ps. 686.4686 million loss generated by exchange differences mainly as a result of a higher liability position in US dollars due to the issuance of new series of notes; (ii) a loss of Ps. 886.7887 million generated by interest accrued on debt financing, mainly due to increased indebtedness and higher interest rates; and (iii) a loss of Ps. 83.582 million generated mainly by derivative instruments due to IDBD’s tender offer.
 
There was a 12%11.7% variation in the U.S. Dollar buying rate during fiscal year 2015 (it increased from Ps. 8.0338.133 as of June 30, 2014 to Ps. 8.9889.088 as of June 30, 2015) as compared to the previous fiscal year, when the U.S. Dollar quotation had experienced a larger variation of 50%50.9% (from Ps. 5.3485.388 as of June 30, 2013 to Ps. 8.0338.133 as of June 30, 2014).
 
Income tax
 
Our income tax expense increased Ps. 692.8693 million, from a Ps. 389.4389 million gain in fiscal year 2014 to Ps. 303.3303 million loss in fiscal year 2015. The Company recognizesWe recognize the income tax expense on the basis of the deferred tax liability method, thus recognizing temporary differences between accounting and tax assets and liabilities measurements. The main temporary differences for the AgriculturalAgriculture business derive from valuation of cattle stock and sale and replacement of property, plant and equipment, while those corresponding to the Urban Properties and Investments business derive from the sale and replacement of investment properties.
 
For purposes of determining the deferred assets and liabilities, the tax rate expected to be in force at the time of their reversion or use, according to the legal provisions enacted as of the date of issuance of these financial statements, has been applied to the identified temporary differences and tax losses.
 
Profit / (loss) for the Fiscal Year
 
Due to the above mentioned factors, our profit / (loss) for the fiscal year increased by Ps. 1,584.62,165 million (112.51%(153.7%) from a Ps. 1,408.41,409 million net loss for fiscal year 2014 to a Ps. 176.2176 million net income in fiscal year 2015. Profit / (loss) for fiscal years 2015 and 2014 is attributable to the controlling company’s shareholders and non-controlling interest, as per the following detail:
 
·  
·  
Profit / (loss) for the fiscal year attributable to the controlling company’s shareholders increased from a loss of Ps. 1,067.9 million in fiscal year 2014 to a loss of Ps. 249.6 million in fiscal year 2015; and
·  the non-controlling interest in controlled companies went from a loss of Ps. 340.5 million in fiscal year 2014 to a gain of Ps. 425.8 million in fiscal year 2015, mainly due to a increase of Ps. 356.2 million in the non-controlling interest of our subsidiary Brasilagro, a increase of Ps. 161.8 million in the non-controlling interest of our subsidiary IRSA, and a increase of Ps. 112.7 million in other companies from the Urban Properties and Investments business.


Fiscal year ended June 30, 2014 compared to fiscal year ended June 30, 2013
Operating results
REVENUES

Total sales revenuesattributable to the controlling company’s shareholders increased from a loss of the Company increased 28.7% from Ps. 3,083.7 million for fiscal year 2013 to Ps. 3,967.9 million for fiscal year 2014. This was mainly due to a 33.7% increase in the Agricultural business, from Ps. 1,355.4 million in fiscal year 2013 to Ps. 1,812.11,068 million in fiscal year 2014 andto a 24.7% increase in the Urban Properties and Investments business, fromloss of Ps. 1,728.2250 million in fiscal year 2013 to Ps. 2,155.8 million in fiscal year 2014.2015; and

Agricultural Business

  Fiscal year ended on June 30, 2014 
Revenues Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment Reporting 
Crops  817,702   19,120   -   836,822 
Cattle  61,691   2,242   26,382   90,315 
Dairy  53,935   -   -   53,935 
Sugarcane  123,851   -   -   123,851 
Agricultural Rental and Services  29,044   -   98   29,142 
Agricultural Subtotal  1,086,223   21,362   26,480   1,134,065 
Land Transformation and Sales  -   -   -   - 
Agro-industrial  548,740   -   5,344   554,084 
Other Segments  123,872   87   -   123,959 
Total Agricultural Business Revenues   1,758,835   21,449   31,824   1,812,108 

  Fiscal year ended on June 30, 2013 
Revenues Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  745,932   4,260   184   750,376 
Cattle  74,534   2,145   6,260   82,939 
Dairy  38,818   -   -   38,818 
Sugarcane  160,259   -   -   160,259 
Agricultural Rental and Services  30,815   -   19   30,834 
Agricultural Subtotal  1,050,358   6,405   6,463   1,063,226 
Land Transformation and Sales  -   -   -   - 
Agro-industrial  207,755   -   1,166   208,921 
Other Segments  83,258   25   -   83,283 
Total Agricultural Business Revenues  1,341,371   6,430   7,629   1,355,430 
 
Sales revenues increased 31.1%,
·  
the non-controlling interest in controlled companies went from Ps. 1,341.4 million in fiscal year 2013 to 1,758.8 in fiscal year 2014. This was due to an increasea loss of Ps. 71.8 million in the Crops segment, an increase of Ps. 15.1 million in the Dairy segment, an increase of Ps. 341.0 million in the Agro-industrial segment, and an increase of Ps. 40.6 million in the Other segments, offset by a reduction of Ps. 12.8 million in the Cattle segment, a reduction of Ps. 36.4 million in the Sugarcane segment and a reduction of Ps. 1.7 million in the Agricultural rental and services segment.
In turn, revenues from our joint ventures increased 233.6% from Ps. 6.4 million in fiscal year 2013 to Ps. 21.4341 million in fiscal year 2014 mainly asto a resultgain of a 344.2% increase in Crops sold by Cresca, from Ps. 4.3426 million in fiscal year 20132015, mainly due to a positive variation of Ps. 19.1356 million in fiscal year 2014.
Similarly, inter-segment revenues increased 317.1%, fromBrasilagro, a Ps. 7.6162 million variation in fiscal year 2013 to Ps. 31.8 million in fiscal year 2014, mainly as a result of livestock sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agro-industrial segment.
Hence, according to business segment reportingIRSA, and considering all our joint ventures and inter-segment eliminations, revenues increased by 33.7%, froma Ps. 1,355.4113 million variation in fiscal year 2013 to Ps. 1,812.1 million in fiscal year 2014.
131

Crops
Revenues from the Crops segment increased 11.5%, from Ps. 750.4 million in fiscal year 2013 to Ps. 836.8 million in fiscal year 2014, mainly as a result of:
·  a 34.1% increase in the average price of sold crops, from Ps. 1,440 per ton in fiscal year 2013 to Ps. 1,931 per ton in fiscal year 2014;
·  partially offset by a reduction of 87,702 tons in the volume of crops sold during fiscal year 2014 compared to the previous fiscal year; and
·  a reduction of 1.0% in the production volume from 355,390 tons in fiscal year 2013 to 351,759 in fiscal year 2014.
The following table shows the sales of crops in detail:
  Sale of Crops (in tons) 
  Fiscal year ended on June 30, 
  2014  2013  Variation 
Corn  179,893   271,144   (91,251)
Soybean  222,051   208,814   13,237 
Wheat  11,359   10,735   624 
Sorghum  3,843   5,807   (1,964)
Sunflower  9,745   10,551   (806)
Other  6,509   14,052   (7,543)
Total Sales  433,400   521,103   (87,703)

Cattle
Sales revenues from the Cattle segment increased 8.9%, from Ps. 82.9 million in fiscal year 2013 to Ps. 90.3 million in fiscal year 2014, mainly as a result of:
·  a 20.0% increase in the average price per kilogram sold, from Ps. 8.5 per ton in fiscal year 2013 to Ps. 10.2 million in fiscal year 2014;
·  an 8.7% reduction in the cattle sales volume, from 9,627 tons in fiscal year 2013 to 8,791 tons in fiscal year 2014; and
·  a 9.7% reduction in the volume of cattle production, from 7,723 tons in fiscal year 2013 to 6,973 tons in fiscal year 2014.
Dairy
Sales revenues from the Dairy segment increased 38.9%, from Ps. 38.8 million in fiscal year 2013 to Ps. 53.9 million in fiscal year 2014, mainly as a result of:
·  a 33.6% increase in the average price of milk, from Ps. 2.02 per liter in fiscal year 2013 to Ps. 2.70 per liter in fiscal year 2014;
·  a 6.1% increase in the average number of milking cows; and
·  a 5.1% increase in the volume of sales, from 17,871 liters in fiscal year 2013 to 18,787 liters in fiscal year 2014.
Sugarcane
Sales revenues from the Sugarcane segment decreased 22.7%, from Ps. 160.3 million in fiscal year 2013 to Ps. 123.9 million in fiscal year 2014, mainly as a result of:
·  504,206 less tons of sugarcane sold in fiscal year 2014 as compared to the previous fiscal year, mainly by Brasilagro. The lower amount of tons of sugarcane sold during the fiscal year is explained by harvesting timing differences, as in the previous season it was concentrated from June to October 2012 and thus included the 11-12 and 12-13 harvests, while in the current season it was concentrated from April to September 2013; and
·  partially offset by a 36.8% increase in the average price of sugarcane sold, from Ps. 136 per ton in fiscal year 2013 to Ps. 186 per ton in fiscal year 2014.
Agricultural Rental and Services
Sales revenues from the Agricultural rental and services segment decreased by 5.5%, from Ps. 30.8 million in fiscal year 2013 to Ps. 29.1 million in fiscal year 2014, mainly as a result of:
·  a 39.3% reduction in leases, due to Cresud’s failure to renew several agreements, including Las Lajitas, Los Leones, Anta el dorado, Ancami and Ceiballito (for Ps. 9 million);
·  a 117.6% increase in revenues from production of seeds (Ps. 4.9 million) mainly due to the higher price of corn and soybean and to a lesser extent, the production volume; and
·  an increase of 24.6% in revenues from irrigation services originated by the impact of the exchange rate, showing an increase of Ps. 0.87 million and a rise of 20% in the milliliters sold as compared to fiscal year 2013.
Agro-industrial
Sales revenues from the Agro-industrial segment increased 165.2%, from Ps. 208.9 million in fiscal year 2013 to Ps. 554.1 million in fiscal year 2014, mainly as a result of:
·  an 80% increase in slaughtering volumes and the differential resulting from the higher price of beef and sub-products; and
·  it should be noted that from November 2013 to February 2014 the produce slaughtered under the kosher ritual was exported to Israel, increasing sales volumes; and
·  another relevant factor in such increase has been the sustained appreciation of the exchange rate as compared to the previous year.
Other Segments
Sales revenues from the Other Segments increased by 48.8%, from Ps. 83.3 million in fiscal year 2013 to Ps. 124.0 million in fiscal year 2014, mainly due to:
·  an increase of Ps. 22.5 million in resales of supplies and others; and
·  an increase of Ps. 16.5 million in commodity brokerage services.
Urban Properties and Investments Business
   Fiscal year ended on June 30, 2014 
 
Revenues
  
Income Statement
 
   Interests in joint ventures   Inter-segment eliminations   
Common maintenance expenses
and collective promotion funds
   Segment reporting 
Shopping Center Properties  2.031.625   9.280   1.808   (659.705)  1.383.008 
Offices  327.954   8.466   4.442   (69.703)  271.159 
Sales and Developments  62.641   22.890           85.531 
Hotels  331.562   -           331.562 
International  90.820   -       (6.894)  83.926 
Financial Operations and Others  574   -           574 
Total Urban Properties and Investments business Revenues  2.845.176   40.636   6.250   (736.302)  2.155.760 
(1)Includes revenues from sales, leases and services (Ps. 2,108.9 million) and revenues from expenses and collective promotion fund (Ps. 736.3 million)
132

   Fiscal year ended on June 30, 2013 
 
Revenues
  
Income Statement
 
   Interests in joint ventures   
Inter-segment eliminations
   
Common maintenance expenses
and collective promotion funds
   Segment reporting 
Shopping Center Properties  1,613,285   6,958      (517,199)  1,103,044 
Offices  281,084   7,372   3,899   (75,184)  217,171 
Sales and Developments  24,867   117,129           141,996 
Hotels  225,836               225,836 
International  40,905           (1,907)  38,998 
Financial Operations and Others  1,203   -       -   1,203 
Total Urban Properties and Investments business Revenues  2,187,180   131,459   3,889   (594,290)  1,728,248 
(1)  Includes revenues from sales, leases and services (Ps. 1,592.9 million) and revenues from expenses and collective promotion fund (Ps. 594.3 million).
Sales revenuesother companies from the Urban Properties and Investments business increased 24.74%, from Ps. 2,187.2 million in fiscal year 2013 to Ps. 2,845.2 million in fiscal year 2014. This was mainly due to an increase of Ps. 418.3 million in the Shopping Center Properties segment, an increase of Ps. 46.9 million in the Offices segment, an increase of Ps. 105.7 million in the Hotels segment, an increase of Ps. 49.9 million in the International segment, and an increase of Ps. 37.8 million in the Sales and Developments segment, partially offset by a reduction of Ps. 0.6 million in the Financial operations and Others segment.
On the other hand, revenues from expenses and collective promotion fund increased by 23.9%, from Ps. 594.3 million in fiscal year 2013 (out of which Ps. 517.2 million is attributable to the Shopping Center Properties segment) to Ps. 736.3 million in fiscal year 2014 (out of which Ps. 659.7 million is attributable to the Shopping Center Properties segment).
In turn, revenues from our interests in joint ventures decreased by 69.0%, from Ps. 131.5 million in fiscal year 2013 to Ps. 40.6 million in fiscal year 2014. Such decrease is mostly attributable to reduced sales revenues derived from the Horizons project, from our joint venture with Cyrsa.
Similarly, inter-segment revenues increased 60.3%, from Ps. 3.9 million in fiscal year 2013 to Ps. 6.3 million in fiscal year 2014, mainly as a result of the refurbishment during the year of some square meters at Abasto shopping center. Also during the year, we started to lease a portion of the administrative offices of such establishment.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, revenues increased by 24.7%, from Ps. 1,728.2 million in fiscal year 2013 to Ps. 2,155.7 million in fiscal year 2014.
Shopping Center Properties
Revenues from the Shopping Center Properties segment increased 25.4%, from Ps. 1,103.0 million in fiscal year 2013 to Ps. 1,383.0 million in fiscal year 2014. Such variation was mainly due to:
·  an increase of Ps. 235.3 million in revenues from fixed and variable rentals as a result of a 30.8% rise in our tenant’s total sales, from Ps. 12,336.6 million in fiscal year 2013 to Ps. 16,132.7 million in fiscal year 2014; and
·  an increase Ps. 37.9 million in revenues from admission fees and parking fees.
Offices
Revenues from the Offices segment increased 24.9%, from Ps. 217.2 million in fiscal year 2013 to Ps. 271.2 million in fiscal year 2014. Such revenues were impacted by the partial sale of investment properties in fiscal year 2014, which resulted in a reduction of the segment total leasable area.
Considering comparable properties in both fiscal years, rental revenues from properties which did not experience a decrease in their leasable area increased by 35%, from Ps. 152.3 million in fiscal year 2013 to Ps. 205.6 million in fiscal year 2014, mostly as a result of the currency devaluation and improved occupancy, whereas rental revenues from properties which leasable area was reduced accounted for almost the same figure in both years (around Ps. 59 million).
As of year-end, the 2014 occupancy rate of premium offices stood at 98.3% and the average rent was around US$ 26 per m2.
Sales and Developments
Revenues from this segment often vary significantly period over period due to:
·  the non-recurrence of property sales and the agreed-upon sale price;
·  the number of properties under construction; and
·  the completion date of such developments.
Without considering our joint ventures, revenues from the Sales and Developments segment increased 151.4% from Ps. 24.9 million in fiscal year 2013 to Ps. 62.6 million in fiscal year 2014. Such increase was mainly attributable to higher revenues from the sale of units of Condominios I and II for Ps. 47.7 million.
On the other hand, revenues from out joint ventures (Horizons) went down by Ps. 94.2 million, resulting in a 39.8% net reduction in the revenues derived from this segment, from Ps. 142.0 million in fiscal year 2013 to Ps. 85.5 million in fiscal year 2014.
business.
133

Hotels
Revenues from our Hotels segment increased by 46.9% from Ps. 225.8 million in fiscal year 2013 to Ps. 331.6 million in fiscal year 2014, mainly as a result of a 38% increase in the average room rate (in terms of Argentine Pesos) and in the average occupancy rate of our hotels from 67.2% in fiscal year 2013 to 68.7% in fiscal year 2014 (mainly due to an improvement in the average occupancy rate at Llao Llao).
International
Revenues from the International segment increased 122.0%, from Ps. 40.9 million in fiscal year 2013 to Ps. 90.8 million in fiscal year 2014, mainly due to the following factors:
·  the abovementioned devaluation of the Argentine Peso and, to a lesser extent;
·  the fact that the results of Rigby 183 LLC – owner of the rental Madison 183 building - were consolidated for 12 months in fiscal year 2014 whereas such results were consolidated for 9 months in fiscal year 2013.
Financial Operations and Others
Revenues from the Financial operations and Others segment went down from Ps. 1.2 million in fiscal year 2013 to Ps. 0.6 million in fiscal year 2014, as a result of reduced revenues from APSAMedia S.A.’s personal financing residual activity (the continuing company of Metroshop S.A., currently merged with IRSA Commercial Properties).
COSTS
Total costs of the Company increased 23.4%, from Ps. 2,647.0 million in fiscal year 2013 to Ps. 3,266.3 million in fiscal year 2014. This was mainly as a result of a 28.0% increase in the Agricultural business, from Ps. 2,045.8 million in fiscal year 2013 to Ps. 2,618.0 million in fiscal year 2014 and a 7.8% increase in the Urban Properties and Investments business from Ps. 0.60 million in fiscal year 2013 to Ps. 0.65 million in fiscal year 2014.
Agricultural Business
  Fiscal year ended on June 30, 2014 
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (1,509,500)  (31,181)  -   (1,540,681)
Cattle  (150,810)  (4,408)  (5,442)  (160,660)
Dairy  (104,334)  -   -   (104,334)
Sugarcane  (206,751)  -   -   (206,751)
Agricultural Rental and Services  (17,374)  -   -   (17,374)
Agricultural Subtotal  (1,988,769)  (35,589)  (5,442)  (2,029,800)
Land Transformation and Sales  (8,228)  -   -   (8,228)
Agro-industrial  (453,307)  -   (26,382)  (479,689)
Other Segments  (100,170)  (85)  -   (100,255)
Total Agricultural Business Costs  (2,550,474)  (35,674)  (31,824)  (2,617,972)

  Fiscal year ended on June 30, 2013 
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (1,216,190)  (11,642)  -   (1,227,832)
Cattle  (142,621)  (3,319)  (1,350)  (147,290)
Dairy  (74,826)  -   -   (74,826)
Sugarcane  (302,206)  -   -   (302,206)
Agricultural Rental and Services  (12,052)  -   -   (12,052)
Agricultural Subtotal  (1,747,895)  (14,961)  (1,350  (1,764,206)
Land Transformation and Sales  (5,675)  -   -   (5,675)
Agro-industrial  (198,402)  -   (6,279)  (204,681)
Other Segments  (71,286)  69   -   (71,217)
Total Agricultural Business Costs  (2,023,258)  (14,892)  (7,629)  (2,045,779)
Total costs increased 26.1%, from Ps. 2,023.3 million in fiscal year 2013 to Ps. 2,550.5 million in fiscal year 2014. This was caused mainly by an increase of Ps. 293.3 million in the Crops segment, an increase of Ps. 8.2 million in the Cattle segment, an increase of Ps. 29.5 million in the Dairy segment, an increase of Ps. 5.3 million in the Agricultural rental and services segment, an increase of Ps. 2.6 million in the Land transformation and sales segment, an increase of Ps. 254.9 million in the Agro-industrial segment and an increase of Ps. 28.9 million in the Other segments, offset by a reduction of Ps. 95.5 million in the Sugarcane segment.
In turn, the cost of our joint ventures experienced a net increase of Ps. 20.8 million, from 14.9 million in fiscal year 2013 to Ps. 35.7 million in fiscal year 2014, mostly as a result of an increase of Ps. 19.6 million in the cost of Cresca’s Crops, from Ps. 11.6 million in fiscal year 2013 to Ps. 31.2 million in fiscal year 2014.
Similarly, inter-segment costs rose by Ps. 24.2 million from Ps. 7.6 million in fiscal year 2013 to Ps. 31.8 million in fiscal year 2014, mainly as a result of the cost of cattle sales during the year to our subsidiary Sociedad Anónima Carnes Pampeanas which was reclassified from the Cattle segment to the Agro-industrial segment.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, revenues increased by 28.0%, from Ps. 2,045.8 million in fiscal year 2013 to Ps. 2,618.0 million in fiscal year 2014.
134

Crops
Costs from the Crops segment increased 25.5%, from Ps. 1,227.8 million for fiscal year 2013 to Ps. 1,540.7 million for fiscal year 2014. Costs from the Crops segment are detailed in the following table:
    
  
Fiscal year
2014
  
Fiscal year
2013
 
  Thousands of Ps. 
Cost of sales  788,361   626,922 
Cost of production  752,319   600,910 
Total Costs  1,540,680   1,227,832 

The cost of sales from the Crops segment increased 24.2%, from Ps. 626.9 million in fiscal year 2013 to Ps. 788.4 million in fiscal year 2014, mainly as a result of:
·  a 51.2% increase in the average cost per ton of crops sold in fiscal year 2014, from Ps. 1,203 in fiscal year 2013 to Ps. 1,819 in fiscal year 2014, mainly as a result of the higher average market prices of crops; and
·  slightly offset by a 16.8% reduction in the volume of tons sold as compared to the previous fiscal year.
The cost of sales as a percentage of sales was 83.5% in fiscal year 2013 and 94.3% in fiscal year 2014.
The cost of production from the Crops segment increased 25.2% from Ps. 600.9 million in fiscal year 2013 to Ps. 752.3 million in fiscal year 2014, mainly as a result of:
·  a 23.2% increase in direct production costs during this fiscal year as compared to the previous one, mainly affected by the inflationary context that impacts both on the prices of leases and supplies used (agrochemicals and seeds);
·  slightly offset by lower production volumes in fiscal year 2014 as compared to fiscal year 2013; and
·  a larger number of hectares in operation in own farms in fiscal year 2014 as compared to fiscal year 2013.
Total cost of production per ton increased 24.5%, from Ps. 1,496 in fiscal year 2013 to Ps. 1,863 in fiscal year 2014, mainly as a result of higher direct costs of production in fiscal year 2014 as compared to fiscal year 2013.
Cattle
Costs of the Cattle segment increased 9.1%, from Ps. 147.3 million in fiscal year 2013 to Ps. 160.7 million in fiscal year 2014. Costs from the Cattle segment are detailed in the following table:
  
Fiscal year
2014
  Fiscal year 2013 
  Thousands of Ps. 
Cost of sales  76,734   74,064 
Cost of production  83,926   73,226 
Total Costs  160,660   147,290 
The cost of sales decreased by 3.6%, from Ps. 74.1 million in fiscal year 2013 to Ps. 76.7 million in fiscal year 2014, mainly as a result of:
·  a 8.2% reduction in cattle sales volumes in fiscal year 2014;
·  partially offset by a higher cost per kilogram sold in fiscal year 2014.
The cost of production from the Cattle segment rose by 14.6%, from Ps. 73.2 million in fiscal year 2013 to Ps. 83.9 million in fiscal year 2014. The higher cost of production from the Cattle segment in fiscal year 2014 was mainly attributable to:
·  higher payroll expenses;
·  higher lease expenses, as in 2014 various farms intended for livestock production in the Province of Buenos Aires were leased; and
·  higher feed costs due to the increase of animals in our own farms fattened in feedlots;
·  offset by lower costs from our subsidiary Cactus due to the discontinuance of its livestock activities in 2014.
Dairy
Costs of the Dairy segment increased 39.4%, from Ps. 74.9 million in fiscal year 2013 to Ps. 104.3 million in fiscal year 2014. Costs from the Dairy segment are detailed in the following table:
  
Fiscal year
2014
  Fiscal year 2013 
  Thousands of Ps. 
Cost of sales  51,686   37,667 
Cost of production  52,648   37,159 
Total Costs  104,334   74,826 

The cost of sales from the Dairy segment increased by 37.2%, from Ps. 37.7 million in fiscal year 2013 to Ps. 51.7 million in fiscal year 2014, mainly as a result of:
·  a 5.1% increase in milk sales volumes; and
·  a 33.5% increase in milk price levels that impacted on the cost of sales.
Cost of production of the Dairy segment increased 41.7%, from Ps. 37.2 million in fiscal year 2013 to Ps. 52.6 million in fiscal year 2014. This rise was mainly due to the impact of higher direct and indirect costs, affecting the cost of production per liter of milk, which increased from Ps. 2.01 in fiscal year 2013 to Ps. 2.73 in fiscal year 2014.
135

Sugarcane
Costs of the Sugarcane segment decreased 31.6%, from Ps. 302.2 million in fiscal year 2013 to Ps. 206.8 million in fiscal year 2014. Costs from the Sugarcane segment are detailed in the following table:
  Fiscal year 2014  Fiscal year 2013 
  Thousands of Ps. 
Cost of sales  105,618   158,152 
Cost of production  101,133   144,054 
Total Costs  206,751   302,206 

The cost of sales from the Sugarcane segment decreased by 33.2%, from Ps. 158.2 million in fiscal year 2013 to Ps. 105.6 million in fiscal year 2014, mainly as a result of:
·  a reduction of 504,2016 tons of sugarcane sold in fiscal year 2014 compared to the previous fiscal year, mainly in our subsidiary Brasilagro; and
·  offset by an increase in the average cost per ton of sugarcane sold in fiscal year 2014, from Ps. 134 per ton in fiscal year 2013 to Ps. 156 per ton in fiscal year 2014.
The cost of sales as a percentage of sales was 98.7% in fiscal year 2013 and 85.3% in fiscal year 2014.
The cost of production of the Sugarcane segment decreased 29.8%, from Ps. 144.1 million in fiscal year 2013 to Ps. 101.1 million in fiscal year 2014, mainly as a result of a lower production volume in fiscal year 2014 as compared to fiscal year 2013, caused by harvesting timing differences, as in the previous season it was concentrated from June to October 2013 and thus included the 11-12 and 12-13 harvests, while in the current season it was concentrated from April to September 2013.
The total cost of production per ton increased 23.5%, from Ps. 124 per ton in fiscal year 2013 to Ps. 154 per ton in fiscal year 2014.
Agricultural rental and Services
The cost of sales from the Agricultural rental and Services segment increased by 44.2%, from Ps. 12.1 million in fiscal year 2013 to Ps. 17.4 million in fiscal year  2014, mainly as a result of:
·  higher lease costs in Brasilagro, due to the amortization of new soil improvement works and structural expenses in the Preferencia farm, which was leased after such expenses had been incurred;
·  higher costs from seed production services, reflecting the increase in the cost of supplies (mostly in US$) and in production volumes; and
·  a 42.2% increase in irrigation service costs.
Land Transformation and Sales
Cost of sales from the Land transformation and sales segment increased 45.0%, from Ps. 5.7 million for fiscal year 2013 to Ps. 8.2 million for fiscal year 2014, mainly due to increases in salary-related items, in particular the share incentive plan.
Agro-industrial
Cost of sales from the Agro-industrial segment increased 134.4%, from Ps. 204.7 million for fiscal year 2013 to Ps. 479.7 million for fiscal year 2014, with a significantly lower incidence of raw materials from the meat packing plant on purchase prices, favoring the increase in the gross marginal contribution.
Other segments
The cost of sales of the Other segments increased 40.8%, from Ps. 71.2 million in fiscal year 2013 to Ps. 100.3 million in fiscal year 2014, mainly as a result of higher costs from the brokerage business related to the increase in the number of commodity trading transactions through FyO for Ps. 13.6 million and higher costs generated by the resale of supplies and others for Ps. 14.0 million.
Urban Properties and Investments Business
  Fiscal year ended on June 30, 2014 
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  
Common maintenance expenses
and collective promotion funds
  Segment reporting 
Shopping Center Properties  (956,359)  (2,754)  (4,321)  667,106   (296,688)
Offices  110,633)  (4,437)  (360)  69,703   (45,367)
Sales and Developments  (18,971)  (15,992)  -   -   (34,963)
Hotels  (216,768)  -   -   -   (216,768)
International  (60,404)  -   -   6,894   (53,510)
Financial Operations and Others  (983)  -   -   -   (983)
Total Urban Properties and Investments Business Costs  (1,364,118)  (23,183)  (4,681)  743,703   (648,279)


136


  Fiscal year ended on June 30, 2013    
Costs Income Statement  Interests in joint ventures  Inter-segment eliminations  
Common maintenance expenses
and collective promotion funds
  Segment reporting 
Shopping Center Properties  (763,460)  (2,090)  (2,667)  522,689   (245,528)
Offices  (117,349)  (4,810)  -   75,184   (46,975)
Sales and Developments  (12,346)  (94,212)  -   -   (106,558)
Hotels  (169,071)  -   -   -   (169,071)
International  (33,494)  -   -   1,907   (31,587)
Financial Operations and Others  (1,517)  -   -   -   (1,517)
Total Urban Properties and Investments Business Costs  (1,097,237)  (101,112)  (2,667)  599,780   (601,236)
Cost of sales from our Urban

Properties and Investments business increased 24.3%, from Ps. 1,097.2 million in fiscal year 2013 to Ps. 1,364.1 million in fiscal year 2014. This was mainly due to an increase of Ps. 192.9 million in the Shopping Center Properties segment, an increase of Ps. 6.6 million in the Sales and Developments segment, an increase of Ps. 47.7 million in the Hotels segment, and an increase of Ps. 26.9 million in the International segment, slightly offset by a decrease of Ps. 6.7 million in the Offices segment, and a decrease of Ps. 0.5 million in the Financial operations and Others segment.
In turn, costs from our joint ventures experienced a net decrease of 72.6%, from Ps. 101.1 million in fiscal year 2013 to Ps. 23.1 million in fiscal year 2014, mainly attributable to a reduction in costs as a result of fewer sales in the Horizons project.
Similarly, inter-segment costs rose by 74.1%, from Ps. 2.7 million in fiscal year 2013 to Ps. 4.7 million in fiscal year 2014, mainly as a result of changes in the cost allocation of our Shopping Center Properties.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, costs increased by 12.4%, from Ps. 601.2 million in fiscal year 2013 to Ps. 648.3 million in fiscal year 2014.
Shopping Center Properties
Costs from the Shopping Center Properties segment increased by 31.6%, from Ps. 245.5 million in fiscal year 2013 to Ps. 296.6 million in fiscal year 2014. This increase is mainly attributable to:
·  an increase of Ps. 15.6 million in salaries and wages, social security contributions and other payroll expenses;
·  a Ps. 33.5 million increase in costs from a deficit in expenses and collective promotion fund from our Shopping Centers;
·  an increase of Ps. 29.4 million in maintenance, security, cleaning, repair and similar expenses (mainly attributable to increases in security and cleaning services and utility rates); and
·  a decrease of Ps. 17.9 million in our depreciation and amortization expense.
The costs from the Shopping Center Properties segment as a percentage of revenues derived from this segment remained steady at around 47%.
Offices
Costs from the Offices segment decreased by 3.4%, from Ps. 47.0 million in fiscal year 2013 to Ps. 45.4 million in fiscal year 2014. Such decrease was attributable to the partial sales of investment property for rental completed in fiscal year 2014.
Costs in the Offices and Others segment, considering similar properties in both fiscal years on account of the inexistence of partial sales, rose by 16.5% from Ps. 68.1 million to Ps. 79.3 million, primarily owing to increased depreciation and amortization costs.
On the other hand, costs attributable to non-comparable properties decreased by 17.8%, from Ps. 5.7 million to Ps. 4.7 million, mostly as a result of the above mentioned sales.
Costs from the Offices segment, as a percentage of revenues derived from this segment, decreased by 40.6% in fiscal year 2013 to 32.8% in fiscal year 2014.
Sales and Developments
Costs from this segment often vary significantly period over period due to:
·  the non-recurrence of property sales and the agreed-upon sale price;
·  the number of properties under construction; and
·  the completion date of projects under construction.
137

Costs from our Sales and Developments segment decreased by 67.2%, from Ps. 106.6 million in fiscal year 2013 to Ps. 35.0 million in fiscal year 2014. Such decrease is mainly attributable to lower costs from the sale of Horizons units (Ps. 77.0 million); partially offset by higher costs from the sale of units at Condominios I and II (Ps. 7.6 million).
Costs from the Sales and Developments segment, as a percentage of revenues derived from this segment, decreased by 74.9% in fiscal year 2013 to 39.2% in fiscal year 2014.
Hotels
Costs from the Hotels segment increased by 28.2%, from Ps. 169.1 million in fiscal year 2013 to Ps. 216.8 million in fiscal year 2014, mainly as a result of:
·  an increase of Ps. 25.2 million in salaries and wages, social security contributions and other payroll expenses;
·  an increase of Ps. 20.1 million in the cost of food, beverages and other hotel-related expenses; and
·  an increase of Ps. 4.6 million in maintenance and repair expenses, among others.
Costs from the Hotels segment, as a percentage of revenues derived from this segment, decreased by 74.5% in fiscal year 2013 to 65.1% in fiscal year 2014.
International
Costs from the International segment increased by 80.3%, from Ps. 31.6 million in fiscal year 2013 to Ps. 53.5 million in fiscal year 2014, mainly as a result of:
·  the devaluation of the Argentine Peso and, to a lesser extent;
·  the fact that the results of Rigby 183 LLC – owner of the rental building Madison 183 - were consolidated for 12 months in fiscal year 2014 whereas such results were consolidated for 9 months in fiscal year 2013.
Costs from the International segment, as a percentage of revenues derived from this segment, decreased by 81.9% in fiscal year 2013 to 66.5% in fiscal year 2014.
Financial Operations and Others
Costs from the Financial operations and Others segment went down by 35.2% from Ps. 1.5 million in fiscal year 2013 to Ps. 1.0 million in fiscal year 2014, as a result of reduced revenues from APSAMedia S.A.’s personal financing residual activity (the continuing company of Metroshop S.A., currently merged with IRSA CP).
Costs from the Financial Operations and Others segment, as a percentage of revenues derived from this segment, decreased by 75.0% in fiscal year 2013 to 66.7% in fiscal year 2014.
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest:
  Fiscal year ended on June 30, 2014 
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  848,578   19,773   -   868,351 
Cattle  145,008   313   -   145,321 
Dairy  62,840   -   -   62,840 
Sugarcane  96,227   -   -   96,227 
Agricultural rental and Services  -   -   -   - 
Agricultural Subtotal  1,152,653   20,086   -   1,172,739 
Land Transformation and Sales  -   -   -   - 
Agro-industrial  -   -   -   - 
Other segments  -   -   -   - 
Total Agricultural Business  1,152,653   20,086   -   1,172,739 

  Fiscal year ended on June 30, 2013 
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  571,020   1,061   -   572,081 
Cattle  78,648   688   -   79,336 
Dairy  40,741   -   -   40,741 
Sugarcane  197,317   -   -   197,317 
Agricultural rental and Services  -   -   -   - 
Agricultural Subtotal  887,726   1,749   -   889,475 
Land Transformation and Sales  -   -   -   - 
Agro-industrial  -   -   -   - 
Other segments  (982)  -   -   (982)
Total Agricultural Business  886,744   1,749   -   888,493 

The Company’s revenues from initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest increased 30.0%, from Ps. 886.7 million in fiscal year 2013 to Ps. 1,152.7 million in fiscal year 2014.
In turn, the Company’s revenues from initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest derived from our interests in joint ventures increased 1.048,4%, from Ps. 1.7 million in fiscal year 2013 to Ps. 20.1 million in fiscal year 2014.
On the other hand, there were no inter-segment eliminations in connection with revenues from initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest.
Hence, according to business segment reporting and considering all our joint ventures, revenues from initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest increased by 32.0%, from Ps. 888.5 million in fiscal year 2013 to Ps. 1,172.7 million in fiscal year 2014.
138

Crops
Production income from the Crops segment increased by 51.8%, from Ps. 572.1 million in fiscal year 2013 to Ps. 868.4 million in fiscal year 2014, mainly as a result of:
·  a 44.2% increase in the average production price of crops;
·  partially offset by a 1.0% reduction in the total production volume, from 355,390 tons in fiscal year 2013 to 351,759 tons in fiscal year 2014.
As of June 30, 2014 the harvested area was 97.4% of our total sown area, compared to 94.9% as of June 30, 2013.
The following table shows the number of tons produced and total production income as of June 30, 2014 and 2013:
Crops Production Income (in tons and thousands of Ps.)
  Fiscal year ended on June 30, 
  2014  2013 
  Tons  Ps.  Tons  Ps. 
Corn  86,300   85,737   107,257   83,416 
Soybean  241,205   563,639   220,292   354,485 
Wheat  12,373   11,929   4,505   3,740 
Sorghum  4,058   1,468   5,486   3,118 
Sunflower  5,884   15,657   12,437   21,230 
Other  1,940   3,390   5,413   11,766 
Total  351,760   681,820   355,390   477,755 

Estimated results from the valuation of our crops in progress at fair value increased 186.2%, from Ps. 56.6 million in fiscal year 2013 to Ps. 162.0 million in fiscal year 2014, mainly due to an increase of 186.8% in corn crops.
Cattle
Production income from the Cattle segment increased by 83.2%, from Ps. 79.3 million in fiscal year 2013 to Ps. 145.3 million in fiscal year  2014, mainly as a result of:
·  a 10,0% increase in the average price per kilogram produced, from Ps. 8.8 per kilogram in fiscal year 2013 to Ps. 9.7 per kilogram in fiscal year 2014;
·  offset by a 9.7% reduction in the volume of cattle production, from 7,723 tons in fiscal year 2013 to 6,973 tons in fiscal year 2014.
The calving rate increased slightly, whereas the death rate recorded a mild increase during fiscal year 2014 as compared to fiscal year 2013.
The number of hectares devoted to cattle production increased from 91,053 hectares in fiscal year 2013 to 95,745 hectares in fiscal year 2014 due to a smaller number of hectares devoted to cattle production leased to third parties.
Results from cattle holdings increased 717.7%, from a gain of Ps. 9.3 million in fiscal year 2013 to a gain of Ps. 75.8 million in fiscal year 2014, mainly as a result of the inflationary context and the currency devaluation occurred in the last semester, which resulted in a significant rise in prices.
Dairy
Production income from the Dairy segment increased 54.2%, from Ps. 40.7 million in fiscal year 2013 to Ps. 62.8 million in fiscal year 2014. This increase was mainly due to:
·  the result from holding of milking cows, which increased 168.8%, from a gain of Ps. 3.2 million in fiscal year 2013 to a gain of Ps. 8.6 million in fiscal year 2014, as the inflationary context and the devaluation occurred during the last semester led to a significant rise in prices;
·  a 33.5% increase in the average price of milk, from Ps. 1.94 per liter in fiscal year 2013 to Ps. 2.59 per liter in fiscal year 2014; and
·  to a lesser extent, an increase of 4.3% in milk production volumes, from 18.5 million liters in fiscal year 2013 to 19.3 million liters in fiscal year 2014. This increase in production volume was mainly due to a higher average number of milking cows per day, from 2,439 in fiscal year 2013 to 2,588 in fiscal year 2014, partially offset by a 2.9% reduction in the efficiency level of average daily milk production per cow, from 20.8 liters in fiscal year 2013 to 20.2 liters in fiscal year 2014.
Sugarcane
Production income from the Sugarcane segment decreased 51.2%, from Ps. 197.3 million in fiscal year 2013 to Ps. 96.2 million in fiscal year 2014, mainly as a result of:
·  actual production income; and
·  a decrease in total production volume of 43.2%, from 1,156,848 tons in fiscal year 2013 to 657,547 tons in fiscal year 2014; and
·  partially offset by a 23.3% increase in the average production price of sugarcane.
The 43.2% decrease in production volume from the Sugarcane segment was mainly due to a 11.5% reduction in our average yield and harvesting timing differences, as in the previous season it was concentrated from June to October 2012 and thus included the 11-12 and 12-13 harvests, while in the current season it was concentrated from April to September 2013.
The following table shows the actual tons produced and income as of June 30, 2014 and 2013:
Sugarcane Production Income (in tons and thousands of Ps.)
  Fiscal year ended on June 30, 
  2014  2013 
  Tons  Ps.  Tons  Ps. 
Sugarcane  657,547   106,547   1,156,848   152,037 
139

Estimated results from the valuation of our sugarcane crops in progress at fair value
Estimated results from the valuation of our sugarcane crops in progress at fair value decreased significantly from a gain of Ps. 45.3 million in fiscal year 2013 to a loss of Ps. 10.3 million in fiscal year 2014 mainly generated by Brasilagro. This variation originated mainly in Brazil, and was caused by the following factors:
·  the number of estimated hectares went down from a year-on-year decrease of 2% in fiscal year 2013 to a year-on-year decrease of 12% in fiscal year 2014;
·  the estimated yields went down from a from a year-on-year increase of 3% in fiscal year 2013 to a year-on-year decrease of 1% in fiscal year 2014; and
·  the estimated unit costs went up from a year-on-year increase of 11% in fiscal year 2013 to a year-on-year increase of 18% in fiscal year 2014.
Other Segments
Income from initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest from the Other segments increased significantly, from a loss of Ps. 1.0 million in fiscal year 2013 to Ps. 0.0 million in fiscal year 2014, due to the variation in the valuation of the timber stocks at fair value in fiscal year 2014.
Changes in the net realizable value of agricultural produce after harvest
  Fiscal year ended on June 30, 2014 
Changes in the net realizable value of agricultural produce after harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (17,624)  -   -   (17,624)
Cattle  177   -   -   177 
Dairy  -   -   -   - 
Sugarcane  -   -   -   - 
Agricultural Rental and Services  -   -   -   - 
Agricultural Subtotal  (17,447)  -   -   (17,447)
Land Transformation and sales  -   -   -   - 
Agro-industrial  -   -   -   - 
Other Segments  -   -   -   - 
Total Agricultural Business  (17,447)  -   -   (17,447)

  Fiscal year ended on June 30, 2013 
Changes in the net realizable value of agricultural produce after harvest Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  11,801   -   -   11,801 
Cattle  (45)  -   -   (45)
Dairy  -   -   -   - 
Sugarcane  -   -   -   - 
Agricultural Rental and Services  -   -   -   - 
Agricultural Subtotal  11,756   -   -   11,756 
Land Transformation and sales  -   -   -   - 
Agro-industrial  -   -   -   - 
Other Segments  -   -   -   - 
Total Agricultural Business  11,756   -   -   11,756 

Income from changes in the net realizable value of agricultural produce after harvest decreased significantly, from a gain of Ps. 11.8 million in fiscal year 2013 to a loss of Ps. 17.4 million in fiscal year 2014. This was caused mainly by a reduction of Ps. 29.4 million in the Crops segment (due to the discontinuance in fiscal year 2014 of corn exports made in fiscal year 2013, which resulted in a higher valuation of corn), offset by a slight increase of Ps. 0.2 million in the Cattle segment.
No interest in joint ventures or inter-segment elimination was recorded in income from changes in the net realizable value of agricultural produce after harvest.
GROSS PROFIT
As a result of the above mentioned factors, the Company’s gross profit increased 38.9%, from Ps. 1,336.9 million in fiscal year 2013 to Ps. 1,856.9 million in fiscal year 2014. This was caused mainly by:
·  a 66.5% increase in the Agricultural Business, from a Ps. 209.9 million profit in fiscal year 2013 to a Ps. 349.4 million profit in fiscal year 2014; and
·  a 33.7% increase in the Urban Properties and Investments business, from a Ps. 1,127.0 million profit in fiscal year 2013 to a Ps. 1,507.5 million profit in fiscal year 2014.
Agricultural Business
As a result of the above mentioned factors, gross profit increased 66.5%, from Ps. 209.9 million in fiscal year 2013 to Ps. 349.4 million in fiscal year 2014.
Crops
Gross profit from this segment increased 38.0%, from Ps. 106.4 million in fiscal year 2013 to Ps. 146.9 million in fiscal year 2014.
Cattle
Gross profit from this segment increased 403.0%, from Ps. 14.9 million in fiscal year 2013 to Ps. 75.2 million in fiscal year 2014.
140

Dairy
Gross profit from this segment increased 162.9%, from Ps. 4.7 million in fiscal year 2013 to Ps. 12.4 million in fiscal year 2014.
Sugarcane
Gross profit from this segment decreased 75.9%, from Ps. 55.4 million in fiscal year 2013 to Ps. 13.3 million in fiscal year 2014.
Agricultural Rental and Services
Gross profit from this segment increased 37.3%, from Ps. 18.8 million in fiscal year 2013 to Ps. 11.8 million in fiscal year 2014.
Land Transformation and Sales
Gross loss from this segment increased 45.0%, from Ps. 5.7 million in fiscal year 2013 to Ps. 8.2 million in fiscal year 2014.
Agro-industrial
Gross profit from this segment increased significantly, from Ps. 4.2 million in fiscal year 2013 to Ps. 74.4 million in fiscal year 2014.
Other Segments
Gross profit from this segment increased 113.9%, from Ps. 11.1 million in fiscal year 2013 to Ps. 23.7 million in fiscal year 2014.
Urban Properties and Investments Business
Gross profit from the Urban Properties and Investments business increased 33.8% from Ps. 1,127.0 million in fiscal year 2013 to Ps. 1,507.5 million in fiscal year 2014. This was mainly due to an increase of Ps. 228.8 million in the Shopping Center Properties segment; an increase of Ps. 55.6 million in the Offices segment; an increase of Ps. 15.1 million in the Sales and Developments segment, an increase of Ps. 58.0 million in the Hotels segment, and an increase of Ps. 23.0 million in the International segment, partially offset by a reduction of Ps. 0.1 million in the Financial Operations and Others segment.
Shopping Center Properties
Gross profit from the Shopping Center Properties segment increased by 26.7% from Ps. 857.5 million in fiscal year 2013 to Ps. 1,086.3 million in fiscal year 2014. Gross profit from the Shopping Center Properties segment as a percentage of revenues derived from this segment stood around 78%.
Offices
Gross profit from the Offices segment increased by 32.7% from Ps. 170.2 million in fiscal year 2013 to Ps. 225.8 million in fiscal year 2014. Gross profit from the Offices segment as a percentage of revenues derived from this segment went up from 59.4% in fiscal year 2013 to 67.2% in fiscal year 2014.
Sales and Developments
Gross profit from the Sales and Developments segment increased by 42.7% from Ps. 35.4 million in fiscal year 2013 to Ps. 50.6 million in fiscal year 2014. Gross profit from the Sales and Developments segment as a percentage of revenues derived from this segment went up from 25.1% in fiscal year 2013 to 60.8% in fiscal year 2014.
Hotels
Gross profit from the Hotels segment rose by 102.2% from Ps. 56.8 million in fiscal year 2013 to Ps. 114.8 million in fiscal year 2014. Gross profit from the Hotels segment as a percentage of revenues derived from this segment went up from 25.5% in fiscal year 2013 to 34.9% in fiscal year 2014.
International
Gross profit from the International segment rose by 310.4% from Ps. 7.4 million in fiscal year 2013 to Ps. 30.4 million in fiscal year 2014. Gross profit from the International segment as a percentage of revenues derived from this segment went up from 19% in fiscal year 2013 to 36.2% in fiscal year 2014.
Financial Operations and Others
Gross profit from the Financial Operations and Others segment decreased Ps. 0.1 million from a loss of Ps. 0,3 million in fiscal year 2013 to a loss of Ps. 0,4 million in fiscal year 2014. Gross profit from the Financial Operations and Others segment as a percentage of revenues derived from this segment went up from 26.1% in fiscal year 2013 to 71.2% in fiscal year 2014.
Gain from disposal of investment properties
Gain from disposal of investment properties derived from the Urban Properties and Investments business increased 29.7%, from a Ps. 178.0 million income in fiscal year 2013 to a Ps. 230.9 million income in fiscal year 2014, mainly as a result of the sale of functional units at: Maipú 1300 building (Ps. 28.3 million), Bouchard 551 building (Ps. 24.1 million), Av. De Mayo 595 building (Ps. 19.2 million), Constitución 1159 building (Ps. 13.4 million), Costeros Dique IV building (Ps. 2.9 million) and Rivadavia 565 building (Ps. 1.1 million), offset by lower revenues from sales of units at the Libertador 498 building (Ps. 36.7 million).
Income from sale of farmlands
Income from sale of farmlands derived from the Land Transformation and Sales segment decreased 38.9%, from Ps. 149.6 million income in fiscal year 2013 to Ps. 91.4 million income in fiscal year 2014, mainly as a result of:
141

During fiscal year 2014
On June 27, 2014, Brasilagro sold a fraction of 1,164 hectares in the “Araucaria” farm located in the municipal district of Mineiros, State of Goias, Brazil, that had been purchased in 2007. After the sale, the farm has a total area of 8,178 hectares, out of which approximately 5,982 hectares are arable land. The sale price was RS. 32.5 million (equivalent to Ps. 117.5 million). In July 2014, the buyer made an initial payment of RS. 4.5 million, and the remaining balance is payable in five installments, the first of which, for RS. 4.5 million, matures in November 2014 and the last one at the time of execution of the title deed, in August 2018. The Company recorded a gain of RS. 21.0 million (equivalent to Ps. 75.8 million) for the sale of the Araucaria farm.
On May 27, 2014, Ombú Agropecuaria S.A. executed an agreement providing for the sale, subject to retention of title, of an 882.96 hectare property in the “San Cayetano I” farm for a total price of US$ 4.2 million. Out of this amount, the sum of US$ 1 million has been already collected and the balance is payable in 5 consecutive semi-annual installments, the last of which falls due in November 2016. The agreement provides that title conveyance will be registered once the full price has been paid. Possession was surrendered on the date of execution of the agreement. The Company recorded a gain of US$ 1.8 million for this sale
During fiscal year 2013
On June 19, 2013 the deed of sale for 5,613 hectares of the “La Suiza” farm, located in Villa Ángela, Province of Chaco, was executed. The transaction price was Ps. 34.9 million.  The result from the sale was a gain of Ps. 29.8 million;
On October 11, 2012, Brasilagro sold the Horizontina farm, located in the municipal district of Tasso Fragoso. Sate of Maranhão, Brazil, for a total price of RS. 75 million (equivalent to Ps. 174.8 million). The Horizontina farm has a surface area of 14,359 hectares.  The result from the sale was a gain of Ps. 53.9 million;
On April 25, 2013, Brasilagro sold an aggregate of 394 hectares of the Araucaria farm, located in the municipal district of Mineros – GO, Brazil. The sale price was RS. 11.7 million (equivalent to Ps. 26.6 million). The result from the sale was a gain of Ps. 12.6 million; and
On May 10, 2013, Brasilagro sold an aggregate of 4,895 hectares of the Cremaq farm, located in the municipal district of Ribeiro Gonçalves-PI, Brazil. The sale price was RS. 42.1 million. The result from the sale was a gain of Ps. 53.2 million.
General and Administrative Expenses
Total administrative expenses of the Company increased 53.1%, from Ps. 352.4 million for fiscal year 2013 to Ps. 539.7 million for fiscal year 2014. This was mainly due to an increase of Ps. 86.0 million in the Agricultural business and an increase of Ps. 101.3 million in the Urban Properties and Investments business.
Agricultural Business
 

 
  Fiscal year ended on June 30, 2014 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (146,512)  (681)  -   (147,193)
Cattle  (27,118)  (65)  -   (27,183)
Dairy  (5,746)  -   -   (5,746)
Sugarcane  (28,261)  -   -   (28,261)
Agricultural Rental and Services  (2,603)  (66)  -   (2,669)
Agricultural Subtotal  (210,240)  (812)  -   (211,052)
Land Transformation and Sales  (1,130)  -   -   (1,130)
Agro-industrial  (16,880)  -   -   (16,880)
Other Segments  (8,761)  (1,807)  -   (10,568)
Total Agricultural Business General and Administrative Expenses  (237,011  (2,619  -   (239,630)
 

  Fiscal year ended on June 30, 2013 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (87,683)  (1,902)  -   (89,585)
Cattle  (13,487)  (232)  -   (13,719)
Dairy  (3,125)  -   -   (3,125)
Sugarcane  (24,163)  -   -   (24,163)
Agricultural Rental and Services  (4,416)  -   -   (4,416)
Agricultural Subtotal  (132,874)  (2,134)  -   (135,008)
Land Transformation and Sales  (572)  -   -   (572)
Agro-industrial  (10,986)  -   -   (10,986)
Other Segments  (7,109)  -   -   (7,109)
Total Agricultural Business General and Administrative Expenses  (151,541)  (2,134)  -   (153,675)

General and administrative expenses from our Agricultural business increased 56.4%, from Ps. 151.5 million in fiscal year 2013 to Ps. 237.0 million in fiscal year 2014. This was mainly due to an increase of Ps. 58.8 million in the Crops segment, an increase of Ps. 13.6 million in the Cattle segment, an increase of Ps. 2.8 million in the Dairy segment, an increase of Ps. 4.1 million in the Sugarcane segment, an increase of Ps. 0.6 million in the Land transformation and sales segment, and an increase of Ps. 5.9 million in the Agro-industrial segment, slightly offset by a reduction of Ps. 1.8 million in the Agricultural rental and services segment and a reduction of Ps. 1.0 million in the Other segments.  The main causes of this variation were:
·  higher fees to Directors: in fiscal year 2014, the amounts paid were Ps. 14.4 million higher than those provisioned by the Shareholders’ Meeting for fiscal year 2013;
·  higher dues and contributions for permanent disability (pension plan): Ps. 12.9 million and 6.9 million were paid as bonus plan during fiscal year 2014; and
·  a 25% rise in expenses as a result of the inflationary context.
In turn, General and administrative expenses from our joint ventures went down 1.7%, from Ps. 2.1 million in fiscal year 2013 to Ps. 2.6 million in fiscal year 2014, mainly due to a 71% reduction in Cresca’s crop expenses, from Ps. 1.9 million in fiscal year 2013 to Ps. 0.7 million in fiscal year 2014 and a 100% increase in the expenses attributable to Cresca’s other segments, from Ps. 1.8 million in fiscal year 2014.
On the other hand, no general and administrative expenses arose from inter-segment eliminations.
Hence, according to business segment reporting and considering all our joint ventures, general and administrative expenses increased by 55.9%, from Ps. 153.7 million in fiscal year 2013 to Ps. 239.6 million in fiscal year 2014.
142

Urban Properties and Investments Business
  Fiscal year ended on June 30, 2014 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (100,710)  (148)  (680)  (101,538)
Offices  (41,169)  (145)  (631)  (41,945)
Sales and Developments  (36,955)  (511)  -   (37,466)
Hotels  (58,562)  -   (1,023)  (59,585)
International  (59,476)  -   -   (59,476)
Financial Operations and Others  (56)  -   -   (56)
Total Urban Properties and Investments Business General and Administrative Expenses  (296,928)  (804)  (2,334)  (300,066)

  Fiscal year ended on June 30, 2013 
General and Administrative Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (66,350)  (126)  (1,120)  (67,597)
Offices  (34,766)  (110)  (108)  (34,984)
Sales and Developments  (30,979)  (1,922)  -   (32,901)
Hotels  (49,337)  -   (546)  (49,883)
International  (13,158)  -   -   (13,158)
Financial Operations and Others  (250)  -   -   (250)
Total Urban Properties and Investments Business General and Administrative Expenses  (194,840)  (2,158)  (1,774)  (198,773)

General and administrative expenses from the Urban Properties and Investments business increased 52.4%, from Ps. 194.8 million in fiscal year 2013 to Ps. 296.9 million in fiscal year 2014. This was mainly due to an increase of Ps. 34.4 million in the Shopping Center Properties segment, an increase of Ps. 6.4 in the Offices segment, an increase of Ps. 9.2 million in the Hotels segment, an increase of Ps. 6.0 million in the Sales and Developments segment, and an increase of Ps. 46.3 million in the International segment, partially offset by reduction of Ps. 0.2 million in the Financial Operations and Others segment.
Administrative expenses from our joint ventures went down by 62.8%, from Ps. 2.2 million in fiscal year 2013 (this figure includes Ps. 1.9 million attributable to the Sales and Developments segment) to Ps. 0.8 million in fiscal year 2014 (this figure includes Ps. 0.5 million attributable to the Sales and Developments segment).
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, administrative expenses increased by 51.0%, from Ps. 198.8 million in fiscal year 2013 to Ps. 300.1 million in fiscal year 2014. Based on the reported business segment reporting and considering our joint ventures and inter-segment eliminations, administrative expenses as a percentage of sales increased from 8.5% in fiscal year 2013 to 10.4% in fiscal year 2014.
Shopping Center Properties
Administrative expenses from the Shopping Center Properties segment increased by 50.2%, from Ps. 67.6 million in fiscal year 2013 to Ps. 101.5 million in fiscal year 2014, mainly due to:
·  an increase of Ps. 13.3 million in salaries and wages, social security contributions and other payroll expenses;
·  an increase in Directors’ fees of Ps. 11.3 million; and
·  an increase of Ps. 5.3 million in service fees.
Administrative expenses as a percentage of revenues derived from this segment increased from 6.1% in fiscal year 2013 to 7.3% in fiscal year 2014.
Offices
General and administrative expenses from our Offices segment increased 19.9%, from Ps. 35.0 million in fiscal year 2013 to Ps. 41.9 million in fiscal year 2014, mainly as a result of a Ps. 9.1 million increase in salaries and wages, social security contributions and other payroll expenses, partially offset by a Ps. 3.1 million reduction in Directors’ fees.
General and administrative expenses as a percentage of revenues derived from this segment stood decreased from 16.1% to 15.4%.
Sales and Developments
General and administrative expenses from our Sales and Developments segment increased 13.9%, from Ps. 32.9 million in fiscal year 2013 to Ps. 37.5 million in fiscal year 2014, mainly as a result of a Ps. 6.5 million increase in salaries and wages, social security contributions and other payroll expenses, partially offset by a Ps. 2.6 million reduction in Directors’ fees.
 General and administrative expenses from the Sales and Developments segment, as a percentage of revenues derived from this segment, increased by 23.2% in fiscal year 2013 to 43.9% in fiscal year 2014.
Hotels
General and administrative expenses from the Hotels segment increased by 19.4%, from Ps. 49.9 million in fiscal year 2013 to Ps. 59.6 million in fiscal year 2014, mainly due to:
·  an increase of Ps. 4.0 million in salaries and wages, social security contributions and other payroll expenses;
·  an increase of Ps. 2.2 million in maintenance and repair expenses; and
·  a Ps. 2.5 million increase in service fees, among other items.
General and administrative expenses from the Hotels segment, as a percentage of revenues derived from this segment, decreased from 22.1% in fiscal year 2013 to 18.0% in fiscal year 2014.
143

International
General and administrative expenses from the International segment increased Ps. 46.3 million, from Ps. 13.2 million in fiscal year 2013 to Ps. 59.5 million in fiscal year 2014, mainly due to:
·  the devaluation of the Argentine Peso;
·  expenses incurred in connection with our investment in IDBD and, to a lesser extent; and
·  the fact that the results of Rigby 183 LLC – owner of the rental building Madison 183 - were consolidated for 12 months in fiscal year 2014 whereas such results were consolidated for 9 months in fiscal year 2013.
General and administrative expenses from the International segment, as a percentage of revenues derived from this segment, increased from 33.7% in fiscal year 2013 to 70.9% in fiscal year 2014.
Selling expenses
Total selling expenses of the Company increased 23.3%, from Ps. 291.2 million in fiscal year 2013 to Ps. 359.0 million in fiscal year 2014. This was mainly due to an increase of Ps. 35.0 million in the Agricultural business and an increase of Ps. 32.9 million in the Urban Properties and Investments business.
Agricultural Business
  Fiscal year ended on June 30, 2014 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (115,497)  (2,332)  -   (117,829)
Cattle  (13,769)  (85)  -   (13,854)
Dairy  (2,249)  -   -   (2,249)
Sugarcane  (4,871)  -   -   (4,871)
Agricultural Rental and Services  (754)  (25)  -   (779)
Agricultural Subtotal  (137,140)  (2,442)  -   (139,582)
Land Transformation and Sales  (3,873)  -   -   (3,873)
Agro-industrial  (54,751)  -   -   (54,751)
Other Segments  (10,726)  -   -   (10,726)
Total Agricultural Business Selling Expenses  (206,490)  (2,442)  -   (208,932)
144


  Fiscal year ended on June 30, 2013 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (115,417)  (506)  -   (115,923)
Cattle  (11,393)  (89)  -   (11,482)
Dairy  (1,842)  -   -   (1,842)
Sugarcane  (4,006)  -   -   (4,006)
Agricultural Rental and Services  (1,711)  -   -   (1,711)
Agricultural Subtotal  (134,369)  (595)  -   (134,964)
Land Transformation and Sales  (10,628)  -   -   (10,628)
Agro-industrial  (21,507)  -   -   (21,507)
Other Segments  (6,834)  (43)  -   (6,877)
Total Agricultural Business Selling Expenses  (173,338)  (638)  -   (173,976)
Selling expenses from the Agricultural Business increased 19.1%, from Ps. 173.3 million in fiscal year 2013 to Ps. 206.5 million in fiscal year 2014. This was mainly due to an increase of Ps. 2.4 million in the Cattle segment, an increase of Ps. 0.4 million in the Dairy segment, an increase of Ps. 0.9 million in the Sugarcane segment, an increase of Ps. 33.2 million in the Agro-Industrial segment, and an increase of Ps. 3.9 million in the Other segments, partially offset by a reduction of Ps. 0.1 million in the Crops segment, a reduction of Ps. 0.9 million in the Agricultural rental and services segment, and a reduction of Ps. 6.7 million in the Land transformation and sales segment.
In turn, selling expenses from our interests in joint ventures increased by 282.8% from Ps. 0.6 million in fiscal year 2013 to Ps. 2.4 million in fiscal year 2014, in connection with our Cresca joint venture.
On the other hand, no inter-segment eliminations arose from selling expenses.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, selling expenses increased by 20.1%, from Ps. 174.0 million in fiscal year 2013 to Ps. 208.9 million in fiscal year 2014.
Urban Properties and Investments Business
  Fiscal year ended on June 30, 2014 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (72,531)  (687)  (209)  (73,427)
Offices  (20,307)  (444)  -   (20,751)
Sales and Developments  (11,330)  (2,376)  -   (13,706)
Hotels  (42,178)  -   (157)  (42,335)
International  -   -   -   - 
Financial Operations and Others  110   -   -   110 
Total Urban Properties and Investments Business Selling Expenses  (146,236)  (3,507)  (366)  (150,109)

  Fiscal year ended on June 30, 2013 
Selling Expenses Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (58,048)  (747)  (112)  (58,907)
Offices  (10,886)  (474)  -   (11,360)
Sales and Developments  (6,683)  (9,773)  -   (16,456)
Hotels  (28,919)  -   -   (28,919)
International  -   -   -   - 
Financial Operations and Others  (1,588)  -   -   (1,588)
Total Urban Properties and Investments Business Selling Expenses  (106,124)  (10,994)  (112)  (117,230)

Selling expenses of the Urban Properties and Investments business increased 37.8%. from Ps. 106.1 million in fiscal year 2013 to Ps. 146.2 million in fiscal year 2014. This was mainly due to an increase of Ps. 14.4 million in the Shopping Center Properties segment, an increase of Ps. 13.4 million in the Hotels segment, an increase of Ps. 4.6 million in the Sales and Developments segment, and an increase of Ps. 9.4 million in the Offices segment, partially offset by and a reduction of Ps. 1.7 million in the Financial operations and Others segment.
In turn, selling expenses from our joint ventures went down by 68.2%, from Ps. 11.0 million in fiscal year 2013 (this figure includes Ps. 9.8 million attributable to the Sales and Developments segment) to Ps. 3.5 million in fiscal year 2014 (this figure includes Ps. 2.4 million attributable to the Sales and Developments segment). This reduction is mainly due to lower expenses from our Cyrsa joint venture in connection with the recognition of fewer sales from the Horizons project in fiscal year 2014.
Hence, according to business segment reporting and considering all our joint ventures and inter-segment eliminations, selling expenses increased by 28.0%, from Ps. 117.3 million in fiscal year 2013 to Ps. 150.1 million in fiscal year 2014. According to the business segment reporting reported and considering all our joint ventures and inter-segment eliminations, selling expenses remained steady at around 5% in both fiscal years.
Shopping Center Properties
Selling expenses from the Shopping Center Properties segment increased by 24.6%, from Ps. 58.9 million in fiscal year 2013 to Ps. 73.4 million in fiscal year 2014, mainly due to:
·  a Ps. 10.2 million increase in taxes, rates and contributions;
·  an increase of Ps. 5.2 in advertising and other selling expenses; and
·  an increase of Ps. 2.7 million in salaries and wages, social security contributions and other payroll expenses;
·  partially offset by a reduction of Ps. 4.1 million in bad debtors.
Selling expenses from our Shopping Center Properties segment as a percentage of revenues derived from this segment stood at around 5.3% in both fiscal years.
Offices
Selling expenses from our Offices segment increased by 82.7%, from Ps. 11.4 million in fiscal year 2013 to Ps. 20.8 million in fiscal year 2014, mainly due to:
·  an increase of Ps. 4.6 million in bad debtors;
·  an increase of Ps. 2.4 million in salaries and wages, social security contributions and other payroll expenses; and
·  a Ps. 2.1 million increase in taxes, rates and contributions payable, mainly as a result of an increase in turnover tax.
Selling expenses from the Offices segment, as a percentage of revenues derived from this segment, increased from 3.9% in fiscal year 2013 to 6.1% in fiscal year 2014.
Sales and Developments
Selling expenses from the Sales and Developments segment decreased by 16.7%, from Ps. 16.5 million in fiscal year 2013 to Ps. 13.7 million in fiscal year 2014, mainly as a result of:
·  a reduction of Ps. 2.7 million in taxes, rates and contributions; and
·  a reduction of Ps. 2.7 million in fees and compensation from services, partially offset by an increase of Ps. 1.3 million in salaries and wages, social security contributions and other payroll expenses, and a Ps. 0.9 million increase in commissions.
Selling expenses from the Sales and Developments segment, as a percentage of revenues derived from this segment, increased from 11.6% in fiscal year 2013 to 16.0% in fiscal year 2014.
Hotels
Selling expenses from our Hotels segment increased by 46.4%, from Ps. 28.9 million in fiscal year 2013 to Ps. 42.3 million in fiscal year 2014, mainly due to:
·  an increase of Ps. 6.5 million in taxes, rates and contributions;
·  an increase of Ps. 2.1 million in salaries and wages, social security contributions and other payroll expenses; and
·  an increase of Ps. 3.1 million in advertising and other selling expenses.
Selling expenses from our Hotels segment as a percentage of revenues derived from this segment stood at around 12.8% in both fiscal years.
145

Financial Operations and Others
Selling expenses from our Financial Operations and Others segment decreased by Ps. 1.7 million, from a loss of Ps. 1.6 million in fiscal year 2013 to a gain of Ps. 0.1 million in fiscal year 2014, mainly as a result of the recovery of the allowance for bad debts in connection with APSAMedia S.A.’s personal financing residual activity (the continuing company of Metroshop S.A., currently merged with IRSA Commercial Properties).
Other operating results, net
Other operating results, net of the Company decreased Ps. 173.2 million, from a Ps. 95.8 million gain in fiscal year 2013 to a Ps. 77.4 million loss in fiscal year 2014.
Agricultural Business
  Fiscal year ended on June 30, 2014 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (28,992)  (363)  -   (29,355)
Cattle  (1,955)  (44)  -   (1,999)
Dairy  (417)  -   -   (417)
Sugarcane  104   -   -   104 
Agricultural Rental and Services  (189)  (33)  -   (222)
Agricultural Subtotal  (31,449)  (440)  -   (31,889)
Land Transformation and Sales  (82)  -   -   (82)
Agro-industrial  (868)  -   -   (868)
Other Segments  3,261   38   -   3,299 
Total Agricultural Business Other operating results, net  (29,138)  (402)  -   (29,540)

  Fiscal year ended on June 30, 2013 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Crops  (9,914)  (1,100)  -   (11,014)
Cattle  (3,190)  (355)  -   (3,545)
Dairy  (803)  -   -   (803)
Sugarcane  (27)  -   -   (27)
Agricultural Rental and Services  (1,135)  -   -   (1,135)
Agricultural Subtotal  (15,069)  (1,455)  -   (16,524)
Land Transformation and Sales  (147)  -   -   (147)
Agro-industrial  (1,305)  -   -   (1,305)
Other Segments  21,321   -   -   21,321 
Total Agricultural Business Other operating results, net  4,800   (1,455)  -   3,345 

Other operating results, net from the Agricultural business decreased by 707.0%, from a Ps. 4.8 million gain in fiscal year 2013 to a Ps. 29.1 million loss in fiscal year 2014. This was mainly caused by a Ps. 18.3 million reduction in the Crops segment and a Ps. 18.0 million reduction in the Other segments, partially offset by a Ps. 0.9 million increase in the Agricultural rental and services segment, a Ps. 1.5 million increase in the Cattle segment, a Ps. 0.4 million increase in the Dairy segment, a Ps. 0.1 million increase in the Sugarcane segment, a Ps. 0.1 million increase in the Land transformation and sales segment, and a Ps. 0.4 million increase in the Agro-industrial segment.
In turn, other operating results, net from our interests in joint ventures increased by 72% from a Ps. 1.5 million loss in fiscal year 2013 to a Ps. 0.4 million loss in fiscal year 2014, in connection with our Cresca joint venture.
On the other hand, no inter-segment eliminations arose from operating results, net.
Hence, according to business segment reporting and considering all our joint ventures, other operating results, net increased by 983.1%, from Ps. 3.3 million in fiscal year 2013 to Ps. 29.5 million in fiscal year 2014.
Crops
Other operating results of the Crops segment decreased Ps. 18.3 million, from a Ps. 11.0 million loss in fiscal year 2013 to a Ps. 29.4 million loss in fiscal year 2014, mainly as a result of the commodity derivatives held by Brasilagro and Cresud (Ps. 20.6 million), partially offset by the charge to income of Brasilagro’s contingency allowance for Ps. 12.1 million.
Other Segments
Other operating results, net of the Other segments decreased Ps. 18.0 million, from a Ps. 21.3 million income in fiscal year 2013 to a Ps. 3.3 million income in fiscal year 2014.
The rest of the segments of the Agricultural business did not record significant changes.
Urban Properties and Investments Business
  Fiscal year ended on June 30, 2014 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (45,953)  (723)  108   (46,568)
Offices  (1,786)  (2,297)  1,023   (3,060)
Sales and Developments  8,300   (163)  -   8,137 
Hotels  (2,680)  -   -   (2,680)
International  (895)  -   -   (895)
Financial Operations and Others  (2,856)  -   -   (2,856)
Total Urban Properties and Investments Business Other operating results, net  (45,870)  (3,183)  1,131   (47,922)
146


  Fiscal year ended on June 30, 2013 
Other operating results, net Income Statement  Interests in joint ventures  Inter-segment eliminations  Segment reporting 
Shopping Center Properties  (45,199)  (475)  654   (45,020)
Offices  743   (990)  -   (247)
Sales and Developments  6,374   (32)  -   6,342 
Hotels  (369)  -   -   (369)
International  135,082   -   -   135,082 
Financial Operations and Others  (3,363)  -   -   (3,363)
Total Urban Properties and Investments Business Other operating results, net  93,268   (1,497)  654   92,425 

Other operating results, net decreased from a Ps. 93.3 million gain in fiscal year 2013 to a Ps. 45.9 million net loss in fiscal year 2014, mainly due to a non-recurring gain of Ps. 137.0 million recognized in fiscal year 2013 as a result of the acquisition of an additional interest in Rigby 183 LLC.
The effect from the consolidation of our joint ventures is not material on this line. According to the information by segment and considering all our joint ventures and inter-segment eliminations, other operating results, net decreased from a net gain of Ps. 92.4 million in fiscal year 2013 to a net loss of Ps. 47.9 million in fiscal year 2014.
Shopping Center Properties
Other operating results, net from the Shopping Center Properties segment increased by 3.6%, from Ps. 45.0 million in fiscal year 2013 to Ps. 46.6 million in fiscal year 2014, mainly due to:
·  an increase in lawsuits and contingencies of Ps. 1,8 million; and
·  an increase in donations of Ps. 0.6 million;
·  partially offset by a Ps. 0.3 million decrease in the project analysis and assessment expense.
The net loss from other operating results, as a percentage of revenues derived from the Shopping Center Properties segment, decreased from 4.1% in fiscal year 2013 to 3.4% in fiscal year 2014.
Offices
The net loss from other operating results of our Offices segment increased Ps. 2.9 million from Ps. 0.3 million in fiscal year 2013 to Ps. 3.1 million in fiscal year 2014, mainly due to:
·  a non-recurring recovery from the allowance for asset impairment recorded in 2013 for Ps. 1.8 million; and
·  an increase of Ps. 0.7 million in lawsuits and other contingencies.
The net loss from operating results of our Offices segment, as a percentage of revenues derived from this segment, increased from 0.1% in fiscal year 2014 to 1.1% in fiscal year 2014.
Sales and Developments
The net gain from other operating results of our Sales and Developments segment increased Ps. 1.8 million from Ps. 6.3 million in fiscal year 2013 to Ps. 8.1 million in fiscal year 2014, mainly due to:
·  an “admission fee” charged in connection with the sale of a hotel plot in Neuquén;
·  a Ps. 2.2 million decrease in the project analysis and assessment expense; and
·  a reduction in lawsuits and contingencies during this year;
·  partially offset by a non-recurring gain of Ps. 15.1 million from the sale of our equity interest in Canteras Natal Crespo S.A. (one of the Company’s joint ventures), recognized in fiscal year 2013.
Hotels
The net loss from operating results of our Hotel segment increased by Ps. 2.3 million, from Ps. 0.4 million in fiscal year 2013 to Ps. 2.7 million in fiscal year 2014, mainly as a result of an increase in the reserve for lawsuits and other contingencies.
The net loss from operating results of our Hotels segment, as a percentage of revenues derived from this segment, increased from 0.2% in fiscal year 2013 to 0.8% in fiscal year 2014.
International
Other operating results, net from this segment decreased from a Ps. 135.1 million net gain in fiscal year 2013 to a Ps. 0.9 million net loss in fiscal year 2014, mainly due to a non-recurring gain of Ps. 136.0 million generated in fiscal year 2013 as a result of the acquisition of an additional interest in Rigby 183 LLC.
147

Financial Operations and Others
The net loss from other operating results from our Financial Operations and Others segment decreased by Ps. 0.5 million from Ps. 3.4 million in fiscal year 2013 to Ps. 2.9 million in fiscal year 2014, mainly due to lower taxes deducted by BHSA on lower dividends distributed in fiscal year 2014 to our subsidiaries Ritelco and Tyrus.
Operating results
As a result of the above mentioned factors, the operating results of the Company increased by Ps. 86.4 million (7.7%), from a gain of Ps. 1,116.6 million in fiscal year 2013 to a gain of Ps. 1,203.0 million in fiscal year 2014.
Agricultural Business
Profit / (loss) from operations of the Agricultural business decreased Ps. 72.5 million (206.1%), from an income of Ps. 35.2 million in fiscal year 2013 to a loss of Ps.37.3 million in fiscal year 2014.
Crops
Profit / (loss) from operations of this segment decreased Ps. 37.4 million (34.0%) from a Ps. 110.1 million loss in fiscal year 2013 to a Ps. 147.5 million loss in fiscal year 2014.
Cattle
Profit / (loss) from operations of this segment increased Ps. 45.9 million (332.6%), from a loss of Ps. 13.8 million in fiscal year 2013 to an income of Ps.32.1 million in fiscal year 2014.
Dairy
Profit / (loss) from operations of this segment increased Ps. 5.1 million (488.5%), from a loss of Ps. 1.0 million in fiscal year 2013 to an income of Ps.4.0 million in fiscal year 2014.
Sugarcane
Profit / (loss) from operations of this segment decreased by Ps. 46.9 million (172.5%), from a gain of Ps. 27.2 million in fiscal year 2013 to a loss Ps.19.7 million in fiscal year 2014.
Agricultural Rental and Services
Profit / (loss) from operations of this segment decreased by Ps. 3.4 million (29.7%), from a Ps. 11.5 million gain in fiscal year 2013 to a Ps. 8.1 million gain in fiscal year 2014.
Land Transformation and Sales
Profit / (loss) from operations of this segment decreased by Ps. 54.5 million (41.1%), from a gain of Ps.132.6 million in fiscal year 2013 to a gain of Ps.78.0 million in fiscal year 2014.
Agro-industrial
Profit / (loss) from operations of this segment decreased by Ps. 31.5 million (106.4%), from a loss of Ps. 29.6 million in fiscal year 2013 to a gain of Ps.1.9 million in fiscal year 2014.
Other Segments
Profit / (loss) from operations of this segment decreased by Ps. 12.7 million (69.0%), from a gain of Ps.18.4 million in fiscal year 2013 to a gain of Ps.5.7 million in fiscal year 2014.
Urban Properties and Investments Business
Profit / (loss) from operations of this business increased Ps.158.9 million (14.7%) from an income of Ps.1,081.4 million in fiscal year 2013 to an income of Ps.1,240.3 million in fiscal year 2014. This was mainly due to an increase of Ps. 316.2 million in the Shopping Center Properties, Offices, Sales and Developments, Hotels and Financial operations and Others segment, partially offset by a Ps. 159.3 million reduction in the International segment.

Shopping Center Properties
Profit / (loss) from operations of our Shopping Center Properties segment increased by 26.1%, from a gain of Ps. 686.0 million in fiscal year 2013 to a gain of Ps. 864.7 million in fiscal year 2014.
Profit / (loss) from operations of our Shopping Center Properties segment as a percentage of revenues derived from this segment stood at approximately 62.0% in both fiscal years.
Offices
Profit / (loss) from operations of our Offices segment increased by 29.5%, from a gain of Ps. 123.6 million in fiscal year 2013 to a gain of Ps. 160.0 million in fiscal year 2014.
Profit / (loss) from operations of our Offices segment as a percentage of revenues derived from this segment increased from 43.5% in fiscal year 2013 to 48.0% in fiscal year 2014.
Sales and Developments
Profit / (loss) from operations of our Sales and Developments segment increased by 40.0%, from a gain of Ps. 170.4 million in fiscal year 2013 to a gain of Ps. 238.5 million in fiscal year 2014.
Profit / (loss) from operations of our Sales and Developments segment, as a percentage of the revenues derived from this segment, increased from 124.2% in fiscal year 2013 to 285.8% in fiscal year 2014.
148

Hotels
Profit / (loss) from operations of our Hotels segment went from a loss of Ps. 22.4 million in fiscal year 2013 to a gain of Ps. 10.2 million in fiscal year 2014.
International
Profit / (loss) from operations of our International segment decreased from a gain of Ps. 129.3 million in fiscal year 2013 to a loss of Ps. 30.0 million in fiscal year 2014.
Financial Operations and Others
Profit / (loss) from operations of our Financial Operations and Others segment increased from a loss of Ps. 5.5 million in fiscal year 2013 to a loss of Ps. 3.2 million in fiscal year 2014.
Share of (loss) / profit of associates and joint ventures
Share of (loss) / profit of associates and joint ventures decreased Ps. 398.9 million, from a Ps. 9.8 million loss in fiscal year 2013 to a Ps. 408.7 million loss in fiscal year 2014, mainly due to:
·  a reduction of Ps. 415.9 million in the share of (loss) / profit from our interest in companies related to our Urban Properties and Investments business recorded in fiscal year 2014;
·  partially offset by a Ps. 2.3 million increase in the Agricultural business, mainly as a result of the revenues derived from the investment in Agro-Uranga (Crops segment).
Net financial results
We had a higher net financial loss of Ps. 1,665.6 million, from a loss of Ps. 908.8 million in fiscal year 2013 to a loss of Ps. 2,574.4 million in fiscal year 2014. This was primarily due to:
·  a higher loss of Ps. 1,417.8 million in net exchange differences in fiscal year 2014;
·  a higher loss of Ps. 207.7 million in net financial interest recorded in fiscal year 2014;
·  a higher income of Ps. 23.9 million in revaluation of receivables from sale of farms in fiscal year 2014;
·  a higher loss of Ps. 358.2 million in derivative financial instruments in fiscal year 2014; and
·  a higher income of Ps. 294.7 million generated by the results from financial transactions and other in fiscal year 2014.
Our net financial loss in fiscal year 2014 was mainly attributable to (i) a Ps. 1,900 million loss generated by exchange differences mainly as a result of a higher liability position in US Dollars due to the issuance of new series of notes; (ii) a loss of Ps. 737.9 million generated by interest accrued on debt financing, mainly due to increased indebtedness and higher interest rates; and (iii) a loss of Ps. 315.6 million generated mainly by derivative instruments due to IDBD’s tender offer.
There was a 50% variation in the U.S. Dollar buying rate during fiscal year 2014 (it increased from Ps. 5.348 as of June 30, 2013 to Ps. 8.033 as of June 30, 2014) as compared to the previous fiscal year, when the U.S. Dollar quotation had experienced a smaller variation, of 19% (from Ps. 4.487 as of June 30, 2012 to Ps. 5.348 as of June 30, 2013).
Income tax
Our income tax expense decreased Ps. 422.9 million, from a Ps. 33.5 million loss in fiscal year 2013 to Ps. 389.4 million income in fiscal year 2014. The Company recognizes the income tax expense on the basis of the deferred tax liability method, thus recognizing temporary differences between accounting and tax assets and liabilities measurements.  The main temporary differences for the Agricultural business derive from valuation of cattle stock and sale and replacement of property, plant and equipment, while those corresponding to the Urban Properties and Investments business derive from the sale and replacement of investment properties.
For purposes of determining the deferred assets and liabilities, the tax rate expected to be in force at the time of their reversion or use, according to the legal provisions enacted as of the date of issuance of these financial statements, has been applied to the identified temporary differences and tax losses.
Profit / (loss) for the Fiscal Year
Due to the above mentioned factors, our profit / (loss) for the fiscal year decreased by Ps. 1,562.7 million (1,012.8%) from a net income Ps. 154.3 million for fiscal year 2013 to a net loss Ps. 1,408.4 million in fiscal year 2014. Profit / (loss) for fiscal years 2014 and 2013 is attributable to the controlling company’s shareholders and non-controlling interest, as per the following detail:
·  Profit / (loss) attributable to the controlling company’s shareholders decreased by Ps. 1,041.0 million, from a loss of Ps. 26.9 million in fiscal year 2013 to a loss of Ps. 1,067.9 million in fiscal year 2014; and
·  the non-controlling interest in controlled companies decreased by Ps. 521.7 million (287.9%), from an income of Ps. 181.2 million in fiscal year 2013 to a loss of Ps. 340.5 million in fiscal year 2014, mainly due to a reduction of Ps. 69.2 million in Brasilagro, a reduction of Ps. 392.2 million in our subsidiary IRSA, and a reduction of Ps. 59.9 million in other companies from the Urban Properties and Investments business.
 
Liquidity
 
Our main sources of liquidity have historically been:
 
·  cash generated by operations;
·  
cash generated by operations;
 
·  cash generated by our issuance of common shares and non-convertible notes;
 
·  cash proceeds from borrowings (including cash from bank loans and overdrafts) and financing arrangements (including cash from the exercise of warrants); and
 
·  cash proceeds from sale of investment and trading properties and property, plant and equipment (including cash proceeds from the sale of farmlands).
 
149

Our main cash requirements or uses (other than in connection with our operating activities) have historically been:
 
·  acquisition of subsidiaries and non-controlling interest in subsidiaries;
·  
acquisition of subsidiaries and non-controlling interest in subsidiaries;
 
·  acquisition of interest in associates and joint ventures;
·  
acquisition of interest in associates and joint ventures;
 
·  capital contributions to associates and joint ventures;
·  
capital contributions to associates and joint ventures;
 
·  capital expenditures in property, plant and equipment (including acquisitions of farmlands) and investment and trading properties;
·  
capital expenditures in property, plant and equipment (including acquisitions of farmlands) and investment and trading properties;
 
·  payments of short-term and long-term debt and payment of the related interest expense; and
·  
payments of short-term and long-term debt and payment of the related interest expense; and
 
·  payment of dividends.
·  
payment of dividends.
 
Our liquidity and capital resources include our cash and cash equivalents, proceeds from operating activities, sales of investment properties, trading properties and farms, obtained bank borrowings, long-term debts incurred and capital funding.
 
Cash Flows
 
The table below shows our cash flow for the fiscal years ended June 30, 2016, 2015 2014 and 2013:2014:
 
  For the fiscal year ended June 30,
  2015  2014  2013 
  (in millions of Pesos)
Net cash generated by operating activities  494.5   883.2   648.5 
Net cash generated from/ (used in) investing activities  873.9   (885.9)  (93.0)
Net cash used in financing activities  (1,778.2)  (446.2)  (17.2)
Net (decrease) increase in cash and cash equivalents  (409.8)  (449.0)  538.3 
 
For the fiscal year ended June 30,
 
2016
2015
2014
 (in million of Pesos)
    
Net cash generated from operating activities4,055494883
Net cash generated from / (used in) investing activities8,652872(886)
Net cash used in financing activities                                                                    (4,495)(1,776)         (446)
Net increase(decrease)  in cash and cash equivalents8,212(410)(449)
    
    
As of June 30, 2015, we had cash and cash equivalents of Ps. 633.7 million, a decrease compared to Ps. 1,003.0 million as of June 30, 2014. The decrease was primarily due to cash outflows related with the cancellation of non-convertible notes, financial loans and financial interests for Ps. 3,205.9 million, the repurchase of non-convertibles notes and equity interest for Ps. 337.9 million, the payment of derivative financial instruments for Ps. 233.1 million, the acquisition of investments in financial assets for Ps. 4,609.6 million, the acquisition of investment properties for Ps. 249.7 million, the acquisition of property, plant and equipment for Ps. 220.6 million, and capital contributions and acquisitions of interest in associates and joint ventures for Ps. 1,368.0 millions; partially offset by the cash inflows from operating activities of Ps. 494.5 million, the issuance of non-convertible notes for Ps. 693.4 million, an increase in the short and long-term debt of Ps. 1,497.8 million, and the disposal of investments in financial assets, investment properties and farms for Ps. 4,486.6 million, Ps. 2,446.7 million and Ps. 326.0 million, respectively.
As of June 30, 2014, we had cash and cash equivalents of Ps. 1,003.0 million, a decrease compared to Ps. 1,047.6 million as of June 30, 2013. The decrease was primarily due to cash inflows from operating activities of Ps. 883.2 million, the issuance of non-convertible notes for Ps. 1,051.8 million, an increase in the short and long-term debt of Ps. 793.5 million, and the disposal of investments in financial assets, investment properties and farms for Ps. 3,870.8 million, Ps. 402.2 million and Ps. 125.9 million, respectively;  partially offset by the cash outflows related with the cancellation of non-convertible notes, financial loans and financial interests for Ps. 1,966.6 million, the acquisition of investments in financial assets for Ps. 3,683.0 million, the payment of dividends for Ps. 243.6 million, the acquisition of investment properties for Ps. 271.9 million, the acquisition of property, plant and equipment for Ps. 133.4 million, and capital contributions and acquisitions of interest in associates and joint ventures for Ps. 1,192.1 millions.
As of June 30, 2015,2016, we had negative working capital of Ps. 251.2478 million (calculated as current assets less current liabilities as of such date).
 
As of June 30, 2016, in our Agricultural business, we had positive working capital of Ps. 595 million (calculated as current assets less current liabilities as of such date).
As of June 30, 2016, in our Urban Properties and Investments Business, our Operation Center in Argentina had negative working capital of Ps. 185 million while our Operations Center in Israel had negative working capital of Ps.888 million, resulting in a consolidated negative working capital of Ps. 1073 million (calculated as current assets less current liabilities as of such date).
At the same date, our Operations Center in Argentina had cash and cash equivalents of Ps.95 million while our Operations Center in Israel had cash and cash equivalents of Ps.13,771 million, totaling consolidated cash and cash equivalents for Ps.13,866 million.
IDBD has diverse debts containing certain covenants which have been successively negotiated, resulting in several waivers expiring in December 2016. IDBD estimates that if the original covenants of such loans were to become effective again, it would not be able to honor them. Non-compliance could have the effect of creditors requiring immediate repayment of the debt. As a holding company, IDBD’s main sources of funds derive from the dividends distributed by its subsidiaries, which have experienced a reduction in recent years. Yet, there are restrictions as to the payment of dividends based on the indebtedness level in some subsidiaries. IDBD has projected future cash flows and expects to have the required liquidity to meet its commitments by issuing new debt in Israel, selling financial assets such as Clal and dividend payouts by Clal. IDBD could also secure additional financing through the private issuance of equity securities. All factors mentioned above, mainly (i) IDBD’s current financial position and need of financing to honor its financial debt and other commitments, (ii) the renegotiation underway with financial creditors, and (iii) the term set by Israel’s governmental authorities to sell the equity interest in Clal and the potential effects of such sale, in particular, on its market value, raise significant uncertainties as to IDBD’s capacity to continue as a going-concern.
The financial position of IDBD and its subsidiaries at the operations center in Israel does not affect the financial position of IRSA and its subsidiaries at the operations center in Argentina. The operation center in Argentina is not facing financial constraints and is compliant with their financial commitments. We believe our working capital (calculated by subtracting current liabilities from current assets) and our cash from operating activities are adequate for our present and future requirements. In the event thatIf cash generated from our operations is at any time insufficient to finance our working capital, we would seek to finance such working capital needs through debt financing or equity issuances or through the sale of selected non-coreselective assets.

In addition, the commitments and other covenants resulting from IDBD’s debt do not have impact on IRSA since such debt has no recourse against IRSA and it is not granted by IRSA’s assets. We do not have significant uncertainties as to the capacity as a group to operate as a going-concern perspective, with such uncertainties being limited to the operation center in Israel. For more information about our liquidity please see “Item 3(d) Risk Factors” and “Recent Developments.”Developments”.
 
On September 10, 2015,8, 2016, IRSA Commercial Properties closed the sale to an unrelated third party of 5,963 square meters in the Intercontinental Plaza Building. The purchase price was Ps.324.5 million, which has been fully paid. For more information see “Recent Development”.
On September 18, 2015, IRSA Commercial Properties issued Series IVII and VIII Notes in an aggregate principal amount of Ps.407.3 million.Ps.384.2 million and US$184.5 million, respectively. Series IVII and VIII Notes have a maturity of 1836 months from its issue date. In addition, on October 16, 2015 IRSA filed to de CNV the updated document of the Global Note Program for up to US$ 300,000,000.For more information, please see “Recent Developments”.
 
On November 6, 2015, IRSA closedAugust 2, 2016, IDBD issued a new Series of Notes in the sale toIsraeli market for NIS 325 million, bearing an unrelated third partyadjustable interest rate and maturing in 2019. Furthermore, DIC expended it issuance of 864 square meters of Maipú 1300 Builidng, that represent two floors of office space, and 4 parking units. After such sale, 2,134 square feet remain in our portfolio. The purchase price was U$S 3 million, which has been fully paid.
150

Notes due 2025 for an additional NIS 360 million. For more information, please see “Recent Developments”.
 
Net cash provided by operating activities
 
Fiscal Year ended June 30, 2016 and 2015.
Net cash provided by operations increased from a net cash inflow of Ps. 494 million during fiscal year ended June 30, 2015 to a net cash inflow of Ps. 4,055 million during fiscal year ended June 30, 2016. The increase in net cash provided by operating activities was primarily due to an increase in inventories of Ps. 53 million; a decrease in trade and other receivables of Ps. 7 million; a decrease in trading properties of Ps. 229 million, an increase in trade and other payables for Ps. 37 million that was partially offset by an increase of Ps. 50 million in derivative financial instruments, a decrease in payroll and social security liabilities of Ps. 33 million and an increase of Ps. 143 million in provisions during fiscal year ended June 30, 2016 compared to fiscal year ended June 30, 2015.
Our operating activities resulted in net cash inflows of Ps. 4,055 million for the fiscal year ended on June 30, 2016, mainly due to operating gains of Ps. 5,035 million, an increase of 182 million in trade and other payables, a decrease of Ps. 135 million in biological assets, a decrease in trading properties of Ps. 229 million and an increase of Ps. 52 million in payroll and social security liabilities, partially offset by the income tax paid of Ps. 811 million, an decrease of Ps. 79 million in inventories, and an increase of Ps. 487 million in trade and other receivables.
Fiscal Year ended June 30, 2015 and 20142014.
 
Net cash provided by operations decreased from a net cash inflow of Ps.883.2Ps. 883 million during fiscal year ended June 30, 2014 to a net cash inflow of Ps. 494.5494 million during fiscal year ended June 30, 2015. The decrease in net cash provided by operating activities was primarily due to a decrease in biological assets of Ps. 171.9172 million and an increase of Ps. 748.2748 million in trade and other receivables; that was partially offset by an increase of Ps. 295.6296 million in operating gains, a decrease in inventories of Ps. 65.265 million and an increase of Ps. 314.7315 million in trade and other payables during fiscal year ended June 30, 2015 compared to fiscal year ended June 30, 2014.
 
Our operating activities resulted in net cash inflows of Ps. 494.5494 million for the fiscal year ended on June 30, 2015, mainly due to operating gains of Ps. 1,199.71,199 million, an increase of Ps. 144.8145 million in trade and other payables, a decrease of Ps. 114.6115 million in biological assets, and an increase of Ps. 84.985 million in payroll and social security liabilities, partially offset by the income tax paid of Ps. 429.9430 million, an decrease of Ps. 131.7132 million in inventories, and an increase of Ps. 748.2480 million in trade and other receivables.
Fiscal Year ended June 30, 2014 and 2013
Net cash provided by operations increased from a net cash inflow of Ps.648.5 million during fiscal year ended June 30, 2013 to a net cash inflow of Ps. 883.2 million during fiscal year ended June 30, 2014. The increase in net cash provided by operating activities was primarily due to an increase of Ps. 156.1 million in operating gains, a decrease of Ps. 533.7 million in trade and other receivables, and a decrease in derivative financial instruments of Ps. 25.7 million; that was partially offset by a decrease of Ps. 390.0 million in trade and other payables and an increase in inventories of Ps. 139.9 million during fiscal year ended June 30, 2014 compared to fiscal year ended June 30, 2013.
Our operating activities resulted in net cash inflows of Ps. 883.2 million for the fiscal year ended on June 30, 2014, mainly due to operating gains of Ps. 903.8 million, a decrease of Ps. 268.3 million in trade and other receivables, a decrease of Ps. 286.6 million in biological assets, and an increase of Ps. 71.6 million in payroll and social security liabilities, partially offset by the income tax paid of Ps. 279.9 million, an increase of Ps. 196.8 million in inventories, and a decrease of Ps. 170.0 million in trade and other payables.
 
Net cash used in investing activities
 
Fiscal Year ended June 30, 20152016 and 20142015.
 
Net cash used in investing activities increased from a net cash outflow of Ps. 885.9872 million during fiscal year ended on June 30, 2015 to a net cash inflow of Ps. 8,652 million during fiscal year ended on June 30, 2016. This variation was mainly due to an increase in cash incorporated by business combination of Ps. 9,193 million, a decrease in acquisition of interest in associates and joint ventures of Ps. 1,242 million, an increase in disposal of investment in financial assets for Ps. 9,642 million; this increase was partially offset by an increase purchases of investment properties of Ps. 638 million, a decrease of Ps. 1,053 million from sale of investment properties and an increase in purchases of property, plant and equipment of Ps. 924 million, an increase in acquisition of investment in financial instruments of Ps. 8,903 million and an increase in loans granted to associates and joint ventures of Ps. 852 million during fiscal year ended June 30, 2016 compared to fiscal year ended June 30, 2015.
Our investing activities resulted in net cash inflows of Ps. 8,652 million for the fiscal year ended on June 30, 2016 mainly due to the sale of financial instruments, investment properties and associates and joint ventures of Ps. 14,129 million, and Ps. 1,394 million, respectively, and cash incorporated by business combination of Ps. 9,193 million and dividends received of Ps. 593 million; partially offset by cash outflows related to acquisitions of investments in financial assets of Ps. 13,513 million, investment properties of Ps. 888 million, property, plant and equipment (including suppliers advances) of Ps. 1,152 million, loans granted to associates and joint ventures of Ps. 852 million, and capital contributions to associates and joint ventures of Ps. 207 million.

Fiscal Year ended June 30, 2015 and 2014.
Net cash used in investing activities increased from a net cash outflow of Ps. 886 million during fiscal year ended on June 30, 2014 to a net cash inflow of Ps. 873.9872 million during fiscal year ended on June 30, 2015. This variation was mainly due to a decrease in acquisition of investment properties forof Ps. 22.222 million, an increase of cash arising from the sale of farms forof Ps. 200.0201 million, an increase in the inflows of cash arising from the sale of financial instruments forof Ps. 615.8616 million and the sale of investment properties forof Ps. 2,044.52,045 million; this increase was partially offset by an increase in acquisitions of investments in financial assets forof Ps. 926.6927 million, a decrease in acquisition of interest in associates and joint ventures forof Ps. 109.8110 million and an increase in acquisition of property, plant and equipment forof Ps. 87.288 million during fiscal year ended June 30, 2015 compared to fiscal year ended June 30, 2014.
 
Our investing activities resulted in net cash inflows of Ps. 873.9872 million for the fiscal year ended on June 30, 2015 mainly due to the sale of financial instruments, farms, investment properties and associates and joint ventures for Ps. 4,486.64,487 million, Ps. 326.0328 million, Ps. 2,446.72,447 million, and Ps. 55,856 million, respectively, and dividends collected for Ps. 18.018 million; partially offset by cash outflows related to acquisitions of investments in financial assetsinstruments for Ps. 4,609.64,610 million, investment properties for Ps. 249.7250 million, property, plant and equipment (including advances) for Ps. 234.6236 million and subsidiaries, associates and joint ventures for Ps. 1,241.61,242 million, and capital contributions to associates and joint ventures for Ps. 126.4 million.
Fiscal Year ended June 30, 2014 and 2013
Net cash used in investing activities increased from a net cash outflow of Ps. 93.0 million during fiscal year ended on June 30, 2013 to a net cash outflow of Ps. 885.9 million during fiscal year ended on June 30, 2014. This variation was mainly due to an increase in acquisitions of investments in financial assets for Ps. 1,944.0 million, an increase in acquisition of interest in associates and joint ventures for Ps. 1,105.9 million, an increase in acquisition of investment properties for Ps. 58.9 million, and a decrease in the inflows of cash arising from the sale of  farms for Ps. 104.5 million; this increase was partially offset by an increase in the inflows of cash arising from the sale of financial instruments for Ps. 2,002.3 million and the sale of investment properties for Ps. 273.6 million, and a decrease in the outflows of cash applied in loans granted to associates and joint ventures for Ps. 57.7 million and acquisition of subsidiaries for Ps. 117.9 million during fiscal year ended June 30, 2014 compared to fiscal year ended June 30, 2013.
Our investing activities resulted in net cash outflows of Ps. 885.9 million for the fiscal year ended on June 30, 2014 mainly due to acquisitions of investments in financial assets for Ps. 3,683.0 million, investment properties for Ps. 271.9 million, property, plant and equipment (including advances) for Ps. 163.1 million and subsidiaries, associates and joint ventures for Ps. 1,131.8 million, and capital contributions to associates and joint ventures for Ps. 60.3 million; partially offset by cash inflows related to the sale of financial instruments, farms, investment properties and associates and joint ventures for Ps. 3,870.8 million, Ps. 125.9 million, Ps. 402.2 million, and Ps. 22.8 million, respectively, and dividends collected for Ps. 22.4126 million.
 
Net cash used in financing activities
 
Fiscal Year ended June 30, 20152016 and 20142015.
 
Net cash used in financing activities decreased from a net cash outflow of Ps.446.2Ps.1,776 million during fiscal year ended June 30, 2015 to a net cash outflow of Ps. 4,495 million during fiscal year ended June 30, 2016, mainly due to an increase of Ps. 3,219 million in payments of non-convertible notes, an increase in payments of borrowings of Ps. 9,697 million, an increase of Ps. 1,160 million in acquisitions of non-controlling interest in subsidiaries, an increase in interest paid for Ps. 3,308, and an increase payment of derivative financial instruments of Ps. 387 million; the decrease was partially offset by an due to an increase cash inflows associated with the issuance of non-convertible notes of Ps. 7,319 million, increase in the cash arising from borrowings from financial entities of Ps. 5,689 million, an increase in proceeds from derivative financial instruments of Ps. 2,091 million, during fiscal year ended June 30, 2016 compared to fiscal year ended June 30, 2015.
Our financing activities resulted in net cash outflows of Ps. 4,495 million for the fiscal year ended on June 30, 2016 mainly due to the cancellation of non-convertible notes, financial loans and financial interests for Ps. 4,291 million, Ps. 11,031 million and Ps. 4,107 million, respectively, acquisition of non-controlling interest in subsidiaries for Ps. 1,192, payment of dividends for Ps. 239 million, payment of derivative financial instruments for Ps. 620 million, and repurchase of non-convertible notes for Ps. 209 million; partially offset by cash inflows associated with the issuance of non-convertible notes for Ps. 8,012 million, borrowings taking from financial entities for Ps. 7,187 million and from derivative financial instruments for Ps. 2,093 million.
Fiscal Year ended June 30, 2015 and 2014.
Net cash used in financing activities decreased from a net cash outflow of Ps.446 million during fiscal year ended June 30, 2014 to a net cash outflow of Ps. 1,778.21,776 million during fiscal year ended June 30, 2015, mainly due to an increase of Ps. 494.9494. million in the cancellation of non-convertible notes and financial interests, an increase of Ps. 744.4744 million in payments of financial loans, a decrease in the inflow of cash arising from the issuance of non-convertible notes forof Ps. 358.4359 million, an increase of Ps. 31.131 million in acquisitions of non-controlling interest, an increase in the repurchase of non-convertible notes forof Ps. 141.6 million,142, a decrease in the proceeds from derivative financial instruments forof Ps. 60.760 million and a decrease of Ps. 123.1123 million in contributions from non-controlling interest; the decrease was partially offset by an increase in the cash arising from borrowings from financial entities forof Ps. 704.3705 million, a decrease in dividends paid forof Ps. 210.1210 million, a decrease in the repurchase of non-convertible notes forequity interest of Ps. 64.965 million and an increased of Ps. 181.5182 million in sale of equity interest in subsidiaries to non-controlling interest, during fiscal year ended June 30, 2015 compared to fiscal year ended June 30, 2014.
 
Our financing activities resulted in net cash outflows of Ps. 1,778.21,776 million for the fiscal year ended on June 30, 2015 mainly due to the cancellation of non-convertible notes, financial loans and financial interests forof Ps. 1,072.01,072 million, Ps. 1,334.51,334 million and Ps. 799.4799 million, respectively, payment of dividends forof Ps. 33.534 million, payment of seller financing of shares forof Ps. 105.9106 million, capital reduction of subsidiaries forof Ps. 228.1228 million, payment of derivative financial instruments forof Ps. 233.1233 million, and repurchase of non-convertible notes and equity interest forof Ps. 305.0305 million and Ps. 32.933 million, respectively; partially offset by cash inflows associated with the issuance of non-convertible notes forof Ps. 693.4693 million, borrowings taking from financial entities forof Ps. 1,497.81,498 million and from associates and joint ventures forof Ps. 22.222 million, contribution from non-controlling interest forof Ps. 15.916 million, and sale of equity in subsidiaries to non-controlling interest for Ps. 181.8 million.
151

Fiscal Year ended June 30, 2014 and 2013
Net cash used in financing activities decreased from Ps.17.2 million during fiscal year ended June 30, 2013 to Ps. 446.2 million during fiscal year ended June 30, 2014, mainly due to an increase of Ps. 577.6 million in the cancellation of non-convertible notes and financial interests, an increase of Ps. 81.6 million in payments of financial loans, a decrease in the cash inflows of cash arising from borrowings from financial entities for Ps. 85.2 million and from associates and joint ventures for Ps. 53.5 million; the decrease was partially offset by an increase  in the inflow of cash arising from the issuance of non-convertible notes for Ps. 251.4 million, a decrease of Ps. 48,7 million in acquisitions of non-controlling interest, a decrease of Ps. 147.8 million in distribution of share capital of subsidiaries, and an increase  of Ps. 131.0 million in contributions from non-controlling interest, during fiscal year ended June 30, 2014 compared to fiscal year ended June 30, 2013.
Our financing activities resulted in net cash outflows of Ps. 446.2 million for the fiscal year ended on June 30, 2014 mainly due to the cancellation of non-convertible notes, financial loans and financial interests for Ps. 799.6 million, Ps. 590.1 million and Ps. 576.9 million, respectively, payment of dividends for Ps. 243.6 million, and repurchase of non-convertible notes and equity interest for Ps. 163.5 million and Ps. 97.7 million, respectively; partially offset by cash inflows associated with the issuance of non-convertible notes for Ps. 1,051.8 million, borrowings taking from financial entities for Ps. 793.5 million and from associates and joint ventures for Ps. 17.2 million, contribution from non-controlling interest for Ps. 139.1 million, and proceeds from derivative financial instruments for Ps. 62.2182 million.
 
Indebtedness
 
As of June 30, 2015, we had total loans in the amount of Ps. 8,299.1 million.
The following table below sets forth the scheduled maturities of our indebtedness by maturing date:
     Schedule of Maturities or Amortization 
 
 
 
Currency
 LESS THAN 1 YEAR (1)  MORE THAN 1 YEAR AND UP TO 2 YEARS   MORE THAN 2 YEARS AND UP TO 3 YEARS   MORE THAN 3 YEARS AND UP TO 4 YEARS   MORE THAN 4 YEARS  TOTAL(2)  ANNUAL AVERAGE INTEREST RATE 
   (in million Pesos, constant currency as of June 30, 2015) (3) 
Bank and Other debt                      
Bank loans (4)
Ps.  616.0   -   -   -   -   616.0  15.01%; 22.54% 
Bank loansPs.  7.6   6.6   3.3   -   -   17.5  Floating 
Bank loans (3)
US$  10.2   13.8   20.7   20.7   62.4   127.8  Floating 
Bank loans (4)
Ps.  687.4   5.8   2.3   -   -   695.5  20.2%' 
Bank loans (4)
Ps.  106.5   -   -   -   -   106.5  22.51% 
Other borrowingsNIS  15.1   -   -   -   -   15.1   n/a 
Secured bank loans (3)
R$  139.2   40.2   39.8   38.0   43.1   300.3  Floating 
Cresud’s Series XIV Notes (3)
US$  0.1   -   290.2   -   -   290.3  1.50% 
Cresud’s Series XV NotesPs.  120.8   -   -   -   -   120.8  23.67% 
Cresud’s Series XVI Notes (3)
US$  5.0   -   499.3   499.3   -   1,003.6  1.50% 
Cresud’s Series XVII NotesPs.  172.6   -   -   -   -   172.6  Badlar + 250 bps 
Cresud’s Series XVIII Notes (3)
US$  1.1   -   -   154.0   154.0   309.1  4.00% 
Cresud’s Series XIX NotesPs.  0.8   185.7   -   -   -   186.5  27.5% ; Badlar + 350 bps 
Cresud’s Series XX Notes (3)
US$  0.8   56.2   -   -   -   57.0  2.5% 
IRSA Commercial Properties’s Series I Notes (3)
US$  10.7   1,021.8   -   -   -   1,032.5  7.88% 
IRSA’s Series I Notes (3)
US$  47.3   1,352.7   -   -   -   1,400.0  8.50% 
IRSA’s Series II Notes (3)
US$  62.8   -   -   -   1,202.1   1,264.9  11.50% 
IRSA’s Series I NotesPs.  214.1   -   -   -   -   214.1  Badlar + 395 bps 
IRSA’s Series II NotesPs.  0.3   10.7   -   -   -   11.0  Badlar + 450 bps 
Syndicated loansPs.  75.5   -   -   -   -   75.5  15.01% ; 15.25% 
Secured seller financing (3)
US$  -   -   -   -   71.0   71.0   n/a 
Seller financing (3)
R$  143.1   -   -   -   -   143.1  Floating 
Finance lease obligations (3)
R$  9.9   6.6   3.2   2.6   -   22.3  6.92%' 
Secured finance lease obligations (3)
US$  1.9   0.8   0.6   -   -   3.3  10.75% ; from 7.14 to 13.28% 
Secured obligationsBol.  3.1   3.4   -   -   -   6.5  From 7 to 10.19% 
Related partiesPs.  7.8   14.4   -   -   -   22.2  Floating 
Related partiesPs.  6.4   5.9   1.8   -   -   14.1  15.25; 24%; Badlar + 300 bps 
Total bank and other debt   2,466.1   2,724.6   861.2   714.6   1,532.6   8,299.1     

(1) Includes accrued interest.
(2) Figures may not sum due to rounding.
(3) Exchange rateoutstanding debt as of June 30, 2015 US$ 1.00 = Ps.9.088, R$ 1.00 = Ps.2.93 and NIS 1.00 = Ps. 2.407
(4) Includes bank overdrafts.2016:
 
CRESUD’s Outstanding Notes
 CurrencyAnual Average Interest RateNominal value
Agricultural business   
Cresud ´s Series XIV NotesUS$1.50%64
Cresud ´s Series XV NotesPs.23.63%176
Cresud ´s Series XVI NotesUS$1.50%218
Cresud ´s Series XVII NotesPs.Badlar + 375 bp.171
Cresud ´s Series XVIII NotesUS$4.00%68
Cresud ´s Series XIX NotesPs.27.50%187
Cresud ´s Series XX NotesUS$2.50%36
Cresud ´s Series XXI NotesPs.Badlar + 375 bp.384
Cresud ´s Series XXII NotesUS$4.00%44
Bank loansUS$Libor + 300 bp. or 6% (the higher)30
Bank loansPs.15.01%31
Bank loansPs.Rate Survey PF 30-59 days40
Bank loansUS$3.50%15
Bank loansUS$10.75% - 7.14% to 14.5%6
Bank loansBol.7% - 10.19%14
Operations Center in Argentina   
IRSA Commercial Properties’ 2017 Notes$Badlar + 4 bp.407
IRSA Commercial Properties’ 2023 NotesUS$8.75%360
IRSA Commercial Properties’ 2017 NotesUS$7.88%-
IRSA’s 2017 Notes(1)
US$8.50%75
IRSA’s 2017 Notes$Badlar + 450 bp.11
IRSA’s 2020 NotesUS$11.50%75
Financial LeasesUS$3.2% al 14.3%1
Related Party$Badlar15
Bank loans$15.25%1
Bank loans$26.50%7
Bank loans$23.00%36
Related Party$Badlar / 8,50%6
Related Party$15.25%6
Related Party$24.00%6
Seller financingUS$N/A2
Seller financingUS$3.50%5
Bank overdrafts$from 22% to 39%-

Operations Center in Israel   
Non -convertible Notes IDBD Serie GNIS4.50%802
Non -convertible Notes IDBD Serie INIS4.95%1.013
Non -convertible Notes IDBD Serie JNIS6.60%309
Non -convertible Notes DIC Serie DNIS5.00%103
Non -convertible Notes DIC Serie FNIS4.95%2.719
Non -convertible Notes DIC Serie GNIS6.35%8
Non -convertible Notes DIC Serie HNIS4.45%124
Non -convertible Notes DIC Serie INIS6.70%513
Non -convertible Notes Shufersal Serie BNIS5.20%1.024
Non -convertible Notes Shufersal Serie CNIS5.45%114
Non -convertible Notes Shufersal Serie DNIS2.99%413
Non -convertible Notes Shufersal Serie ENIS5.09%392
Non -convertible Notes Shufersal Serie FNIS4.30%317
Non -convertible Notes Cellcom Serie BNIS5.30%185
Non -convertible Notes Cellcom Serie DNIS5.19%599
Non -convertible Notes Cellcom Serie ENIS6.25%164
Non -convertible Notes Cellcom Serie FNIS4.60%715
Non -convertible Notes Cellcom Serie GNIS6.99%285
Non -convertible Notes Cellcom Serie HNIS1.98%950
Non -convertible Notes Cellcom Serie INIS4.14%804
Non -convertible Notes PBC Serie CNIS5.00%550
Non -convertible Notes PBC Serie DNIS4.95%1.317
Non -convertible Notes PBC Serie ENIS4.95%974
Non -convertible Notes PBC Serie FNIS7.05%669
Non -convertible Notes PBC Gav-Yam Serie ENIS4.55%283
Non -convertible Notes PBC Gav-Yam Serie FNIS4.75%1.226
Non -convertible Notes PBC Gav-Yam Serie GNIS6.41%215
Non -convertible Notes PBC Ispro Serie BNIS5.40%255
Bank loans and othersNISPrime + 1.3%333
Bank loans and othersNISPrime + 1%80
Bank loans and othersNISPrime + 0.65%63
Bank loans and othersNIS6.90%150
Bank loans and othersNIS4.95%1
Bank loans and othersNIS4.95%1
Bank loans and othersNIS3.25%1
Bank loans and othersUS$5.66%13
Bank loans and othersUS$5.21%197
Bank loans and othersUS$Libor + 5%223
Bank loans and othersNIS4.60%200

      Total
  Agricultural business Urban properties and investments 
   Operations Center in ArgentinaOperations Center in IsraelTotal 
         
Less than 1 year                 1,226                           2,813              19,437             22,250                23,476
More than 1 and up to 2 years                 1,210                                19              16,826             16,845                18,055
More than 2 and up to 3 years                    500                                  1              19,535             19,536                20,036
More than 3 and up to 4 years                 1,332                                17                4,643               4,660                  5,992
More than 4 and up to 5 years                       40                           1,063                7,092               8,155                  8,195
More than 5 years                       34                           5,313              36,169             41,482                  41,516
  4,342 9,226103,702112,928 117,270
(1)  
On September 7, 2011,9, 2016, we issuedannounced our intention to redeem all outstanding Series VIII Notes which are denominated in U.S. Dollars in a principal nominal amount of US$ 60 million, due 36 months after the issue date and fully repayable at maturity. They bear interest at a fixed rate of 7.5% payable semiannually on September 7 and March 7 each year.
As of June 30, 2015 this class has been fully paid.
On June 21, 2012, we issued three new series ofI Notes for a total amount of Ps. 383.5 million under our Global Note Program:
  • Series IX Notes, for a principal amount of Ps. 161.0 million, maturing 18 months after the issue date, and accruing interest at a variable rate (BADLAR Privada + 300 basis points), payableUS$74,554,000. The redemption took place on quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 12, 15 and 18 months from the issue date.
  • Series X Notes, for a principal amount of US$ 31.5 million (equivalent to Ps. 142 million at issue date), maturing 24 months after the issue date, and payable in Pesos at an applicable exchange rate in connection with each payment date. The notes accrue interest at a fixed rate of 7.75% per annum, payable quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 18, 21 and 24 months from the issue date.
152

  • Series XI Notes, for a nominal value of Ps. 80.5 million due 36 months after the issue date, accrues interest at a variable rate (Badlar plus 375 basis points). These are paid on a quarterly basis in arrears while amortization is made in three consecutive payments, the first two payments in an amount equal to 33.33% each of the face value, and the last one in an amount equal to 33.34% of the face value, all of which amount to 100% of the face value of Series XI Notes on the 24th, 30th and 36th months from the issue date.
As of June 30, 2015 these classes have been fully paid.
On September 19, 2013, the Company issued Series Five of the Second Tranche of Series X Notes for a nominal value of US$ 30 million. As a consequence, the aggregate principal amount of Series X Notes was US$ 61.5 million, taking into consideration the US$ 31.5 million issued on June 21, 2012. The Second Tranche of Series X Notes is fully exchangeable for Series X Notes.
As of June 30, 2015 this class has been fully paid.
On February 22, 2013, we issued two new series of Notes for a total amount of Ps. 500 million under our Global Note Program:
  • Series XII Notes, for a principal amount of Ps. 102.1 million, maturing 21 months after the issue date, and accruing interest at a variable rate (BADLAR Private + 410 basis points), payable on quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 15, 18 and 21 months after the issue date.
  • Series XIII Notes, for a principal amount of US$ 79.4 million (equal to Ps. 397.9 million at issue date), maturing 27 months after the issue date, and payable in Pesos at an applicable exchange rate in connection with each payment date. The notes accrue interest at a fixed rate of 1.90% per annum, payable quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 24 and 27 months after the issue date.
As of June 30, 2015 these classes have been fully paid.
On May 22, 2013, we issued series XIV Notes for a total amount of US$ 32 million (equivalent to Ps. 167.5 million at issue date) under our Global Note Program, which will mature from 60 months from the issue date, the aforementioned notes will be payable in Pesos at an applicable exchange rate in connection with each payment date. The notes accrue interest at a fixed rate of 1.5% per annum, on payable quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 54 and 60 months after the issue date.
On November 18, 2013, we issued two new series of Notes for a total amount of Ps. 828 million under our Global Note Program:
  • Series XV Notes, for a principal amount of Ps. 176.4 million, maturing 24 months after the issue date, and accruing interest at a variable rate (BADLAR Private + 399 basis points), payable on quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 18, 21 and 24 months after the issue date.
  • Series XVI Notes for a total amount of US$ 109.11 million with an issuance price of 102.3% (equivalent to Ps. 661.2 million at issue date), which will mature from 60 months from the issue date, the aforementioned notes will be payable in Pesos at an applicable exchange rate in connection with each payment date. The notes accrue interest at a fixed rate of 1.5% per annum, on payable quarterly basis in arrears, and the principal amount is payable in quarterly payments due within 54 and 60 months after the issue date.
On September 12, 2014, the Ninth Series of simple corporate notes was issued in the equivalent amount of Ps. 455.3 million, in two classes.
  • Series XVII Notes, for a face value of Ps. 171.8 million and falling due 18 months after the issuance date, will accrue interest at a variable rate (Badlar plus 250 basis points). Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 18 months following the issuance date. The issuance price was 100.0% of the nominal value.
  • Series XVIII Notes, for a face value of US$ 33.7 million, with an issuance price of 102.179% of the nominal value resulting US$ 34.4 million equivalent to Ps. 289.7 million at issuance date and falling due 60 months after the issuance date, will accrue interest at fixed annual rate of 4%. Interest will be payable quarterly in arrears whereas the principal will be amortized in two consecutive payments on the 54 and 60 months following the issuance date.
On March 13, 2015, the tenth Series of simple corporate notes was issued in the amount equivalent to Ps. 352.8 million nominal value, in two classes.
  • Series XIX Notes, for a face value of Ps. 187.0 million and falling due 18 months after the issuance date, will accrue interest at fixed rate of 27.5% during the first twelve months and will accrue interest at floating rate the remaining six months (Badlar plus 350 basis points). The issuance price was 100% of the nominal value.  Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 18 months following the issuance date.
  • Series XX Notes, for a face value of US$ 18.2 million, with an issuance price of 104% of the nominal value resulting US$ 18.9 million equivalent to Ps. 165.8 million and falling due 24 months after the issuance date, will accrue interest at fixed annual rate of 2.5%. Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 24 months following the issuance date.
On August 12, 2015 the Eleventh Tranche of Notes was issued, comnsisting of two series, Series XXI and XXII, for a principal amount of Ps. 396.2 million, under the US$ 300 Million Program approved by the Shareholders’ Meeting. October 11, 2016. For  more information see “Recent Development.”Development”
 
IRSA’S Series I
Operations Center in Argentina
 On March 3, 2016, IRSA and IRSA CP announced that they would launch offers to buy in cash: (i) 11.50% Class II Notes due 2020 and issued by IRSA for principal amount up to US$76.5 million, (ii) any and 8.50% Class 1 Notes due 2017 and 2020issued by IRSA, and (iii) any and 7.875% Class 1 Notes notes due 2017 and issued by IRSA CP.
 
On February 2, 2007,March 23, 2016, IRSA CP issued US$ 150 million at a nominal fixed rate 8.5%. The notes are due February 2017 andNotes in an aggregate principal is paid at maturity. Interest is payable on February and August of each year from August 2007.
This issue was in the framework of the global issuance program of notes for a nominal value of up to US$ 200 million authorized by Resolution N° 15,529 and 15,537 of the CNV dated December 7 and December 21, 2007. On February 25, 2010, the Board of Directors of IRSA expanded the amount to up to US$ 400 million as mandated by the Ordinary and Extraordinary Meeting of Shareholders held on October 29, 2009.
As part of the expanded program, on July 20, 2010 IRSA issued NCN for an amount of US$ 150360 million under its Global Notes Program. Class II Notes accrue interest semi-annually, at a nominalan annual fixed rate of 11.5%.8.75% and mature on March 23, 2023. The notes are due July 2020 and principal is paid at maturity. Interest is payable on January 20 and June 20issue price was 98.722% of each year from January 20, 2011.nominal value.
 
IRSA NCNCP’s Notes due 20172023 are subject to certain covenants, events of default and 2020 contain certain customary covenants and restrictions, including among others, limitations, forsuch as the limitation on incurrence of additional indebtedness, limitation on restricted payments, disposal of assets, and entering into certainlimitation on transactions with related companies.affiliates, and limitation on merger, consolidation and sale of all or substantially all assets.
 
Under the NCN indentures, IRSA is permitted toTo incur additional indebtedness, provided its coverage of consolidated interest ratioIRSA CP is higher than 1.75.required to meet a minimum 2.00 to 1.00 Consolidated Interest Coverage Ratio. The coverage of consolidated interest ratioConsolidated Interest Coverage Ratio is defined as consolidatedConsolidated EBITDA divided by consolidated interest expense, subject to certain adjustments.expense. Consolidated EBITDA is defined as operating income plus depreciation and amortization and other consolidated non-cash charges.
 
The Class II Notes contain financial covenants limiting IRSA CP’s ability to declare or pay dividends in cash or in kind, unless the following conditions are met at the time of payment:
 
a)  
153

no Event of Default shall have occurred and be continuing;
 
Restricted payments include restrictions for payment
b)  
IRSA CP may incur at least US$1.00 worth of dividends additional debt pursuant to the “Restriction on Additional Indebtedness”;
c)  
and other outflows relating to prepaymentsthe aggregate amount of indebtedness or to acquisition of certain investments. These restricted payments could not be made in excess ofsuch dividend exceeds the sum of:
·  50% of IRSA’s cumulative consolidated net income; or 75% of IRSA’s cumulative consolidated net income if the coverage of consolidated interest ratio is at least 3.0 to 1; or 100% of IRSA’s cumulative consolidated net income if the coverage of consolidated interest ratio is at least 4.0 to 1;
 
·  net cash proceeds from new capital contributions;
i.  
·  reduction of the indebtedness of IRSA or its restricted subsidiaries;
·  reduction in investments in debt certificates (other than permitted investments); and
·  distributions received from unrestricted subsidiaries.
Issuance100% of Series III and Series IV Notes
On February 10, 2012, IRSA issued an aggregate principal amount of Ps. 300 million under the US$ 300 Million Program approved by the Shareholders’ Meeting:
·  Series III Notes, for a principal amount of Ps. 153.2 million, accrue interest at BADLAR rate plus 249 basis points, and mature 18 months from their issue date. They are repayable in three consecutive payments due within 12, 15 and 18 months after their issue date, and;
·  Series IV Notes, for a principal amount of US$ 33.8 million (equivalent to Ps. 146.9 million), accrue interest at a fixed rate of 7.45%, are subscribed and repayable in Pesos at the applicable exchange rate, and mature 24 months after the issue date. They are repayable in 4 equal consecutive payments due within 15, 18, 21 and 24 months after their issue date.
IRSA’S Series V and VI Notes due 2015 and 2017
On February 26, 2014, Series V and VI were issued for an amount of Ps. 220.2 million. Company's NCN due 2015 and Company's NCN due 2017 both contain certain customary covenants and restrictions, including among others, limitationscumulative EBITDA for the incurrenceperiod (treated as one accounting period) from July 1, 2015 through the last day of additional indebtedness, restricted payments, disposal of assets, and entering into certain transactions with related companies.
Series V Notes ("Class V"), were issued for an amount of Ps. 209.4 million. The securities were issued at par value and priced at a floating interest rate equalthe last fiscal quarter ended prior to Badlar rate plus 395 basis points. The principal of Class V will be repaid through a single payment on the maturity date. Class V matures within 18 months from the date of issue. Interest will be paid quarterly. Class V is fully canceled.such Restricted Payment minus an amount equal to 150% of consolidated interest expense for such period; and
 
Series VI Notes ("Class VI"), were issued
ii.  
any reductions of Indebtedness of IRSA on a consolidated bais after the Issue Date any reductions of Indebtedness of after the Issue Date exchanged for an amountto Capital Stock of Ps. 10.8 million. The securities were issued at par value and priced at a floating interest rate equal to Badlar rate plus 450 basis points. The principal of Class VI will be repaid through a single payment on the maturity date. Class VI matures within 36 months from the date of issue. Interest will be paid quarterly on May 26, 2014, August 26, 2014, November 26, 2014, February 26, 2015, May 26, 2015 and August 26, 2015, November 26, 2015, February 26, 2016, May 26, 2016, August 26, 2016, November 28, 2016 and February 27, 2017.IRSA or its Subsidiaries.
 
IRSA Commercial Properties Series I On April 7, 2016, the Meeting of IRSA’s Notes holders by majority vote approved the proposed amendments to IRSA’s 2017 Trust Indenture, which included basically the elimination of all restrictive covenants on such class effective as of April 8, 2016.
 
On During the months of March, April and May 11, 2007,of 2016, the Company acquired all IRSA Commercial Properties issued two parts of notesCP’s 7.875% Notes Class I due 2017 for a total amount of US$ 170 million. One of the series (Series I) consists of US$ 120 million notes at a nominal fixed rateand US$75.4 million of 7.87% due May 2017 while the other (Series II) comprises Ps. 154.0 million (equivalent to US$ 50 million) notes at a nominal fixed rate of 11.0% due in June 2012. Interest on the Series I is payable on May 11 and November 11 of each year from November 11, 2007; principal due in May 11, 2017. Interest on the Series II was paid on June 11 and December 11 of each year from December 11, 2007; principal was due in seven equal and consecutive semi-annual installments from June 11, 2009. As of June 30, 2012, Series II is completely canceled.
These issuances were part of a global issuance program of notes for a nominal value of up to US$ 200 million authorized by Resolution N° 15,614 of the CNV dated April 19, 2007.IRSA Notes. On October 29, 2009,11, 2016 the Ordinary and IRSA Commercial Properties' Extraordinary MeetingCompany acquired the remaining US$74.6 million of Shareholders expanded the amount to up to US$ 400 million.
IRSA Commercial Properties Series IIRSA’s 8.50% Notes due 2017, contain certain covenants, events of default and restrictions, as well as limitations on additional indebtedness, transactions with affiliates, mergers and total or partial disposal ofso the assets of IRSA Commercial Properties. For additional indebtedness IRSA Commercial Properties is required to comply with the financial ratio “coverage of consolidated interest”, which should be higher than 1.75. The coverage of consolidated interest ratio is defined as consolidated EBITDA divided by consolidated interest expense, subject to certain adjustments. EBITDA is defined as operating income plus, depreciation and amortization and certain other consolidated non-cash charges.following notes remains outstanding:
 
Issuance of Series I
·  
IRSA’s Notes Class II at 11.50% maturing in 2020 US$71.4 million.
 
On September 18, 2015 we issued Series I Notes under our Global Note Program in an aggregate principal amount Such payments were accounted for as a cancellation of Ps.407.3 million. Series I Notes have a maturity of 18 months from its issue date, and will bear a mixed interest rate of 26.5% per year during the first three months, and Private Badlar Rate (Tasa Badlar Privada) plus 400 bps per year during the remaining period, playable on a quarterly basis. For more information see “Recent Development.”debt.
 
Other Debts
CRESUD
Banco Ciudad Financial Loan In relation to financial covenants under 11.50% Notes due in 2020 issued by IRSA, the Meeting of Noteholders held on March 23, 2016 approved:
 
On January 10, 2012, we subscribed
i)  
to modify the covenant on Limitation on Restricted Payments, so that the original covenant was replaced so as to take into consideration IRSA’s capability to make any restricted payment provided that (a) no Event of Default has occurred and persisted, and (b) IRSA may incur at least US$1.00 of additional debt pursuant to the Limitation on Additional Indebtedness; and
ii)  
the exclusion of IDBD or any of its subsidiaries for purposes of the definition of “Subsidiary” or any of the definitions or commitments under the Trust Indenture of Notes due in 2020 and issued by IRSA (regardless of whether the financial statements of any of these companies has any time been consolidated into IRSA’s financial statements).
iii)  
a loanSupplementary Trust Indenture reflecting all the amendments approved, entered into with Banco Ciudad for a total amountthe Bank of US$ 20 million, disbursable in several installments.New York Mellon on March 28, 2016.
 
The principal amount accrues interest at the higher of an annual nominal rate equal to the 180 day LIBOR rate plus a spread of 300 basis points or an annual nominal fixed rate of 6%. Interest is payable semi-annually
Operations Center in Israel
IDBD has certain financial restrictions and the principal amount is repayable on an annual basis, starting on the second anniversary of the first disbursement.covenants in connection with its financial debt, included in its debentures and loans from banks and financial institutions.
 
As of June 30, 2016, IDBD reported that the application of the “Liquidity Covenant” and the “Economic Equity Covenant” (as described below) is currently suspended.
Note that, it was agreed between IDBD and the relevant lending corporations that the parties would work to formulate an arrangement, to replace or amend the current financial covenants by December 31, 2016.
If such arrangement is not reached, then with respect to the results for IDBDs first quarter of 2017 and thereafter, the previous financial covenants will re-apply, in which case IDBD estimates that it will not be able to comply with the thresholds which were determined in the past with respect to the Liquidity Covenant and the Economic Equity Covenant with respect to IDBD’s results for the first quarter of 2017 and thereafter. IDBD estimates it will not be able to fulfill the covenant which stipulates that the balance of cash and marketable securities will not fall below the scope of forecasted current maturities for the two quarters subsequent to the reporting quarter (the “Liquidity Covenant”). Regarding the Economic Equity Covenant, it is noted that the economic equity as of June 30, 2016, amounted to a positive balance of NIS 247 million, significantly lower than the thresholds which were determined in the past as part of the Economic Equity Covenant.
In view of and due to the decrease in Mr. Ben Moshe’s ownership of IDBD, effective as of February 2015 disbursements had been madeand thereafter, in March 2016 IDBD reached understandings with its lending corporations with regard to an amendment of the control covenant and additional amendments relating to restrictions on the sale of main holdings.
As per IDBD’s position, as of June 30, 2016, there were no conditions that established grounds for calling IDBD’s obligations to its financial creditors for immediate payment. Without derogating from the IDBD’s position, it is noted that the decision of the bondholders (Series I) dated April 21, 2016, to call the full balance of IDBD’s debt due to bondholders for immediate repayment and the decision to take steps for dissolution are liable to raise grounds for the financial creditors. According to an opinion that IDBD received, the conditions required for it to call the bonds were not fulfilled. On July 18, 2016, the Court handed down its judgment and accepted the consensus motion filed by the trustee to dismiss the claim.
As of June 30, 2016, IDBD’s loans which are subject to the aforementioned financial covenants, were classified under current liabilities, in consideration of the fact that IDBD has reached agreement with its principal lenders to extend the arrangements as specified in the financial covenants of the loan agreements until March 31, 2017 for a total amount of US$ 15.2 million. The loan proceeds will be used for an investment project consisting of reconverting for agricultural purposes 15,934 hectares in the “Los Pozos” farm, currently assigned to livestock breeding.
154

Production Investment Loanperiod shorter than twelve months.
 
On December 5, 2012, we subscribedAugust 2, 2016 IDBD issued a loan with Banco de la Provincia de Buenos Airesnew Series of Debentures in the Israeli market for an amount of Ps. 24.0NIS 325 million underdue November 2019 at an annual interest rate adjustable by CPI plus 4.25%. The notes are pledged by shares of Clal Insurance Enterprise Holdings Ltd, subject to the credit facilityapproval of the Commissioner of Capital Markets, Insurance and Savings. IDBD worked to get the authorization to constitute the guarantee through the filing of an application to the Supreme Court asking for production investment described in Communication A 5319 issuedsuch approval. In case IDBD does not get the required approval, funds must be repaid with interest plus a penalty. on September 15, 2016, the High Court of Justice gave a partial judgment and decision, according to which it was decided, to reject the petition  for the most part and to grant an order which instructs the Commissioner to appear and show a reason for her opposition to the request of the company to pledge up to 5% of the shares of Clal Holdings, subject to an outline agreed to at the time by the Argentine Central Bank.company. Furthermore, the company maintains the right to accede to a proposal for compromise which was raised in the context of the discussion. A hearing date was set for January 2017.
Likewise, on August 4, 2016, DIC reopened its Series of Debentures due 2025 an additional amount of NIS 360 million. The loan accrues interestplacement was made at a fixed ratean IRR of 15.01%, with interest payable on a semi-annual basis, and matures 42 months after5.70%. 
Pursuant to the disbursement date. The principal amount is repayabledecision of the Supreme Court sitting as the High Court of Justice in 7 semi-annual installments,connection with the first installment falling duepetition that the company submitted in June 2013.connection with the pledge of the shares of Clal Holdings in September 2016, on October 13, 2016, the Board of Directors of IDBD decided to execute a partial early redemption of the debentures of the company, that is to be carried out on November 1, 2016, as follows:
 
FyO – Production Investment Loan
On November 22, 2013, FyO subscribed• The company will carry out a loan with Banco Hipotecario forpartial early redemption of the debentures  in an amount of Ps. 840,000, under approximately NIS 239 million of par value (“the credit facility for production investment describedredeemed portion”) and in Communication A 5449 issued by the Argentine Central Bank. The loan accruesa total of approximately NIS 244 million with respect to principal, interest at a fixed rate of 15.25%, with interest payable on a monthly basis, and matures 36 months after the disbursement date. There is a grace period of one yearcompensation for the repaymentredeemed portion.
• The determining date for the eligibility to receive the early redemption of the principal amount, afterof the debentures is 25.10.2016.
• The early redemption represents 73.7% of the unpaid balance of the principal of the debentures, which is also the original balance of the series of the debentures.
• The rate of interest (including the compensation for carrying out the early redemption as an increment of 3% with respect to the period from August 3, 2016 through  October 21 2016)  that will be paid upon the partial early redemption of the redeemed portion of the principal is repayable in 24 monthly consecutive installments.approximately 1.8%.
 
Bolivia Investment Loan
• The rate of interest (including the compensation for carrying out the early redemption as an increment of 3% with respect to the period from August 3, 2016 through October 31 2016)  that will be paid in the context of the early redemption, which is calculated out of the balance of the unpaid balance of the principal on the date of the early redemption (NIS 325 million linked to the CPI) is approximately 1.3%.
 
On December 17, 2012, Agropecuaria Acres Del Sud S.A., CRESUD’s subsidiary, subscribed a loan
• Pursuant to the “known” CPI (index with Banco Económico S.A. forrespect to the month of September 2016, which was published on 14.10.2016) as compared with the base index published with respect to the month of June 2016, no linkage increments will apply with respect to the redeemed portion upon early redemption.
• The unpaid balance of the principal of the debentures after executing the early redemption (without linkage) will stand at an amount of BOB 13.5 million. The loan accrues interest at a fixed rateapproximately NIS 86 million par value, which represents approximately 26.3%, of 7.45%, with interest and principal being payable semi-annually. The loan matures 60 months after the disbursement date. The loan proceeds were used to plant sugarcane in the 4 Vientos and Primavera farms and to fund infrastructure expenses in channels, roads and bridges in 4 Vientos.
Banco de la Pampa Loan
On August 3, 2012 we subscribed a loan with Banco de La Pampa for an amount of Ps.  20.0 million. The loan accrues interest at the Encuesta variable rate less 200 basis points, with an annual nominal rate subject to a bottom of 10.50% and a ceiling of 14.50%. There is a grace period of one year and a half for the repaymentoriginal balance of the principal amount, after which it is repayable in 6 semi-annual consecutive installments. The loan proceeds were used to make working capital investments in our subsidiary Sociedad Anónima Carnes Pampeanas S.A.
IRSA
Hoteles Argentinos Loan
On December 26, 2013, Hoteles Argentinos S.A. (“HASA”), IRSA’s subsidiary, subscribed a loan with Banco Hipotecario for an amount of Ps. 5.0 million, under the credit line for productive investment provided under Communication “A” 5449 of the Central Bank.debentures. The loan accrues interest at a fixed ratecompany will act to pledge the shares of 15.25%, with interest payable on a monthly basis, and matures 36 months afterClal Holdings against the disbursement date. There is a grace period of one year for the repaymentbalance of the unpaid principal amount, after which the principal is repayable in 24 monthly consecutive installments.
Llao Llao Loan
On December 23, 2013, Llao Llao Resorts S.A. (“Llao LLao”), IRSA’s subsidiary, subscribed a loan with Banco Hipotecario for an amount of Ps. 4.0 million, under the credit line for productive investment provided under Communication “A” 5449 of the Central Bank. The loan accrues interest at a fixed rate of 15.25%, with interest payable on a monthly basis, and matures 36 months afterdebentures (after carrying out the disbursement date. Thereearly redemption). As is a grace period of one year forrequired according to the repayment of the principal amount, after which the principal is repayable in 24 monthly consecutive installments.
Nuevas Fronteras Mortgage Loan
On December 30, 2014, Nuevas Fronteras S.A. (“Nuevas Fronteras”), IRSA’s subsidiary, subscribed a loan with Banco Hipotecario for Ps. 7.0 million, under the credit line for production investment described in Communication “A” 5600 issued by the Central Bank. The loan accrues interest at a fixed rate of 24.0% during the first twelve months and at a variable rate (corrected Badlar + 50 bps) during the remaining twenty-four months, payable monthly and it is due 36 months after the disbursement date. Principal is subject to one-year grace period and then it is payable in 24 consecutive monthly installments.
IRSA Propiedades Comerciales S.A. (“IRSA Commercial Properties”)
ARCOS Syndicated Loan
On November 16, 2012, IRSA Commercial Properties subscribed a syndicated loan with local banks in the amount of Ps. 118 million, under the credit line for production investment described in Communication “A” 5319 issued by the Central Bank. The loan accrues interest at a fixed rate of 15.01%, payable monthly and it is due 36 months after the disbursement date. Principal is subject to one-year grace period and then it is payable in nine consecutive quarterly installments.
Bank Loans Communication 5319
On December 12, 2012 IRSA Commercial Properties subscribed a loan with Banco de la Provincia de Buenos Aires for Ps. 29.0 million, under the credit facility for production investment described in Communication “A” 5319 issued by the Central Bank. The loan accrues interest at a fixed rate of 15.01%, payable monthly and it is due 36 months after the disbursement date. Principal is subject to a 9-month grace period and then it will be repaid in 9 consecutive quarterly installments.
Neuquén Syndicated Loan
On June 12, 2013, IRSA Commercial Properties executed a syndicated loan with local banks in the amount of Ps. 111 million, under the credit facility for production investment described in Communication “A” 5380 issued by the Central Bank. The loan accrues interest at a fixed rate of 15.25%, payable monthly and it is due 36 months after the disbursement date. Principal is subject to a one-year grace period and then it will be repaid in 9 consecutive quarterly installments.
Capex Citibank 5449 – Other Loans
On December 23, 2013, IRSA Commercial Properties subscribed a loan with the Citibank N.A. local branch for an aggregate amount of Ps. 5.9 million, under the credit facility for production Investment described in Communication “A” 5449 issued by the Central Bank. The loan accrues interest at a fixed rate of 15.25%, payable quarterly and it is due 39 months after the disbursement date. Principal is subject to a one-year grace period and then it will be repaid in 9 consecutive quarterly installments.
Capex Citibank 5620 – Other Loans
On December 30, 2014, IRSA Commercial Properties subscribed a loan with the Citibank N.A. local branch for an aggregate amount of Ps. 10.3 million, under the credit facility for production Investment described in Communication “A” 5620 issued by the Central Bank. The loan accrues interest at a fixed rate of 26.50%, payable quarterly and it is due 36 months after the disbursement date. Principal is subject to a one-year grace period and then it will be repaid in 9 consecutive quarterly installments.
155

Nuevo Puerto Santa Fe Loan
On December 26, 2013, NPSF, IRSA Commercial Properties’ subsidiary, executed a loan agreement with Banco Hipotecario for an aggregate amount of Ps. 10.0 million, under the credit facility for production investment described in Communication “A” 5449 issued by the Central Bank. The loan accrues interest at a fixed rate of 15.25%, payable monthly and it is due 36 months after the disbursement date. Principal is subject to a one-year grace period and then it will be repaid in 24 consecutive monthly installments.
Soleil Debt
On December 28, 2007, as a result of the purchase of Soleil plot of land, an agreement was executed with INCSA for the purpose of financing a balance price in the amount of US$ 12.6 million. Such loan accrues interest at a fixed rate of 5%, payable on annual basis. Principal shall be repaid when due on June 30, 2017. This financing agreement was prepaid in whole on August 22, 2014.trust indenture.
 
 
• Pursuant to what is stated in the trust indenture, the redeemed portion will be paid in relation to all of the holders of the debentures, pro- rata according to the par value of the held debentures.

IDBD is continuing to act in order to reach consents with the relevant financing corporations in order to arrange over time the calculated financial covenants that were determined in the provisions of its loan agreements, and additional contractual issues that exist in the loan agreements.
Off balance sheet arrangements
 
We currently have no agreement that is not included in the balance sheet or significant transactions with non-consolidated entities that are not reflected in our consolidatedAudited Consolidated Financial Statements. All of our interests and/or relationships with our subsidiaries or controlled entities on a joint basis are recorded in our consolidatedAudited Consolidated Financial Statements.
 
 
Investments in technology, in our agricultural business, amounted to Ps.10.4 million, Ps.9.3 millionPs. 10, Ps. 10 and Ps.12.1Ps. 9 million for the fiscal years 2016, 2015 2014 and 20132014 respectively. Our total technology investments aimaimed to increase the productivity of purchased land have amounted to Ps.445.2Ps.455 million since fiscal year 1995.
 
We reach our objectives within this area through the implementation of domestic and international technological development projects focusing mainly on:
 
Quality and productivity improvement.
Increase in appreciation value of land through the development of marginal areas.
Increase in the quality of food in order to achieve global food safety standards. We aim to implement and perform according to official and private quality protocols that allow us to comply with the requirements of our present and future clients. Regarding official regulations, in 2003 we implemented the Servicio Nacional de Sanidad y Calidad Agroalimentaria law on animal identification for livestock in six farms. Simultaneously, in 2004 we implemented Global GAP Protocols (formerly EurepGap) with the objective of complying with European Union food safety standards and as a mean for continuous improvement of the internal management and system production of our farms. Our challenge is to achieve global quality standards.
Certification of suitable quality standards, since in recent years worldwide agriculture has evolved towards more efficient and sustainable schemes in terms of environmental and financial standpoints, where the innocuousness and quality of the production systems is becoming increasingly important. In this context, Good Agricultural Practices (GAP) have emerged, as a set of practices seeking to ensure the innocuousness of agricultural products, the protection of the environment, the workers’ safety and well-being, and agricultural health, with a view to improving conventional production methods. Certification of such standards allows to demonstrate the application of Good Agricultural Practices to production systems and ensures product traceability, allowing to impose stricter controls to verify the enforcement of the applicable laws.
The implementation of a system of control and assessment of agricultural tasks for analyzing and improving efficiency in the use of agricultural machinery hired. For each of the tasks, a minimum standard to be fulfilled by contractors was set, which has led to do an improvement in the plant stand upon sowing, a better use of supplies and lower harvesting losses.
 
We have several trademarks registered with the Instituto Nacional de la Propiedad Industrial, the Argentine institute for industrial property. We do not haveown any patents ornor benefit from licenses thatfrom third parties.
A substantial part of Cellcom’s operations are material for conducting our business.subject to the Communications Law, regulations enacted by the Ministry of Communications, and the provisions of the licenses granted to Cellcom by the Minister of Communications. Cellcom’s activies which include providing cellular service, landline, international telephone services and internet access, and infrastructure services are subject to licensing. For more information, please see “Legal framework – Operations Center in Israel”
 
 
International Outlook:Macroeconomic Outlook
 
As reported byin the International Monetary Fund (“IMF”) in itsIMF’s “World Economic Outlook” (“WEO”), global GDP expanded by 3.1% in 2015, slightly below the projections mainly as a result of a strong decline in activity increased by 3.4%during the last quarter in 2014, and worldthe year. World growth is expected to reach 3.2% in 2016 and 3.5% in 20152017. In 2016 and 3.8%2017, growth in 2016. From 2015 to 2016, developed economies areis expected to growremain steady at values a bit in excess ofabout 2%, driven by the growth in the United States of 3.1%2.5%, and in the Euro area, of 1.5%.
 
EmergingAs of April 2016, emerging and developing economies have recorded growth rates similar to those seen last year, and theyof 4%, also slightly below the projections. They are expected to grow 4.3%4.1% and 4.7% by the end of 20152016 and 2016. The recovery2017. Emerging economies continue facing challenges as regards the inflow of developed economies should have a positive impact on trade, although it could be lessened by lower commodity prices.foreign capital. Countries which are more flexible in terms of foreign exchange responded better to the global flow of capital than in previous decelerations.
 
During 20132014 and 2014,2015, the financialcommodities markets generally continued their pickup after their lower performance of 2011. The MSCI World index showedsuffered a strong decline. Mainly, oil exhibited a sustained negative trend until reaching a historical low in February 2016. During 2016, the commodities markets exhibited a strong recovery during 2013,with a 31.6% rise in oil prices. Soybean reversed the decline it had suffered in 2014 and a less strong recovery during 2014. On the other hand, the MSCI Emerging Markets index follows a negative trend since 2013. The continued currency stimulation programs2015 and rose 33.6%.
IMF’s forecasts indicate that inflation in the world, led mainlyeconomies of emerging and developing markets will decrease from 4.7% in 2015 to 4.5% in 2016, due to the decline in the prices of raw materials and the effects of last year’s currency depreciations evening out.
Average inflation in advanced economies will remain below the goals set by the FED, have brought mostcentral banks, mostly as a result of the upsurgelower price of oil. As of April 2016, the general level of inflation in advanced economies averaged 0.3%, the developed markets.lowest since the global financial crisis.
 
Argentine Economy:macroeconomic context
 
ArgentineOn October, 2016, IMF published its growth forecasts were revised down again as compared to those of last year. The IMF reduced its projection for GDP growth in 2014 to 0.5% and projected a slight contraction in GDP2016 for 20151.8% decline of 0.3%.the GDP. This correction was mainly due to deteriorated external financing conditions.the change in policies implemented by the new government administration aimed at balancing certain macroeconomic distortions. Growth is expected to strengthen to 2.7 percent in 2017 on the back of moderating inflation and more supportive monetary and fiscal policy stances.
 
Consumption remained as the main driver of economic activity, as shopping
Shopping center and supermarket sales grew at rates of 33.3% and 26.1%, respectively, comparing May 2015 and the same last year period.
According to INDEC the unemployment rate was at 6.9% of the economically active population, showingreached a slighttotal Ps. 4,374 million in April 2016, which represents a 41.4% increase of 0.3% on a year-on-year basis in December. In turn, nominal salaries increased 31.5% during the same period.
156

Comparedas compared to the same period last year. Accumulated sales for the first four months of the previous year totaled Ps. 14,586 million, representing a 29.2% increase as compared to the same period last year.
The INDEC reports that, as of April 2016, industrial activity in Argentina decreased by 1.3%6.7% as compared to the same month in 2015. Manufacturing production accumulated a 2.4% decline during the first halffour months of 2015 (removing the seasonal component). Car production fell 11.8% on year-on-year basis in July 2015,year as compared to the same as car exports, which fell 21.1%.period last year.
 
Regarding the balance of payments, in the first quarter of 20152016 the current account deficit reached US$ 3,7104,013 million, with US$ 4521,403 million allocated to the goods and services trade balance, and US$ 3,2312,572 million to the income account, which represents 72% of the foreign direct investment return.
 
During the pastfirst quarter of 2016, the financial account showed a surplus of US$ 5,3798,510 million resulting from net income from the non-financial public sector and the BCRAArgentine Central Bank (“BCRA”) for US$ 3,3176,233 million, from the non-financial private sector for US$ 1,1961,701 million, and from the financial sector for US$ 866576 million.
The stock of international Reserves atfell by US$ 5,844 million in 2015. During the beginningfirst half of August 20152016, reserves grew by US$ 4,944 million. At July, reserves stood at US$ 33,915 million, accounting for an increase of 17.4%, compared to last year and after the payment of the sovereign bond, BODEN 15, on October 3, 2015, the stock of of foreign currency reserves was US$ 27.7 billion.25,512 million.
 
Total gross external debt atincreased by US$ 10,605 million during the closingfirst quarter of March 2015 was estimated2016 and stood at US$ 145,931163,236 million an increase of US$ 1,840 million compared to the previous quarter.
at March 2016.  The non-financial public sector and Argentine Central Bank debt for the quarter was estimated at US$ 78,15492,469 million, an increasehaving increased by US$ 8,593 million during the first quarter of 243 million from the previous quarter.2016. The Argentine Central Bank’s liabilities increased by US$ 2,320 million mainly explained by disbursements and new tranche capitalization of the swap with the Popular Republic of China. The government security and bond outstanding balance diminishedincreased by US$ 1,7023,431 million mainly due to depreciationduring the first quarter of 2016. At the Euro with respect toend of this quarter, the US Dollar and to a lesser extent due to secondary market transactions.
balance was US$ 43,794 million.  The non-financial private debt forgrew US$ 2,261 million during the first quarter was estimatedof 2016. At March 2016, such debt stood at US$ 64,931 million, increasing by US$ 1,390 million compared to the previous quarter.
67,621 million.  The financial sector debt excluding the Argentine Central Bank was estimated atdecreased by US$ 2,846250 million showing an increase forduring the first quarter of 2016, reaching a total of US$ 2073,145 million.
 
In connection with the fiscal sector, revenues recorded a year-on-year increase of 33.9%38.9% as of May 2015,March 2016, whereas primary expenditure grew by 34.3%, slightly over38.7% during the increase in revenues, and was mostly oriented to items related to the sustainment of domestic demand.
same period. In local financial markets, the Private Badlar rate in Pesos ranged from 19%20% to 23%30% in the period from July 20142015 to June 2015,2016, averaging 20.47%28% in June 20152016 against 22.03%20% in June 2014.2015. The Argentine Central Bank continued withdiscontinued its controlled floating exchange rate policy:policy in December 2015; consequently, the Peso sustained a 11.7%63% nominal depreciation in the period from July 20142015 to June 2015.
2016. At June 2016, the exchange rate stands at Ps.14.50 pesos per US$1.00.  In the fiscal year herein analyzed,June 2016, Argentina’s country risk measured as per the Emerging Market Bond Index, decreased by 9397 basis points in year-on-year terms, maintaining a high spread vis-à-vis the rest of the countries in the region. The debt premium paid by Argentina was at 631518 basis points in June 2015,2016, compared to the 304352 basis points paid by Brazil and the 194213 basis points paid by Mexico.
 
Product Prospects
Agriculture and Cattle Raising Sector in Argentina
Agriculture
Argentina has positioned itself over the years as one of the world’s leading food producers and exporters. It is the second largest country in South America after Brazil and has particularly favorable natural conditions for diversified agricultural production: vast extensions of fertile land and varied soil and weather patterns.
During the decade of the nineties, the Argentine agriculture and cattle raising industry experienced sweeping changes, such as a significant increase in production and yield (thanks to a sustained agricultural modernization process), relocation of production (crops vs. livestock) and a significant restructuring process within the industry, as well as increased land concentration. Taking advantage of a favorable international context, the agriculture and cattle raising sector has been one of the major drivers of the Argentine recovery after the economic and financial crisis of 2002.
During the 2015/2016 crop season, soybean production was over 56 million tons, a decrease of 7% as compared to the previous season.
Corn production reached 28 million tons, 2.5% lower than in the previous year.
Wheat production reached 11.3 million tons, 19% lower than in the previous year.
 
The sourcespolicies implemented by the new government have led to better projections for the agricultural industry. Mainly, the strong devaluation of the following informationpeso and tax reductions on exports have improved the situation of agricultural growers. Withholding taxes on corn and wheat have been fully eliminated, whereas withholding taxes on soybean have been lowered by 5% (to 30% down from 35%). As a result of these measures, the production of soybean, corn and wheat, are the Ministerio de Agricultura, Ganadería y Pesca de la República Argentina and the United States Department of Agriculture (“USDA”).
Wheat
World wheat production for the 2015/2016 campaign is projected by USDA at 732.79 million tons, 7 million tons more than the 2014/2015 campaign. Estimated harvested area is expected to increase by almost 1 million hectares at global level, while production yields are expected to stay at similar levels as the 2014/2015 campaign. The wheat production forecast for Argentina is 10.557, 36.5 and 14.4 million tons 16% less than 2014/2015 campaign, with wheat planted area projected to decrease from 5.26 to 4 million hectares.respectively.
 
Corn
USDA projections for the 2015/2016 season estimates that world production will reach 972.60 million tons, showing a derease with respect to the previous year. 2015/2016 yield is estimated at 5.54 million tons per hectare, down 1.6% from previous campaign. In the case of Argentina, the planted area is expected to decrease from 3.20 to 3.10 million hectares, pushing the expected production down from 26.5 million to 25 million tons for the 2015/2016 campaign.
Soybean
The USDA projections for the 2015/2016 season estimates that the world soybean production will remain at its 2014/2015 levels, at 320.49 million tons. In particular, USDA estimates that Argentina’s soybean production will decrease by 3.8 million tons, to 57 million tons in the 2015/2016 campaign.
 
Cattle
 
AccordingAs reported by SENASA, with an aggregate stock of 52,636,778 heads as of March 31, 2016, the Cattle stock has increased by 2.3% as compared to the USDA projections, worldsame period of the previous year. For the third year in a row, the Cattle stock surpassed 51 million heads.
As reported by the Argentine Chamber of Beef Commerce and Industry (Cámara de la Industria y Comercio de Carnes y Derivados de la República Argentina, “Ciccra”), consumption of cattle beef production is projected at 58.4 million tonsper capita was 55.9 kilograms per year on average for the first quarter of 2016, accounting for a year-on-year fall of 5.9%. This decrease in consumption reflects the fact that the consumers’ salaries were restated in 2015, down 1.3 million tons from previous year production. Inwhereas prices have risen after the casedevaluation of Argentina, the expected production remain stableArgentine peso in December 2015. However, the effects of the devaluation of the Argentine peso, along with the reduction in export taxes, generate a promising scenario for 2015 with 2.7 million tons. The beef cattle market has remained sound, with listed prices that surpassed the peaks set last spring when the Province of Buenos Aires became flooded.Cattle exports.
 
Dairy
Milk Sector
 
The USDA estimates show,United States Department of Agriculture projects that milk production in Argentina for 2015 will be 11.6 million tons, higher than in the previous year. However, milk production for 2016 faces a tough scenario, as the elimination of withholding taxes on corn adversely affected the input/product ratio as concerns milk. Moreover, international prices remain depressed.
The challenge faced by the international context, coupled with unfavorable weather conditions in the sector would imply that the worldmost efficient producers will remain in business, causing production of milk will increase from the 2014 production levels of 485 million tons to 493 million tons by the end of 2015. In the case of Argentina, production is expected to increase to 10.7 million tons in 2015, 3.6% lower than 2014 due to unfavorable weather early in the year and ongoing adverse economic situation. As the dairy sector shrinks leaving the more efficient farmers, milk yields per cow are expected to rise.increase.
 
Argentina continues to be the third largest exporter of whole powdered milk in the world. Exports for 2015 are estimated at 180,000 tons.
For additional information about our Agricultural business, please see Item 4. Information on the Company “B, Business Overview - Agricultural Business”.
Evolution of Shopping Centers in Argentina
 
Private consumption continues to be the drivera significant component of economic activity. Theactivity, although in the past months there has been a slight deceleration in its growth rate. At June 2016, the Consumer Confidence Index (CCI), that measures the purchasing expectations, prepared by the Center for Research in Finances (Centro de Investigación en Finanzas) of the School of Business of Universidad Torcuato Di Tella increased by 30.9% in had shown a 22.2% decline as compared to June 2015, as well as a 1.9% increase as compared to the same monthJune 2014. Sales in 2014. The metric stood at the highest level since January 2012, and only 10% below the highest historical recordshopping centers in January 2007. The evolution of the Shopping Centers segment shows evidence thereof. Based on the information released by the Argentine Institute of Censuses and Statistics (“INDEC”), in June 2015 the sales at current prices –without removal of the seasonality component-April 2016 reached a total amount of Ps. 3,6694,374 million, which represented a 26.5%41.4% increase compared to the same month in 2014.2015. Accumulated sales for the first four months of the year totaled Ps. 14,586 million and reached a 29.2% variation compared to the same period the previous year.
 
157


 
In relation to the office market, according
According to Colliers International, as of June 2016, the A+ and A office inventory remained stable since the fourth quarter of 2015 at 1,655,954 sqm. In terms of rental availability, there was a 1% decrease in the City of Buenos Aires remained stablevacancy rate to 6.4% during the second quarter of 2015 at 1,646,885 sqm. With regard2016 compared to the same period the previous year. Thus, the vacancy rate there washas remained at a slight decrease from 8.1%stable range between 6% and 8% since 2010. These values indicate that the market is healthy in terms of its operations, allowing an optimum level of supply with balanced values. According to the first quartermarket segments, class A properties show a vacancy rate of 7% for the year to 7.4% during the second quarter. Theentire stock, while A+ properties buildings show a vacancy rate of 6.5% (6.9% in the previous period) and class A properties showed a vacancy rate of 7.9%, 1.1pp lower than the 9% recorded in the first quarter of 2015.5%.
 
In terms of available footage,During the second quarter of 2015 ended with 120,2482016, net absorption was negative at 400 sqm, offered for rental, 78%i.e., more meters than the ones that have been occupied have become vacant, a situation that was not seen since 2012. This behavior of which is represented by the sub-markets Macrocentro Sur, Zona Norte GBA and Puerto Madero. Net absorption recorded in the second quarter of the year was 12,838 sqm. This valuedemand is mainly explained by the performancesub-market Zona Norte GBA, which concentrates most of the spaces that have become vacant. On the other hand, it is verified that the area that has become vacant in A+ properties (-2,908 sqm) was mostly absorbed by class A properties while during the quarter an aggregate footage of 10,128 sqm has been absorbed. If the geographic distribution of this absorption is analyzed,(as it can be seen that the sub-market Zona Norte GBA accounts for 69% of this total area. Such area is followed –far behind- by the sub-markets Microcentro and Puerto Madero (accounting for 20 and 18%, respectively). Conversely, in Plaza Roma a negative absorption of 1,105 sqm was recorded, mainly explained by the vacancy of 6 floors in Torre Bouchard. In turn, the sub-markets Macrocentro, Macrocentro Sur and Plaza San Martin did no record changes in absorption, i.e. no new spaces have been occupied or have become vacant in the properties comprising such stock.2,474 sqm).
 
Average rental price recorded an increase inDuring the second quarter fromof 2016, rental prices remained steady as compared to the general average prices seen over the past ten years (US$ 24.8 per square meter). Compared to the previous quarter, a 2.5% increase was recorded (from US$ 23.824.1 per square meter to US$ 24.7 per square meter. Upon performing an analysis by building category, it is shown that the averagemeter). This slight increase shows a 1.4% increase in rental price of those in theprices for A+ segment is US$ 26.3 per square meterproperties (US$ 25.527.2 per square meter in the previous period), while the average price of those in class A issecond quarter against US$ 23.6 per square meter (US$ 22.726.8 per square meter in the previousfirst quarter) and a 2.4% increase in rental prices for A properties (US$ 23.4 per square meter in the second quarter against US$ 22.9 per square meter in the first quarter). The spread between both categories is US$ 3.8 and reached US$ 12 in low vacancy periods.
In turn, the sub-market Macrocentro NorteCatalinas is currently the marketone with the best prices in the market. The average value of the properties in such area amounts to US$ 31.227.9 per square meter. This value is expected to increase over the next few months due to the addition of new towers with prices already over US$ 35 per square meter (vacancy rate 2.8%).in the inventory.
 
LateAt June 2016, the sub-market Zona Norte GBA shows average rental prices of US$ 23.3, almost at the same values of June 2015. Moreover, during the same month, the vacancy rate was 8.9%, compared to 9.5% in June 2015.
Israeli macroeconomic context
According to the OECD, for the year ended at December 31, 2015, Israel’s growth reached 2.5%. Israel’s economic growth is projected to remain at 2.5% in 2016, before rising to 3% in 2017.
Since March 2015, the Bank of Israel has kept interest rates at 0.10% and has continued with its policy to intervene in the currency market to support economic policies. For both July and August 2016, the Monetary Committee also decided to leave the interest rate at the same level. Similar to the announcements of the interest rate decisions for November and December of 2015, all announcements in the first half of 2016 included guidance that monetary policy is expected to remain accommodative for a considerable time.
Since March 2015, the Bank of Israel has pursued a policy to intervene in the currency market. It continued to purchase foreign currency, purchasing US$4 billion, about US$0.9 billion of which were purchased as part of the program intended to offset the effects of natural gas production on the exchange rate. The rest were purchased as part of a program designed to moderate excessive fluctuations in the exchange rate.
During the twelve months ending June 30, 2016, the CPI in Israel declined by 0.8%. The energy component continued to contribute to the decline of the CPI, as a result of the sharp decline in global oil prices, even though this trend reversed itself during the first half of the year.
During the first half of 2016, the shekel remained stable in terms of the nominal effective exchange rate (the average in June relative to the average in December), and relative to the U.S. dollar. Relative to the euro, the shekel appreciated by about 3%. Various models of the equilibrium exchange rate indicate that the shekel may be overvalued.
Activity in the housing market remained roburst during the reviewed period: Home prices continued to increase, and the volumes of transactions and of new mortgages originated remain high. At the beginning of the first half of 2016, the Research Department presented a forecast in which it projected that inflation would return to within the target range at the beginning of 2017, and that the Bank of Israel interest rate would increase gradually starting in the last quarter of 2016.
In regards to the seasonality, in Israel retail segment business results are subject to seasonal fluctuations as a result of the consumption behavior of the population proximate to the Pesach holidays (March and/or April) and Rosh Hashanah and Sukkoth holidays (September and/or October). This also affects the balance sheet values of inventory, customers and suppliers. Our revenues from cellular services are usually affected by seasonality with the third quarter of the year characterized by higher roaming revenues due to increased incoming and outgoing tourism.
In 2016, the Passover holiday fell at the end of April, compared to 2015 when it was at the beginning of April. The timing of the holiday affects Shufersal’s sales and special offers in the second quarter of 2016, compared to last year.  The Passover holiday in the second quarter of 2016 had a greater effect on Shufersal’s results than in the corresponding quarter in 2015, four new office buildings are expected to be included intherefore analysis of the office inventory with a total footageresults for the first half of 44,000 sqm. Two of them will be located in the Plaza San Martín sub-market and the remaining ones will be located in Zona Norte C.A.B.A. and Macrocentro Sur. It should be noted that 38% of this new area will be subjectyear compared to the LEED sustainability standards.corresponding period in 2015 better represents the changes between the periods.
 
For information about Production and Sales, please see Item 5.A. “Consolidated Operating Results”.
 
 
Agricultural Business
 
In the ordinary course of business, FyO guarantees certain brokerage transactions. Under the agreement, FyO guarantees the performance of the producer in case it In the ordinary course of business, FyO guarantees certain brokerage transactions. Under the agreement, FyO guarantees the performance of the producer in case it does not comply with the physical delivery. We have recourse against the non-performing party. As of June 30, 2015,2016, the value of transacted merchandise for which guarantees were granted amounted to Ps. 7.8102.7 million. As of the date of this annual report, there were non-performing parties under the agreements for which we had to respond as guarantor. As of the date of this annual report, the value of transacted merchandise for which guarantees were granted amounted to Ps. 26.265.8 million.
 
Urban Properties and Investment Business
 
As of June 30, 2015,2016, IRSA did not have any off-balance sheet transactions, arrangements or obligations with unconsolidated entities or others that are reasonably likely to have a material effect on our financial condition, results of operations or liquidity.
 

 
The following table showsfollowings tables show our contractual obligations, as of June 30, 2015.2016.
 
Where the interest payable is not fixed, the amount disclosed has been determined by reference to the existing conditions at the reporting date.
 
As of June 30, 2015 Less than 1 year  Between 1 and 2 years  
Between
2 and 3 years
  
Between
3 and 4 years
  More than 4 years  Total (i) 
Trade and other payables  943,713   11,001   4,698   2,582   -   961,994 
Borrowings (excluding finance lease liabilities)  2,215,239   3,296,084   616,654   717,850   2,118,068   8,963,895 
Finance lease  11,785   7,291   3,859   2,552   -   25,487 
Derivative financial instruments  270,499   269,949   -   -   -   540,448 
Total  3,441,236   3,584,325   625,211   722,984   2,118,068   10,491,824 
Payments due by period
(in millions of Pesos)
 
(i)  Includes accrued and prospecting interest, if applicable.
As of June 30, 2016 Less than 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years More than 4 yearsTotal
Trade and other payables                              14,287                                   438                                       562                                     54                                       4                              15,345
Borrowings (Excluding finance lease liabilities)                              25,260                              21,093                              31,601                              10,176                              59,037                            147,167
Finance lease obligations                               2,265
                                    2,093
                                       1,809
                                    1,487
                                     3,398
                                     11,052
Derivative financial instruments                                   1128                                     178
                                     15
                                     -                                     -                                  1,321
 Purchase Obligations
105 47 58-  210
Total                              43,045                              23,849                              34,045                              11,717                              62,439                            175,095
 
 
See the discussion at the beginning of this Item 5 and “Disclosure regarding forward looking statements” in the introduction of this annual report, for forward-looking statement safe harbor provisions.
 
For information about Production and Sales, please see Item 5.A. “Consolidated Operating Results”.
 
Item 6.                      Directors, Senior Management and Employees
 
 
Board of Directors
 
We are managed by a board of directors, which consists of ten directors and three alternate directors. Each director and alternate director is elected by our shareholders at an annual ordinary meeting of shareholders for a three-year term, provided, however, that only one third of the board of directors is elected each year. The directors and alternate directors may be re-elected to serve on the board unlimited number of times. There are no arrangements or understandings pursuant to which any director or person from senior managements is selected.
 
158

Our current board of directors was elected at the shareholders’ meetings held on October 31, 2013, November 14, 2014 and October 30,2015,30, 2015, for terms expiring in the years 2016, 2017 and 2018, respectively.
 
Our current directors are as follows:
 
Directors(1)
Date of Birth
Position in Cresud
Term Expires(2)
Date of Current Appointment
Current Position Held Since
Eduardo Sergio Elsztain01/26/1960Chairman11/14/06/30/1711/14/141994
Saúl Zang12/30/1945First Vice-Chairman11/14/06/30/1711/14/141994
Alejandro Gustavo Elsztain03/31/1966Second Vice-Chairman and CEO
06/30/16(3)
10/31/131994
Gabriel A.G. Reznik11/18/1958Regular Director10/06/30/1810/30/152003
Jorge Oscar Fernández01/08/1939Regular Director10/06/30/1810/30/152003
Fernando Adrián Elsztain01/04/1961Regular Director
06/30/16
10/31/132004
David Alberto Perednik11/15/1957Regular Director and Chief Administrative Officer06/30/16(3)10/31/132004
Pedro Damaso Labaqui Palacio02/22/1943Regular Director10/06/30/1810/30/152006
Daniel E. Mellicovsky01/17/1948Regular Director11/14/06/30/1711/14/142008
Alejandro Gustavo Casaretto10/15/1952Regular Director11/14/06/30/1711/14/142008
Gastón Armando Lernoud06/04/1968Alternate Director11/14/06/30/1711/14/141999
Enrique Antonini03/16/1950Alternate Director
06/30/16(3)
10/31/132007
Eduardo Kalpakian03/03/1964Alternate Director
06/30/16(3)
10/31/132007
      
(1)
The business address of our management is Moreno 877, 23rd Floor, (C1091AAQ) Buenos Aires, Argentina.
(2)  Term expires at the annual ordinary shareholders’ meeting.
The business address of our management is Moreno 877, 23rd Floor, (C1091AAQ) Buenos Aires, Argentina.
(2)
Term expires at the annual ordinary shareholders’ meeting.
   (3)
   These position will be considerated in the annual ordinary shareholders´meeting that will take place October 28, 2016.
 
Gabriel A. G. Reznik, Jorge Oscar Fernandez, Pedro Dámaso Labaqui Palacio, Daniel Elias Mellicovsky, Enrique Antonini and Eduardo Kalpakian, qualify as independent, in accordance with the CNV’s Rules.
 
The following is a brief biographical description of each member of our board of directors:
 
Eduardo Sergio Elsztain. Mr. Elsztain studied Economic Sciences at University of Buenos Aires (Universidad de Buenos Aires). He has been engaged in the real estate business for more than twenty five years. He is chairmanChairman of the boardBoard of directorsDirectors of IRSA Inversiones y Representaciones Sociedad Anónima, Consultores Asset Management S.A., Arcos del Gourmet S.A., BACS Banco de Crédito & Securitización S.A.,IRSA Commercial Properties, Cresud, BrasilAgro, Austral Gold Ltd. and Banco Hipotecario S.A., Brasilagro Companhia Brasileira de Propiedades Agricolas, Tarshop S.A., E-Commerce Latina S.A., and Dolphin Netherlands BV,SA, among other companies.others. He is also directorChairman of IDBD Development Corporation Ltd.Ltd, Discount Investment Corporation. Mr. Eduardo S. Elsztain is also member of the World Economic Forum, the Council of the Americas, the Group of 50 and Argentina’s Business Association (AEA). He is President of Fundacion IRSA, which promotes education among children and young people; President of TAGLIT - Birthright Argentina; Co-Founder of Endeavor Argentina; and Vice-President of the World Jewish Congress. He is Fernando A.Adrián Elsztain’s cousin and Alejandro G.Gustavo Elsztain and Daniel Ricardo Elsztain’s brother.
 
Saúl Zang.Mr. Zang obtained a law degree from University of Buenos Aires (Universidad de Buenos Aires). He is a member of the International Bar Association and the Interamerican Federation of Lawyers. He is a founding member of Zang, Bergel & Viñes law firm. He is chairman of Puerto Retiro S.A., first vice-chairman of IRSA Inversiones y Representaciones Sociedad Anónima and vice-chairman of IRSA Propiedades Comerciales S.A., Tarshop S.A., and Fibesa S.A., among other companies. He is also director of Banco Hipotecario S.A., Nuevas Fronteras S.A., Brasilagro Companhia Brasileira de Propiedades Agricolas, IDBD Development Corporation Ltd, BACS Banco de Crédito & Securitización S.A., Tarshop S.A., and Palermo Invest S.A., among other companies.

 
Alejandro Gustavo Elsztain.Mr. Elsztain obtained a degree in agricultural engineering from University of Buenos Aires (Universidad de Buenos Aires). Currently he is chairman of Fibesa S.A. and Cactus Argentina S.A., and second vice-chairman of IRSA Inversiones y Representaciones Sociedad Anónima. He is also vice-chairman of Nuevas Fronteras S.A., and Hoteles Argentinos S.A. He is also director of Brasilagro Companhia Brasileira de Propiedades Agricolas and Emprendimientos Recoleta S.A., among other companies. Mr. Alejandro Gustavo Elsztain is brother of our Chairman Mr. Eduardo S. Elsztain and Daniel Ricardo Elsztain, and cousin of Fernando Adrián Elsztain.
 
Gabriel A. G. Reznik.Mr. Reznik obtained a degree in Civil Engineering from University of Buenos Aires (Universidad de Buenos Aires). He worked for IRSA Inversiones y Representaciones Sociedad Anónima since 1992 until May 2005 at which time he resigned. He had formerly worked for an independent construction company in Argentina. He is director of Emprendimientos Recoleta S.A., and Puerto Retiro S.A., as well as member of the board of Banco Hipotecario S.A., among other companies.
 
Jorge Oscar Fernández. Mr. Fernández obtained a degree in Economic Sciences from University of Buenos Aires (Universidad de Buenos Aires). He has performed professional activities at several banks, financial corporations, insurance firms and other companies related to financial services. He is also involved in many industrial and commercial institutions and associations.
 
Fernando Adrián Elsztain.Mr. Elsztain studied architecture at University of Buenos Aires (Universidad de Buenos Aires). He has been engaged in the real estate business as a consultant and as managing officer of a real estate company. He is chairman of the board of directors of Llao Llao Resorts S.A., Palermo Invest S.A. and Nuevas Fronteras S.A. He is also a director of IRSA Inversiones y Representaciones Sociedad Anónima, IRSA Propiedades Comerciales S.A., and Hoteles Argentinos S.A. He is also alternate director of Puerto Retiro S.A. and Banco Hipotecario S.A., among other companies. He is cousin of our CEO, Alejandro Elsztain, and of our Chairman, Mr. Eduardo S. Elsztain.
 
Pedro Damaso Labaqui Palacio. Mr. Labaqui obtained a law degree from University of Buenos Aires (Universidad de Buenos Aires). He is also director of Bapro Medios de Pago S.A., Permanent Syndic of Bayfe S.A. Fondos Comunes de Inversión, director and member of the Supervisory Committee of J. Minetti S.A.; and Director of REM Sociedad de Bolsa S.A.
 
David Alberto Perednik. Mr. Perednik obtained a degree in accounting from University of Buenos Aires (Universidad de Buenos Aires). He has worked for several companies such as Marifran Internacional S.A., a subsidiary of Louis Dreyfus Amateurs where he worked as Financial Manager from 1986 to 1997. He also worked as a Senior Consultant in the administration and systems department of Deloitte & Touche from 1983 to 1986. He is also chief administrative officer of IRSA Inversiones y Representaciones S.A. and IRSA Propiedades Comerciales S.A.
Daniel E. Mellicovsky.Mr. Mellicovsky obtained a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). He has served as director of several companies of the agricultural, food supplies, financial and hotel development sectors.
 
Alejandro Gustavo Casaretto Mr. Casaretto obtained a degree in agricultural engineering from University of Buenos Aires (Universidad de Buenos Aires). He has served as our technical manager, farm manager, and technical coordinator since 1975.
 
Gastón Armando Lernoud.Mr. Lernoud obtained a law degree from El Salvador University (Universidad de El Salvador) in 1992. He obtained a Masters degree in Corporate Law in 1996 from Palermo University (Universidad de Palermo). He was a senior associate member of Zang, Bergel & Viñes law firm until June 2002, when he joined our Company’s lawyers team.
 
159

Enrique Antonini. Mr. Antonini holds a degree in law from the University of Buenos Aires (Universidad de Buenos Aires). He is currently a member of the board of directors of Banco Mariva S.A. (since 1992), and Mariva Bursátil S.A. (since 1997). He has also served as director of IRSA Inversiones y Representaciones Sociedad Anónima from 1993 to 2002, and at present he is alternate director of IRSA Inversiones y Representaciones Sociedad Anónima. He is member of the Banking Lawyers Committee and the International Bar Association.
 
Eduardo Kalpakian. Mr. Kalpakian holds a degree in business from the University of Belgrano (Universidad de Belgrano). He has also an MBA from the CEMA University of Argentina. He has been director for 25 years of Kalpakian Hnos. S.A.C.I., a leading carpet manufacturer and flooring distributor in Argentina. Currently is vice-chairman of such company’s board and CEO. He is also vice-chairman of the board of La Dormida S.A.A.C.E I.
 
Employment contracts with our directors and certain senior managers
 
We do not have written contracts with our directors. However, Messrs. Eduardo S. Elsztain, Saúl Zang, Alejandro G. Elsztain, Fernando A. Elsztain, David A. Perednik, Alejandro G. Casaretto and Gastón Armando Lernoud are employed by us under the Labor Contract Law No. 20,744.
 
Law No. 20,744 governs certain conditions of the labor relationship, including remuneration, protection of wages, hours of work, holidays, paid leave, maternity protection, minimum age requirements, protection of young workers and suspension and termination of the contract.
 
Senior Management
 
Senior management performs its duties in accordance with the instructions of our board of directors. There are no arrangements by which a person is selected as a member of our senior management.
 
The following table shows information about our current senior management of the Operations Center in Argentina (designated by the board of directors meeting):
 
NameDate of BirthPositionCurrent Position Held Since
Alejandro G. Elsztain03/31/1966CEO1994
Carlos Blousson09/21/1963General Manager for Argentina and Bolivia Operations2008
David A. Perednik11/15/1957Chief Administrative Officer1997
Matías I. Gaivironsky
Alejandro Casaretto
02/23/1976
10/15/1952
Chief Financial and Administrative Officer
2011
Alejandro Casaretto10/15/1952
Chief Regional Agricultural Officer
2011
2008
 
The following is a biographical description of each of our senior managers who are not directors:
 
Matias Ivan Gaivironsky. Matías Iván Gaivironsky. Mr. Matías Gaivironsky obtained a degree in business in the University of Burnos Aires (administration from Universidad de Buenos Aires).Aires. He holdshas a Master in Finance from CEMA University.Universidad del CEMA. Since 1997 he has held severalserved in various positions inat IRSA, IRSA Propiedades Comerciales S.A,CP and our Company. Since December 2011the Company, and he has beenserved as Chief Financial Officer since December 2011. In early 2016, he was also designated to add the funtions of Administrative Officer. Previously, inIn 2008 he was Tarshop S.A’sserved as Chief Financial Officer.Officer in Tarshop S.A. and was later appointed Manager of the Capital Markets and Investor Relations Division of IRSA, IRSA CP and the Company.
 
Carlos Blousson. Mr. Blousson obtained a degree in agricultural engineering from University of Burnos Aires (Universidad de Buenos Aires). He has been working as our Chief Sales Officer since 1996. Prior to joining us, he worked as a futures and options operator at Vanexva Bursátil –Sociedad de Bolsa. Previously, he worked as a farmland manager and a technical advisor at Leucon S.A.
The following table shows information about our current senior management of the Operations Center in Israel:
Name
Date of birth
Position
Current position held since
Sholem Lapidot
10/22/1979
Chief Executive Officer
2016
Gil Kotler
04/10/1966
Chief Financial Officer
2016
Aaron Kaufman
03/03/1970
VP & General Counsel
2015
Sholem Lapidot. Mr. Lapidot has studied Rabbinical Studies and Jewish Philosophy in Argentina, Canada and Israel. He serves as Director in Discount Investment Corp. He has been the chief executive officer of IDB Development since January 2016.
Gil Kotler. Mr. Kotler obtained a bachelors’ degree in economics and accounting from Tel Aviv University in Israel in 1993. As well as a GMP at Harvard Business School in 2011. He has been the chief financial officer of IDB Development since April 2016.
Aaron Kaufman. Mr. Kaufman obtained a law degree in Tel Aviv University in 1996. He has been partner in Epstein Law Firm until November 2015, when he joined IDBD as a VP and General Counsel.

 
Executive Committee
 
Pursuant to our by-laws, our day-to-day business is managed by an executive committee consisting of a minimum of four and a maximum of seven directors and one alternate member, among which there should be the chairman, first vice-chairman and second vice-chairman of the board of directors. The current members of the Executive Committee are Messrs. Eduardo S. Elsztain, Saúl Zang, Alejandro Elsztain and Fernando A. Elsztain.
 
The executive committee is responsible for the management of the day-to-day business pursuant to authority delegated by our board of directors in accordance with applicable law and our by-laws. Our by-laws authorize the executive committee to:
 
designate the managers and establish the duties and compensation of such managers;
grant and revoke powers of attorney to attorneys-at-law on behalf of us;
hire, discipline and fire personnel and determine wages, salaries and compensation of personnel;
enter into contracts related to our business;
manage our assets;
enter into loan agreements for our business and set up liens to secure our obligations; and
perform any other acts necessary to manage our day-to-day business.
 
Supervisory Committee
 
Our Supervisory Committee is responsible for reviewing and supervising our administration and affairs, and verifying compliance with the bylaws and the decisions adopted at shareholders’ meetings pursuant to the provision of the General Companies Law. The members of the Supervisory Committee are appointed at the annual general ordinary shareholders’ meeting for a term of one year. The Supervisory Committee is composed of three members and three alternate members.
 
160

The following table shows information about the members of our Supervisory Committee, who were elected in the annual general ordinary shareholders’ meeting which was held on October 30, 2015:
 
Member
Date of Birth
Position
José Daniel Abelovich07/20/1956Member
Marcelo Héctor Fuxman11/30/1955Member
Noemí Ivonne Cohn05/20/1959Member
Roberto Daniel Murmis04/07/1959Alternate Member
Alicia Graciela Rigueira12/02/1951Alternate member
Sergio Leonardo Kolaczyk
11/28/1964Alternate member
 
All members of the supervisory committee qualify as independent, in accordance with CNV Resolution No. 400/2002 Rules.
Set forth below is a brief biographical description of each member of our Supervisory Committee:
 
José Daniel Abelovich. Mr. Abelovich obtained a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). He is a founding member and partner of Abelovich, Polano & Asociados S.R.L. / firm member of Nexia International, a public accounting firm in Argentina. Formerly, he had been a manager of Harteneck, López y Cía/Coopers & Lybrand and has served as a senior advisor in Argentina for the United Nations and the World Bank. He is a member of the Supervisory Committees of IRSA Inversiones y Representaciones Sociedad Anónima, IRSA Propiedades Comerciales S.A, Shopping Alto Palermo S.A,, Hoteles Argentinos S.A., Inversora Bolívar, and Banco Hipotecario S.A, among other companies.
 
Marcelo Héctor Fuxman. Mr. Fuxman obtained a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). He is a partner of Abelovich, Polano & Asociados S.R.L. / firm member of Nexia International, a public accounting firm in Argentina. He is also a member of the Supervisory Committees of IRSA Inversiones y Representaciones Sociedad Anónima, IRSA Propiedades Comerciales S.A, Shopping Alto Palermo S.A, Hoteles Argentinos S.A., Inversora Bolívar, and Banco Hipotecario S.A, among other companies.
 
Noemí Ivonne Cohn. Mrs. Cohn obtained a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). Mrs. Cohn is a partner at Abelovich, Polano & Asociados S.R.L. / firm member of Nexia International a public accounting firm in Argentina, and works in the audit area. Mrs. Cohn worked in the audit area in Harteneck, Lopez and Company, Coopers & Lybrand in Argentina and in Los Angeles, California. Mrs. Cohn is member of the Supervisory Committees of IRSA Inversiones y Representaciones Sociedad Anónima and the Company, among other companies.
 
Roberto Daniel Murmis. Mr. Murmis holds a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). Mr. Murmis is a partner at Abelovich, Polano & Asociados S.R.L / firm member of Nexia International. Mr. Murmis worked as an advisor to the Public Revenue Secretariat, Argentine Ministry of Economy. Furthermore, he is a member of the Supervisory Committee of IRSA Inversiones y Representaciones Sociedad Anónima, Shopping Alto Palermo S.A,, Futuros y Opciones S.A., and Llao Llao Resorts S.A, among other companies.
 
Alicia Graciela Rigueira. Mrs. Rigueira holds a degree in accounting from the University of Buenos Aires (Universidad de Buenos Aires). Since 1998 she has been a manager at Estudio Abelovich, Polano & Asociados / firm member of Nexia International. From 1974 to 1998, Mrs. Rigueira performed several functions in Harteneck, Lopez y Cia. affiliated with Coopers & Lybrand. Mrs. Rigueira lectured at the School of Economic Sciences of Lomas de Zamora University.
 
Sergio Leonardo Kolaczyk. Mr. Kolaczyk obtained a degree in accounting from the Universidad de Buenos Aires (Universidad de Buenos Aires). He is a professional of Abelovich, Polano & Asociados S.R.L. / firm member of Nexia International. He is also an alternate member of IRSA Inversiones y Representaciones Sociedad Anónima and IRSA Propiedades Comerciales S.A’s Supervisory Committees.
 
KEY EMPLOYEES
 
There are no key employees.
 

B. COMPENSATION
 
Compensation of directors
 
Under the Argentine Law, if the compensation of the members of the Board of Directors is not established in the by-laws of the Company, it should be determined by the shareholders’ meeting. The maximum amount of total compensation to the members of the Board of Directors, including compensation for technical or administrative permanent activities, cannot exceed 25% of the earnings of the Company. That amount should be limited to 5% when there is no distribution of dividends to shareholders and will be increased proportionally to the distribution, in accordance with the formulas and scales set forth under the CNV’s Technical Rules. When one or more directors perform special commissions or technical or administrative activities, and there are no earnings to distribute or they are reduced, , the shareholding meeting mayshall approve compensation in excess of the above metioned limitis.limits.
 
The compensation of our directors for each fiscal year is determined pursuant to Argentine law, and taking into consideration whether the directors performed technical or administrative activities and our fiscal year’s results. Once the amount is determined, it is considered at the shareholders’ meeting.
 
At our shareholders’ meeting held on October 30, 2015, was approveda compensations for an aggregate amount of Ps.14,310,941 was approved for all of our directors for the fiscal year ended June 30, 2015.
 
Compensation of Supervisory Committee
 
Our shareholders’ meeting held on October 30, 2015 further approved by majority vote not to pay a compensation to our Supervisory Committee.
 
Compensation of Senior Management
 
Our senior management is paid a fixed amount established by taking into consideration their background, capacity and experience and an annual bonus which varies according to their individual performance and our results.
 
The total and aggregate compensation paid to our senior management of the Operations Center in Argentina and the Agricultural Business for the fiscal year 2014/2015,2015/2016, started in July 2014,2015, was Ps. 4.54,943,802.
The aggregate compensation paid to our Senior Management of the Operations Center in Israel since we gained control of IDBD on October 11, 2015 and until June 30, 2016, was Ps.11,36 million.
For our CEO and CFO total compensation was considered since they were appointed in January 2016.
 
Compensation of the Audit Committee
 
The members of our Audit Committee do not receive any additional compensation other than that received for their services as members of our board of directors.
 
161

 
Capitalization Program for our executive staff
 
During the fiscal year ended June 30, 2006,2007, the Company developed the design of a capitalization program for its executive staff consisting in contributions made by both the employees and the Company.
 
Such program is intended for certain employees selected by the Company that it wishes to retain by increasing employee total compensation by means of an extraordinary reward in so far as certain requirements are fulfilled.
 
The payment of contributions into the plan and participation therein are voluntary. Once the intended beneficiary accepts to take part in the plan, he/she may make two types of contributions: a monthly contribution based on his/her salary and an extraordinary contribution, based on his/her annual bonus. It is suggested that contributions should be of up to 2.5% of salaries and of up to 15% of the annual bonus. And then there is the contribution payable by the Company which shall amount to 200% of the monthly contributions and of 300% of the extraordinary contributions made by the employees.
 
The funds resulting from the contributions made by the participants are transferred to an independent financial vehicle, specially created and situated in Argentina in the form of a mutual fund with the approval of the CNV. These funds can be freely redeemed at the request of participants.
 
The funds resulting from the contributions made by both companies are transferred to another independent financial vehicle, separate from the one previously mentioned.
 
In the future, the participants shall have access to 100% of the benefits under the plan (that is, including the contributions made by the Company for the benefit of the employees into the financial vehicle specially created) in any of the following circumstances:
 
·  ordinary retirement as prescribed by labor law
·  
ordinary retirement as prescribed by labor law
 
·  total or permanent disability, and
·  
total or permanent disability, and
 
·  death.
·  
death.
 
In case of resignation or termination without good cause, the participant may redeem the amounts contributed by us only if he or she has participated in the Plan for at least 5 years and if certain conditions have been fulfilled.
 
During this fiscal year ended June 30, 2015, 2014 and 2013,2016, the Company has made contributions to the plan for Ps. 2.9 million, Ps. 10.2 million and Ps. 6.4 million, respectively.3.6 million.
 
Mid and
Long Term Incentive Program
 
The Shareholders’ Meetings held on October 31, 2011, October 31, 2012, and October 31, 2013, ratified the resolutions approved thereat as regards the incentive plan for ourthe Company’s executive officers, up to 1% of its shareholders’ equity by allocating the same number of own treasury stock (the “Plan”), and delegated on the Board of Directors the broadest powers to fix the price, term, form, modality, opportunity and other conditions to implement such plan. In this sense and in accordance with the new Capital Markets Law, the Company has made the relevant filing with the CNV and pursuant to the comments received from such entity, it has made the relevant amendments to the Plan which, after the CNV had stated to have no further comments, were explained and approved at the Shareholders’ Meeting held on November 14, 2014, where the broadest powers were also delegated to the Board of Directors to implement such plan.
 
The Company has developed a medium and long term incentive and retention stock program for its management team and key employees under which share-based contributions were calculated based on the annual bonus for the years 2011, 2012, 2013 and 2014.
 
The beneficiaries under the Plan are invited to participate by the Board of Directors and their decision to access the Plan iswas voluntary.

 
In the future, the Participants or their successors in interest will have access to 100% of the benefit (Cresud’s shares contributed by the Company) in the following cases:
 
·  if an employee resigns or is dismissed for no cause, he or she will be entitled to the benefit only if 5 years have elapsed from the moment of each contribution
·  
if an employee resigns or is dismissed for no cause, he or she will be entitled to the benefit only if 5 years have elapsed from the moment of each contribution.
 
·  total or permanent disability
·  
retirement.
 
·  death.
·  
total or permanent disability.
·  
death.
 
While participants are part of the program and until the conditions mentioned above are met to receive the shares corresponding to the contributions based on the 2011 to 2013 bonus, participants will receive the economic rights corresponding to the shares assigned to them.
Regarding fiscal year As provided under the plan, the shares of stock corresponding to the 2014 bonus were delivered in April 2015; moreover, an amount equivalent to one salary was delivered in the program sets forth an extraordinary reward consistingform of freely availableshares of stock payable in a single opportunity on a date to be determined by the Company. The date was fixed for April 1, 2015 for payroll of ourthose employees (who received CRESUD’s shares) and June 26, 2015 for payroll employees of IRSA, IRSA Propiedades Comerciales S.A., PAMSA, ERSA, ARCOS and FIBESA (who received IRSA’s shares).
In addition, we have decided to grant a bonus to all the personnel with more than two years of seniority as of June 30, 2014, and who dodid not participate in the program described above, which bonus consistsplan and who had discharged services for a term of a number of shares equivalent to their compensation for June 2014.two years.
 
The shares allocated to the Plan by ourthe Company are shares purchased in 2009, which the Shareholders’ Meeting held on October 31, 2011, has specifically decided to allocate to the program.
 
Our CEO of the Operations Centers in Isreal, has a stock option remuneration plan which includes 5,310,000 options, that will be given in five series, and which may be exercised for 5,310,000 ordinary shares, par value NIS 1 per share of Discount Investments.
C. BOARD PRACTICES
 
Benefits upon Termination of Employment
 
There are no contracts providing for benefits to directors upon termination of employment, other than those described under the following sections: (i) Item 6 “Directors, Senior Management and Employees – B. Compensation – Capitalization Plan and (ii) Item 6 “Directors, Senior Management and Employees – B. Compensation – Mid and Long Term Incentive Program.
 
Audit Committee
Internal Control
 
Management uses the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Report”) to assess effectiveness of internal control over financial reporting.
 
The COSO Report sets forth that internal control is a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of the entity’s objectives in the following categories:
 
·  Effectiveness and efficiency of operations
·  
Effectiveness and efficiency of operations
 
·  Reliability of financial reporting
·  
Reliability of financial reporting
 
·  
·  
Compliance with applicable laws and regulations
162

 
Based on the above, the Company’s internal control system involves all levels of the company actively involved in exercising control:
 
·  the board of directors, by establishing the objectives, principles and values, setting the tone at the top and making the overall assessment of results;
·  
the board of directors, by establishing the objectives, principles and values, setting the tone at the top and making the overall assessment of results;
 
·  the management of each area is responsible for internal control in relation to objectives and activities of the relevant area, i.e. the implementation of policies and procedures to achieve the results of the area and, therefore, those of the entity as a whole;
·  
the management of each area is responsible for internal control in relation to objectives and activities of the relevant area, i.e. the implementation of policies and procedures to achieve the results of the area and, therefore, those of the entity as a whole;
 
·  the other personnel plays a role in exercising control, by generating information used in the control system or taking action to ensure control.
·  
the other personnel plays a role in exercising control, by generating information used in the control system or taking action to ensure control.
AUDIT COMMITTEE
 
In accordance with the Capital Markets Law No. 26.831 and the Rules of the CNV, our board of directors has established an audit committee which would focus on assisting the board in exercising its duty of care, compliance with disclosure requirements, the enforcement of accounting policies, the management of our business risks, the management of our internal control systems, ethical conduct of our businesses, monitoring the sufficiency of our financial statements, our compliance with the laws, independence and capacity of independent auditors and performance of audit duties both by our Company and our external auditors. These responsabilities are meant to comply with the duties assigned by Law 26.831, the Technical Rules of the CNV, and other applicable laws.
 
On November 3, 2008,5, 2015, our board of directors appointed Jorge Oscar Fernández, Pedro Damaso Labaqui Palacio, and Daniel Elías Mellicovsky and Gabriel Adolfo Gregorio Reznik, all of them independent members, as members of the audit committee. The board of directors named Jorge Oscar Fernández as the financial expert in accordance with the relevant SEC rules. We have a fully independent audit committee as per the standards provided in Rule 10(A)-3(b)(1).
 
Remuneration Committee
 
There is no remuneration committee.
 
D. EMPLOYEES
Operations Center in Argentina
 
As of June 30, 2015,2016, we had 2,8262,879 employees.
 
As of such date, we had 1,0991,117 permanent and 9 temporary employees in our Agricultural Business in Argentina, including our employees, FyO and SACPSA but not those of Agro-Uranga S.A. Approximately 52% are under collective labor agreements. We have good relations with each of our employees.
 
We employ 183161 people in our International Agricultural businesses, composed of 153122 employees of Brasilagro and 3039 employees in the companies located in Bolivia.
 
Our Real Estate Business had 1,753 employees. Our Development and Sale of Properties and Other Non-Shopping Center Businesses segment had 3431 employees, 64 of whom are represented by the Commerce Labor Union (Sindicato de Empleados de Comercio, or SEC) and 10 by the Horizontal Property Union (SUTERH). The Shopping Center segment had 973964 employees including 472461 under collective labor agreements. Our Hotels segment had 704758 employees with 494622 represented by the Tourism, Hotels and Gastronomy Union from the Argentine Republic (Unión de Trabajadores del Turismo, Hoteleros y Gastronómicos de la República Argentina) (UTHGRA).

 
The following table shows the number of employees in the Company’s various businesses as of the dates mentioned below:
 
   Agricultural Business(1)   Real Estate Business 
 
 
  Permanent   Temporary   
Development and Sale of Properties and Other Non-Shopping Center Businesses (2)
   Shopping Centers   
Hotels(3)  
   Total 
June 30, 2011  772   48   82   811   678   2,391 
June 30, 2012  848   17   92   833   662   2,452 
June 30, 2013  857   11   91   787   662   2,408 
June 30, 2014  756   16   89   872   647   2,380 
June 30, 2015(4)
  1,099   16   34   973   704   2,826 
(1)Agricultural Business includes our employees and employees of FyO and SACPSA, but not those of Agro-Uranga S.A.
(2)Includes IRSA, Consorcio Libertador S.A., and Consorcio Maipú 1300 S.A.
(3)Hotels include Intercontinental, Sheraton Libertador and Llao Llao.
(4)Duing April and May 2015, the employees who were assigned to IRSA, and used to be in charge of the building’s operations and the real estate business, were transferred to IRSA Commercial Properties.
 
Agricultural Business(1)
Real Estate Business
 
Permanent
Temporary
Development and Sale of Properties and Other Non-Shopping Center Businesses (2)
Shopping Centers
Hotels(3)
Total
 
June 30, 201177248828116782,391 
June 30, 201284817928336622,452 
June 30, 201385711917876622,408 
June 30, 201475616898726472,380 
June 30, 2015(4)
1,09916349737042,826 
June 30, 20161,1179319647582,879 
 
 
(1)
Agricultural Business includes our employees and employees of FyO and SACPSA, but not those of Agro-Uranga S.A.
163
(2)

Includes IRSA, Consorcio Libertador S.A., and Consorcio Maipú 1300 S.A.
(3)
Hotels include Intercontinental, Sheraton Libertador and Llao Llao.
(4)
During April and May 2015, the employees who were assigned to IRSA, and used to be in charge of the building’s operations and the real estate business, were transferred to IRSA Commercial Properties.
 
Operations Center in Israel
The following table shows the number of employees as of March 31, 2016 of our Israeli operating center divided by company:
IDBD29
DIC (1)
31
Shufersal13,726
Cellcom (2)
3,138
PBC (3)
221
Other(4)
1,042
Total18,187
(1) Includes Elron’s employees.
(2) Does not include temporary or external employees.
(3) Includes 106 hotel and cleaning employees.
(4) Includes IDBG, Bartan and IDB Tourism
E. SHARE OWNERSHIP
 
Share ownership of directors, members of the supervisory committee, and senior management as of June 30, 2015.2016.
 
The following table sets forth the amount and percentage (expressed on a fully diluted basis) of our shares beneficially owned by our directors, Supervisory Committee and senior management as of June 30, 2015:2016(2):
 
NamePosition Number of Shares  Percentage 
Position
Number of Shares
Percentage
Directors         
Eduardo Sergio Elsztain (1)
Chairman  187,772,805   37.43%Chairman154,993,97730.90%
Saúl ZangFirst vice-chairman  4,012,506   0.80%First vice-chairman 4,012,5060.80%
Alejandro Gustavo ElsztainSecond vice- chairman / Chief Executive Officer  7,145,810   1.42%Second vice- chairman / Chief Executive Officer7,145,8101.42%
Gabriel A. G. ReznikDirector  -   - Director--
Jorge Oscar FernándezDirector  3,034,219   0.60%Director3,034,2190.60%
Fernando Adrián ElsztainDirector  -   - Director--
David Alberto PerednikDirector / Chief Administrative Officer  104,971   0.02%
Pedro Damaso Labaqui PalacioDirector  -   - Director6,0000.00%
Daniel Elias MellicovskyDirector  -   - Director--
Alejandro Gustavo CasarettoDirector/Regional manager of Agricultural Real Estate  136,260   0.03%Director/Regional manager of Agricultural Real Estate135,0350.03%
Salvador Darío BergelAlternate Director  -   - 
Gastón Armando LernoudAlternate Director  53,704   0.01%Alternate Director11,0910.00%
Enrique AntoniniAlternate Director  -   - Alternate Director--
Eduardo KalpakianAlternate Director  -   - Alternate Director--
            
Senior Management            
Matias GaivironskyChief Financial Officer  83,080   0.02%Chief Financial and Administrative Officer83,0800.02%
Carlos BloussonChief Executive Officer of the International Operation  54,534   0.01%Chief Executive Officer of the International Operation9,986 0.00%
            
Supervisory Committee            
José Daniel AbelovichMember  -   - Member--
Marcelo Héctor FuxmanMember  -   - Member--
Noemí Ivonne CohnMember  -   - Member--
Roberto Daniel MurmisAlternate member  -   - Alternate member--
Alicia Graciela RigueiraAlternate member  -   - Alternate member--
Sergio Leonardo KolaczykAlternate member  -   - Alternate member--
Executive Committee            
Eduardo Sergio ElsztainMember  187,772,805   37.43%Member154,993,97730.90%
Saúl ZangMember  4,012,506   0.80%Member 4,012,5060.80%
Alejandro Gustavo ElsztainMember  7,145,810   1.42%Member7,145,8101.42%
   
   

 
(1)  
Includes (i) 187,552,100154,898,780 shares beneficially owned by IFISA, for which Mr. Eduardo S. Elsztain may be deemed beneficial owner, (ii) 880 common shares beneficially owned by Consultores Venture Capital Uruguay S.A. (iii) 752 common shares held by Consultores Asset Management S.A. and (iii) 219,825(iv) 93,565 common shares owned directly by Mr. Eduardo S. Elsztain.
(2)  
David Alberto Perednik resigned his position as alternate director on September 29, 2016. For more information please see “Recent Developments­Resignation as alternate director.”

 
Option Ownership
 
No options to purchase shares have been granted to our Directors, Senior Managers, members of the Supervisory Committee, or Audit Committee.
 
Employees’ Participation in our Capital Stock
 
There are no arrangements for involving our employees in our capital stock or related to the issuance of options, shares or securities other than those described under the following sections: (i) ITEMItem 6: Directors, Senior Management and Employees – B. Compensation – Capitalization Plan and (ii) Item 6:6. Directors, Senior Management and Employees – B. Compensation – Mid and Long Term Incentive Program.
 
Item 7.                      Major shareholders and related party transactions
 
A. MAJOR SHAREHOLDERS
 
Information about Major Shareholders
 
Share Ownership
 
The following table sets forth information regarding ownership of our capital stock by each person known to us to own beneficially at least 5% of our common shares, ANSES (The Argentine Social Security National Agency) and all our directors and officers as a group. Percentages are expressed on a fully diluted basis.
 
 Share Ownership as of June 30, 2015 Share Ownership as of June 30, 2016
Shareholder Number of Shares  Percentage Number of SharesPercentage
IFISA(1)(2)
  187,772,805   37.43%154,993,97730.90%
Senvest Management LLC  2,554,766   5.09%
Directors and officers(3)
  14,625,084   2.91%14,541,7172.90%
ANSES  17,862,157   3.56%17,862,1573.56%
Total  222,814,812   49.0%187,397,85137.36%
 
(1)
Eduardo S. Elsztain is the Chairman of the board of directors of IFIS Limited, a corporation organized under the laws of Bermuda and Inversiones Financieras del Sur S.A., a corporation organized under the laws of Uruguay. Mr. Elsztain holds (through companies controlled by him and proxies) a majority of the voting power in IFIS Ltd., which owns 100% of IFISA.
(2)
As a result, Mr. Elsztain may be deemed beneficial owner of 37.43%30.90% of our total shares, which includes (i) 187,552,100154,898,780 shares beneficially owned by Inversiones Financieras del Sur S.A., for which Mr. Eduardo S. Elsztain may be deemed beneficial owner, (ii) 880 common shares beneficially owned by Consultores Venture Capital Uruguay S.A., (iii) 219,825752 common shares held by Consultores Asset Management S.A. and (iv) 93,565 common shares owned directly by Mr. Eduardo S. Elsztain.
(3)
Includes only direct ownership of our Directors and Senior Management, other than Mr. Eduardo S. Elsztain.
 

164

 
Change in Capital Stock Ownership
 
 
As of June 30, (5)
 As of June 30,
 2015  2014  2013  2012  2011 20162015201420132012
IFISA(1)(2)
  37.43%  39.3%  39.3%  38.8%  38.2%30.9%37.4%39.3%39.3%38.8%
D.E. Shaw & Co L.P. (3)
  -   0.7%  2.1%  3.2%  8.1%-0.7%2.1%3.2%
Senvest Management LLC  5.1%  3.6%  0.7%  0.3%  0.3%4.7%5.1%3.6%0.7%0.3%
Directors and officers(4)
  2.3%  2.4%  2.2%  1.9%  1.3%2.9%2.3%2.4%2.2%1.9%
ANSES  3.6%  3.4%  3.4%  3.1%  3.1%3.6%3.4%3.4%3.1%
(1)
(1) Mr. Eduardo S. Elsztain is the Chairman of the board of directors of IFIS Limited, a corporation organized under the laws of Bermuda and Inversiones Financieras del Sur S.A., a corporation organized under the laws of Uruguay. Mr. Elsztain holds (through companies controlled by him and proxies) a majority of the voting power in IFIS Ltd., which owns 100% of IFISA.
(2)
As a result, Mr. Eduardo S. Elsztain may be deemed beneficial owner of 37.43%30.90% of our total shares, which includes (i) 187,552,100154,898,780 shares beneficially owned by Inversiones Financieras del Sur S.A., for which Mr. Eduardo S. Elsztain may be deemed beneficial owner, (ii) 880 common shares beneficially owned by Consultores Venture Capital Uruguay S.A., (iii) 219,825752 common shares held by Consultores Asset Management S.A.   (iv) 93,565 common shares owned directly by Mr. Eduardo S. Elsztain.
(3)
According to the Form filed with the SEC as of June 30, 2015.SEC.
(4)
Includes only direct ownership of our Directors and Senior Management, other than Mr. Eduardo S. Elsztain.
(5) On a fully diluted basis.
 
Difference in Voting Rights
 
Our major shareholders do not have different voting rights.
 
Arrangements for change in control
 
There are no arrangements that may at a subsequent date in a change in control.
 
Securities held in the host country
 
As of June 30, 2015,2016, our total issued and outstanding capital stock outstanding consisted of  501,642,804 common shares. As of June 30, 2015,2016, there were approximately 46,292,70241,803,722 Global Depositary Shares (representing 462,927,021418,037,222 of our common shares, or 92.3%83.33% of all of our outstanding shares held) in the United States by approximately 8486 registered holders of Global Depositary Shares.
 
As of June 30, 20152016 our directors and senior officers controlled, directly or indirectly, approximately 39.75%33.79% of our common shares. As a result, these shareholders have, and will continue to have, significant influence on the election of our directors and the outcome of any action requiring shareholder approval.
 
B. RELATED PARTY TRANSACTIONS
 
We enter into transactions with related parties on an arm’s-length basis. A related party transaction means any transaction entered into directly or indirectly by us or any of our subsidiaries that is material based on the value of the transaction to (a) any director, officer or member of our management or shareholders; (b) any entity in which any such person described in clause (a) is interested; or (c) any person who is connected or related to any such person described in clause (a).
 
LeaseAgreement for the Exchange of Corporate Services with IRSA and IRSA CP
Considering that each of IRSA, IRSA CP and us have operating areas which are somewhat similar, the Board of Directors deemed it advisable to implement alternatives aimed at reducing certain fixed costs of our Chairman’s officescombined activities and to lessen their impact on operating results while seizing and optimizing the individual efficiencies of each of them in the different areas comprising the management of operations.
To such end, on June 30, 2004, a Master Agreement for the Exchange of Corporate Services (“Frame Agreement") was entered into between IRSA, IRSA CP and us, which was amended several times to bring it in line with evolving requirements. The agreement has a term of 24 months, is renewable automatically for equal periods, unless it is terminated by any of the parties upon prior notice.
This agreement currently provides for the exchange and sharing of services among the following areas: Human Resources, Finance, Institutional Relations, Administration and Control, Insurance, Security, Agreements, Technical Tasks, Infrastructure and Services, Procurement, Architecture and Design, Development and Works, Real Estate, Hotels, Board of Directors, Board of directors of Real Estate Business, General Manager Office, Board Safety, Audit Committee, Real Estate Business Management, Human Resources of Real Estate Business, Fraud Prevention, Internal Audit and Agricultural Investment Management.
Pursuant to this agreement, the companies hired Deloitte & Co., an external consulting firm to review and evaluate half-yearly the criteria used in the process of liquidating the corporate services, as well as the basis for distribution and source documentation used in the process indicated above, by means of a half-yearly report.
The operations indicated above allow both IRSA and IRSA CP to keep our strategic and commercial decisions fully independent and confidential, with cost and profit apportionment being allocated on the basis of operating efficiency and equity, without pursuing individual economic benefits for any of the related companies.
Offices and Shopping centers spaces leases
 
Our Chairman’s offices are located at Bolívar 108, City of Buenos Aires. We have leased this property from Isaac Elsztain e Hijos S.C.A., a company controlled by certain relatives of Eduardo S. Elsztain, our chairman, and also from Hamonet S.A., a company controlled by Fernando A. Elsztain, one of our Directors, and certain of his relatives.
 
A lease agreement was executed among us, IRSA, IRSA Commercial Properties and Isaac Elsztain e Hijos S.C.A., in March 2004, which is due in March 2017 and has a monthly payment lease of US$5 thousands, which is distributed and shared equally among the three companies.
In April 1, 2014,addition, we, IRSA, IRSA Commercial Properties and Hamonet S.A. entered into a lease agreement for the lease of the executive offices located in 108 Bolívar St., 3rd and 4th floors, City of Buenos Aires. This lease has a term of 36 months and rent of US$ 5.001 per month, which is distributed and shared equally among the three companies.
Lease of our Headquarters
Our administrative headquarters are located at Intercontinental Plaza Building, located at 877 Moreno St., floor 23, in the Autonomous City of Buenos Aires, which belongs to IRSA Commercial Properties since December 2014, for more information about the acquisition of the Intercontinental Plaza Building, see Item 4.A. History and Development of the Company. We lease certain floors and this lease extends up to June, 2016, January, 2017 and August, 2017. The monthly lease is US$24.0 thousands plus maintenance fees and the applicable taxes and charges in proportion to the leased space. Additionally, IRSA leases part of the second floor of the Intercontinental Plaza Building, on a lease that extends up to December, 2017. The monthly lease payment is US$7.7 thousands plus maintenance fees and the applicable taxes and charges in proportion to the leased space.
In addition IRSA leases from IRSA Commercial Properties a space in the Abasto shopping center. The agreements are valid until November, 2015 and September, 2016. The monthly rent is US$19.0 thousands, plus a fixed amount for common expenses.

165

Tarshop, leases from IRSA Commercial Properties three floors and certain parking lot spaces of our building located at 652 Suipacha St. The term of this lease extends up to 2017. The monthly lease payment is US$52.1 thousands plus maintenance fees and the applicable taxes and charges in proportion to the leased space.
Llao Llao Resorts S.A. rents from IRSA a floor on our Maipu 1300 building. This lease shall last until 2015 and has a monthly rate of US$ 1,950 plus any common expenses, taxes and fees, the parties are currently negotiation its extension.
Fibesa S.A. leases from IRSA Commercial Properties part of a floor in the Intercontinental Plaza Building, located in 877 Moreno St., of the Autonomous City of Buenos Aires, for a monthly rent of US$11.6 thousands plus maintenance fees, in proportion to the lease space. This agreement extends up to October, 2017.
BACS, leases from IRSA Commercial Properties a floor in the República Building, located in 1 Tucuman St., of the Autonomous City of Buenos Aires, for a monthly average amount of US$20.9 thousands plus maintenance fees, in proportion to the lease space. This agreement extends up to October, 2017.
BHN Sociedad de Inversión S.A., BHN Seguros Generales S.A. and BHN VidaVisa S.A. rent offices owned by IRSA CP in different buildings.
Furthermore, we also let various spaces in our Shopping Centers (stores, stands, storage space or advertising space) to third parties and related parties such us Tarshop S.A. and BHSA.
Lease agreements entered into with associates included similar provisions and amounts to those included in agreements with third parties.
Donations granted to Fundación IRSA and Fundación Museo de los Niños
Fundación IRSA is a non-profit charity institution that seeks to support and generate initiatives concerning education, the promotion of corporate social responsibility and the entrepreneurial spirit of the youth. It carries out corporate volunteering programs and fosters donations by the Company’s employees. The main members of Fundación IRSA's Board of Directors are: Eduardo S. Elsztain (President); Saul Zang (Vice President I), Alejandro Elsztain (Vice President II) and Mariana C. de Elsztain (secretary). It finances its activities with donations from IRSA, IRSA CP, Cresud and others related companies.

On October 31, 1997, IRSA CP entered into an agreement with Fundación IRSA whereby 3,800 square meters of the constructed area at the Abasto shopping center was granted under a gratuitous bailment agreement for a term of 30 years. Subsequently, on October 29, 1999, Fundación IRSA assigned free of cost all the rights of use over such store and its respective obligations to Fundación Museo de los Niños.
On November 29, 2005, IRSA CP signed another agreement with Fundación Museo de los Niños granting under gratuitous bailment 2,670.11 square meters of the constructed area at Alto Rosario shopping center for a term of 30 years.
Fundación Museo de los Niños has used these spaces to set up “Museo de los Niños”, Abasto and “Museo de los Niños, Rosario”, two interactive learning centers intended for children and adults. Both agreements establish the payment of common expenses and direct expenses related to the services performed by these stores should be borne by Fundación Museo de los Niños.
Legal Services
We hire legal services from Estudio Zang, Bergel & Viñes, in which Saúl Zang is a partner. Mr. Zang is a member of our Board of Directors and that of our related companies. During the fiscal years ended June 30, 2016, 2015 and 2014 we paid Zang, Bergel & Viñes Abogados an aggregate amount of approximately Ps.6 million, Ps.5 million and Ps.4 million, respectively, as payment for legal services.
Purchase of agrochemicals from Adama
Adama is a company specialized in agrochemicals, particularly used in farming, and is a worldwide leader in active ingredients used in agricultural production. CRESUD, in the normal course of its business, acquires agrochemical products and/or hires services from Adama.  On July 17, 2016, DIC reported that it had signed an agreement with ChemChina to sell 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments.”
Hospitality Services
We and our related parties hire, in certain occasions, hotel services and lease conference rooms for events to Nuevas Fronteras S.A. and Hoteles Argentinos S.A., leasessubsidiaries of IRSA.
Purchase and sale of goods and/or service hiring
In the normal course of its business and with the aim of making resources more efficient, we, or our related parties, including our parent company, in certain occasions purchases and/or hires services which later sells and/or recovers for companies or other related parties, based upon their actual utilization.
Borrowings
In the normal course of its activities, we enter into diverse loan agreements or credit facilities between our subsidiaries and/or other related parties. These borrowings generally accrue interests at market rates.
Financial and service operations
We work with several financial entities in Argentina for operations including, but not limited to, credit, investment, purchase and sale of securities and financial derivatives. Such entities include Banco Hipotecario S.A. and its subsidiaries. Furthermore, Banco Hipotecario S.A. and BACS Banco de Crédito y Securitización S.A. usually act as underwriters in Capital Market transactions.
In addition, we have entered into agreements with BHSA, who provides collection services for our Shopping Centers.
Transactions with IFISA
On February 10, 2015, Dolphin, sold 71,388,470 IDBD shares to IFISA, for an amount of US$ 25.6 million, US$ 4.0 million of which were paid upon execution and the remaining balance of US$ 21.6 million were financed for a term of up to 360 days and priced at Libor 1M (one month) + 3%. On May 9, 2016, the parties agreed to extend the expiration date for 30 days as from execution of the addenda, to be automatically renewable every 30 days for a maximum term of 180 days, and increasing the rate to 9% since February 10, 2016.
On May 31, 2015, IRSA, through Dolphin, sold to IFISA 46 million of warrants Series 4 for a total amount of NIS 0.46 million (equivalent to US$ 0.12 million at the time of the transaction), provided IFISA agreed to exercise them fully when Dolphin were so required by IDBD.
On July 28, 2015, Dolphin granted a loan to IFISA for an amount of US$ 7.2 million, due in July 2016, which accrues interest at Libor 1M (one month) + 3%. On May 9, the parties agreed to extend the expiration date to June 8, 2016, to be automatically renewable every 30 days for a maximum term of 180 days, and increased the rate to 9%.
On October 9, 2015, IRSA granted a loan in the amount of US$ 40 million to IFISA. The term of the loan is one year calculated from the disbursement and will bear interest at a rate of 3% + Libor 1M, to be determined monthly. On October 9, 2016, the parties agreed to extend the expiration date to be automatically renewable every 30 days for a maximum term of 180 days and increase the rate to 9%.
In February 2016, DN B.V., a subsidiary of Dolphin, entered into an option contract with IFISA whereby Dolphin is granted the right, but not the obligation to acquire 92,665,925 shares of IDBD held by IFISA at a share price of NIS 1.64 plus an annual interest of 8.5%. The exercise date for the option extends for two years.
All transactions are carried out at arm’s length.
On June 2014, the Company – through its subsidiary, Real Estate Investment Group IV LP – renewed a credit facility granted by IFISA, a company indirectly controlled by Eduardo Sergio Elsztain, for a total amount of 1.4 million shares of Hersha Hospitality Trust. The transaction was agreed upon for a term of 30 days, which could be renewed for up to 360 days; the facility was priced at Libor (3 months) + 50 bp. This credit facility was cancelled after the end of fiscal year 2014 in order to sell the remaining amount of Hersha.
As of June 30, 2016 we had current a credit line with IFISA of shares and/or GDRs of IRSA for up to 3,500,000 GDRs. The expiration of this line will operate in June 2017 and bears an annual fixed rate of 6%.

On June 18, 2012 we entered a credit facility agreement with IFISA, pursuant to which we agreed to lend to IFISA up to US$ 6.0 million, which will mature on November 24, 2012, then it was extended until November 24, 2015, at an interest rate equivalent to LIBOR (12 months) + 300 bp., date in which was canceled.
Investment in mutual funds of BACS Administradora de Activos S.A. S.G.F.C.I.
We invest from time to time our liquid fund in mutual funds managed by BACS Administradora de Activos S.A. S.G.F.C.I., which is a subsidiary of Banco Hipotecario, among other entities.
Credit line with IRSA Propiedades Comerciales S.A.
On July 5, 2016, IRSA renewed and increased the credit line with IRSA Propiedades Comerciales S.A. for up to US$ 120 million, in which IRSA Propiedades Comerciales S.A. is the lender and IRSA is, directly or indirectly, the borrower. The loan bears annual interest at a rate of 9% and matures on June 24, 2017.
As of the date of this annual report, the total amount due by IRSA to IRSA Commercial Properties a floor in the República Building, located in 1 Tucuman St., of the Autonomous City of Buenos Aires, for a monthly average amount ofamounts to US$26.5 thousands plus maintenance fees, in proportion to the lease space. This agreement extends up to September, 2016.45 million.
 
Farmland Lease Agreement San Bernardo
 
We lease a farmland located in the Province of Córdoba, from San Bernardo de Córdoba S.A. (formerly known as Isaac Elsztain e Hijos S.C.A.), pursuant to a lease agreement effective as of June, 2014.August 2015. The leased farmland has an extension of 12,63512,600 hectares.
 
The rent to be paid is the equivalent in Pesos of 3.5 Kg.3,5kg of beef per hectare. The beef price will be set, taking into account the price per kilo of beef quoted on Mercado de Hacienda de Liniers, the previous week of the payment date. In addition, the parties have agreed in a productivity prize of 15% of the weight that the cattle achieve above 240.000kg. This prize will be payable on September only if2016. This lease contemplates the cattle achieves the amountpossibility of kilos.extension up to two periods per year. Currently being agreed conditions of its extension.
 
We pay a rent of Ps. 0.5 million during the fiscal year ended June 30, 2014. Fernando Adrián Elsztain, our director is also president of Isaac Elsztain e Hijos S.C.A. In addition, Alejandro G. Elsztain who is alternate director of Isaac Elsztain e Hijos S.C.A. is also our second vice-chairman and CEO.
The referred lease agreement finished on June 30, 2015, and it was renewed for one year. The farmland extension of 12.600 hectares, and the rent to be paid is the equivalent in Pesos of 3,5kg of beef per hectare. The beef price will be set, taking into account the price per kilo of beef quoted on Mercado de Hacienda de Liniers, the previous week of the payment date.
In addition, the parties have agreed in a productivity prize of 15% of the weight that the cattle achieve above 240.000kg. This prize will be payable on September, only if the cattle achieves the amount of kilos.
We pay a rent of Ps. 0.7 million during the fiscal year ended June 30, 2015.
Consulting AgreementLegal Services
 
Pursuant to the terms of the Consulting Agreement with Consultores Asset Management effective as of November 7, 1994, Consultores Asset Management provides us advisoryWe hire legal services on matters related to capital investmentsfrom Estudio Zang, Bergel & Viñes, in all aspects of the agricultural business. Onewhich Saúl Zang is a partner. Mr. Zang is a member of our shareholdersBoard of Directors and the Chairmanthat of our board of directors is the owner of 85% of the capital stock of Consultores Asset Management and our First Vice Chairman of the board of directors holds the remaining 15% of its capital stock.
Pursuant to the terms of the Consulting Agreement, Consultores Asset Management provides us with the following services:
advises with respect to the investment of our capital in all aspects of agricultural operations, including, among others, sales, marketing, distribution, financing, investments, technology and business proposals;
acts on our behalf in such transactions, negotiating the prices, conditions, and other terms of each operation; and
gives advice regarding securities investments with respect to such operations.
The Consulting Agreement expressly provides that Consultores Asset Management may not advise us with respect to transactions that are entirely related to real estate.
Under the Consulting Agreement, we pay Consultores Asset Management for its services, an annual fee equal to 10% of our annual after-tax net income. We also reimburse Consultores Asset Management the administrative expenses incurred by it in performing its duties under the Consulting Agreement and: (i) remuneration to the directors and certifying accountants; (ii) remuneration of legal consultants; (iii) remuneration of auditors; (iv) representation costs; and (v) all other costs incurred by it in performing its services.
During fiscal year ended June 30, 2014 and 2013 there were not charges for consulting agreement fees. During fiscal year ended June 30, 2015 the charge for consulting agreement fees was of Ps. 11.4 million.
The Consulting Agreement is subject to termination by either party upon not less than 60 days prior written notice. If we terminate the Consulting Agreement without cause, we will be liable to Consultores Asset Management for twice the average of the amounts of the management fee paid to Consultores Asset Management for the two fiscal years prior to such termination.
Space for Fundación IRSA and Fundación Museo de los Niños at No Cost
On October, 1997, IRSA trough its subsidiary IRSA Commercial Properties granted Fundación IRSA the right to use 3,800 square meters of constructed area in the Abasto Shopping Center free of charge for a 30-year period.
Moreover, on November, 2005, IRSA Commercial Properties granted Fundación Museo de los Niños the right to use approximately 2,670 square meters of constructed area in the Shopping Rosario free of charge for a 30-year period.
Fundación IRSA is a charitable, non-profit organization whose Chairman is Eduardo S. Elsztain and whose Secretary, is Mariana Carmona de Elsztain, Mr. Elsztain’s wife. Fundación IRSA has used the available area to house a museum called “Museo de los Niños, Abasto,” an interactive learning center for children and adults, which opened to the public in April 1999. On September 27, 1999, Fundación IRSA assigned and transferred at no cost, the entirety of Museo de los Niños, as well as Abasto’s rights and obligations to Fundación Museo de los Niños.
Fundación Museo de los Niños is a charitable non-profit organization created by the same founders of Fundación IRSA and has the same members of the administration committee as Fundación IRSA. Fundación Museo de los Niños acts as special vehicle for the developments of “Museo de los Niños, Abasto” and “Museo de los Niños, Rosario.” On October 29, 1999, our shareholders approved the assignment of “Museo de los Niños, Abasto” agreement to Fundación Museo de los Niños. In addition, on December 12, 2005, an agreement granting the right to use of the space designated for Museo de los Niños, Rosario, at no cost, was signed.
companies. During the fiscal years ended June 30, 2016, 2015 and 2014 and 2013, we made donations to Fundación IRSA and Fundación Museo los Niños for a totalpaid Zang, Bergel & Viñes Abogados an aggregate amount of Ps. 4.7approximately Ps.6 million, Ps. 3.3Ps.5 million and Ps. 1.4Ps.4 million, respectively,
Sale of Advertising Space in Media as payment for legal services.
 
We and our related parties usually execute agreements with third parties by which we sell/acquire, for their future use rights to advertise
Purchase of agrochemicals from Adama
Adama is a company specialized in media (TV, radio, newspapers, etc.) that are lateragrochemicals, particularly used in advertising campaigns.farming, and is a worldwide leader in active ingredients used in agricultural production. CRESUD, in the normal course of its business, acquires agrochemical products and/or hires services from Adama.  On July 17, 2016, DIC reported that it had signed an agreement with ChemChina to sell 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by IDBD through DIC. For more information see “Recent Developments.”
 
166

Special reimbursement with different payment methods
We and our related parties undertake different commercial actions and promotions intended to promote the influx and consumption of the public in our shopping centers.
In some particular promotions it is offered, in specific dates or periods, different discount rates to the clients and/or financing planes with zero interest rates. We and our related parties entered into agreements with different financial entities outside of our economic group and/or related parties such as Banco Hipotecario and Tarshop.
These agreements generally establish different reimbursement rates to those costumers that do purchases in all the shops that are part of them using the payment methods specified by each financial entity and, in certain opportunities, additional financing plans with zero interest rates. The costs of the reimbursements given to the customers generally are distributed proportionally among the entities, while the cost of the financing at zero interest rate is assumed by the financial entities. We and our related parties act as intermediaries, making sure that the tenants adhere to the plan and advertising of these promotions. This operation doesn’t generate any cash influx or transfer of income or cost between us and our related parties.
Hospitality Services
 
We and our related parties hire, in certain occasions, hotel services and lease conference rooms for events to Nuevas Fronteras S.A., and Hoteles Argentinos S.A. and Llao Llao Resorts S.A., subsidiaries of IRSA.
 
Occasionally, we
Purchase and our related parties acquire rights to stay in the hotelssale of those companies, for their use in different corporate goods and/or promotional activities. As of June 30, 2015 and June 30, 2014, we and our related party had 128 and 723, days accommodation pending of utilization.
Agreement for the Exchange of Corporate Services between us, IRSA and IRSA Commercial Properties.
Considering that each of IRSA Commercial Properties, IRSA and us, have operating areas which are somewhat similar, the Board of Directors deemed it advisable to implement alternatives aimed at reducing certain fixed costs of its activities and to lessen their impact on operating results while seizing and optimizing the individual efficiencies of each of them in the different areas comprising the management of operations.
In this regard, on June 30, 2004,  IRSA Commercial Properties, IRSA and us, entered into an agreement for the exchange of corporate services, which was amended on August 23, 2007, August 14, 2008, November 27, 2009, March 12, 2010, July 11, 2011, October 15, 2012, November 12, 2013, February 24, 2014 and February 18, 2015.
The agreement for the exchange of corporate services among IRSA Commercial Properties, IRSA and us, currently provides for the exchange of services among the following areas: human resources, finance, institutional relationships, administration and control, insurance, contracts, technical, infrastructure and services, purchases, architecture and design and development and works department, real estate, hotels, board of directors, board of directors of the real estate business, general management department, security, audit committee, real estate administration, human resources of the real estate business, fraud prevention, internal audit, administration of the agribusiness investments environment and quality, among others
The exchange of services consists in the provision of services in relation to any of the aforementioned areas by one or more of the parties to the agreement for the benefit of the other party or parties, which are invoiced and paid primarily by an offset against the services provided by any of the areas and, secondarily, in case of a difference between the value of the services rendered, in cash.
Under this agreement the companies have entrusted to an external consultant the review and evaluation, on a semiannual basis, of the criteria applied in the corporate service settlement process and of the distribution bases and supporting documentation used in such process, through the issuance of a semiannual report.
On March 12, 2010, an amendment to the agreement for the exchange of corporate services was entered into to simplify issues originating from the consolidation of financial statements as a result of the increase in IRSA’s equity interest. As a result, certain employment agreements of, IRSA Commercial Properties and our corporate employees were transferred to us.
Later, as consequence of the ongoing process of generating the most efficient distribution of corporate resources among the different areas, on February 24, 2014, a new amendment to the agreement was entered by virtue of which the parties agreed to transfer to IRSA Commercial Properties and us the employments agreements of the corporate employees that develop exclusively in the real estate business. The labor costs of the employees continued to be distributed in accordance with the terms of the agreement for the exchange of corporate services, as amended.hiring
 
In the futurenormal course of its business and with the aim of making resources more efficient, we, or our related parties, including our parent company, in certain occasions purchases and/or hires services which later sells and/or recovers for companies or other related parties, based upon their actual utilization.
Borrowings
In the normal course of its activities, we enter into diverse loan agreements or credit facilities between our subsidiaries and/or other related parties. These borrowings generally accrue interests at market rates.
Financial and service operations
We work with several financial entities in Argentina for operations including, but not limited to, credit, investment, purchase and sale of securities and financial derivatives. Such entities include Banco Hipotecario S.A. and its subsidiaries. Furthermore, Banco Hipotecario S.A. and BACS Banco de Crédito y Securitización S.A. usually act as underwriters in Capital Market transactions.
In addition, we have entered into agreements with BHSA, who provides collection services for our Shopping Centers.
Transactions with IFISA
On February 10, 2015, Dolphin, sold 71,388,470 IDBD shares to IFISA, for an amount of US$ 25.6 million, US$ 4.0 million of which were paid upon execution and the remaining balance of US$ 21.6 million were financed for a term of up to 360 days and priced at Libor 1M (one month) + 3%. On May 9, 2016, the parties agreed to extend the expiration date for 30 days as from execution of the addenda, to be automatically renewable every 30 days for a maximum term of 180 days, and increasing the rate to 9% since February 10, 2016.
On May 31, 2015, IRSA, through Dolphin, sold to IFISA 46 million of warrants Series 4 for a total amount of NIS 0.46 million (equivalent to US$ 0.12 million at the time of the transaction), provided IFISA agreed to exercise them fully when Dolphin were so required by IDBD.
On July 28, 2015, Dolphin granted a loan to IFISA for an amount of US$ 7.2 million, due in July 2016, which accrues interest at Libor 1M (one month) + 3%. On May 9, the parties agreed to extend the expiration date to June 8, 2016, to be automatically renewable every 30 days for a maximum term of 180 days, and increased the rate to 9%.
On October 9, 2015, IRSA granted a loan in the amount of US$ 40 million to IFISA. The term of the loan is one year calculated from the disbursement and will bear interest at a rate of 3% + Libor 1M, to be determined monthly. On October 9, 2016, the parties agreed to extend the expiration date to be automatically renewable every 30 days for a maximum term of 180 days and increase the rate to 9%.
In February 2016, DN B.V., a subsidiary of Dolphin, entered into an option contract with IFISA whereby Dolphin is granted the right, but not the obligation to acquire 92,665,925 shares of IDBD held by IFISA at a share price of NIS 1.64 plus an annual interest of 8.5%. The exercise date for the option extends for two years.
All transactions are carried out at arm’s length.
On June 2014, the Company – through its subsidiary, Real Estate Investment Group IV LP – renewed a credit facility granted by IFISA, a company indirectly controlled by Eduardo Sergio Elsztain, for a total amount of 1.4 million shares of Hersha Hospitality Trust. The transaction was agreed upon for a term of 30 days, which could be renewed for up to 360 days; the facility was priced at Libor (3 months) + 50 bp. This credit facility was cancelled after the end of fiscal year 2014 in order to continuesell the remaining amount of Hersha.
As of June 30, 2016 we had current a credit line with IFISA of shares and/or GDRs of IRSA for up to 3,500,000 GDRs. The expiration of this line will operate in June 2017 and bears an annual fixed rate of 6%.

On June 18, 2012 we entered a credit facility agreement with IFISA, pursuant to which we agreed to lend to IFISA up to US$ 6.0 million, which will mature on November 24, 2012, then it was extended until November 24, 2015, at an interest rate equivalent to LIBOR (12 months) + 300 bp., date in which was canceled.
Investment in mutual funds of BACS Administradora de Activos S.A. S.G.F.C.I.
We invest from time to time our liquid fund in mutual funds managed by BACS Administradora de Activos S.A. S.G.F.C.I., which is a subsidiary of Banco Hipotecario, among other entities.
Credit line with IRSA Propiedades Comerciales S.A.
On July 5, 2016, IRSA renewed and increased the policycredit line with IRSA Propiedades Comerciales S.A. for up to US$ 120 million, in which IRSA Propiedades Comerciales S.A. is the lender and IRSA is, directly or indirectly, the borrower. The loan bears annual interest at a rate of generating9% and matures on June 24, 2017.
As of the most efficient distributiondate of corporate resources amongthis annual report, the different areas, this agreement may be extendedtotal amount due by IRSA to other areas shared by us with IRSA Commercial Properties and IRSA.amounts to US$45 million.
 
In spite
Farmland Lease Agreement San Bernardo
We lease a farmland located in the Province of Córdoba, from San Bernardo de Córdoba S.A. (formerly known as Isaac Elsztain e Hijos S.C.A.), pursuant to a lease agreement effective as of August 2015. The leased farmland has an extension of 12,600 hectares.
The rent to be paid is the equivalent in Pesos of 3,5kg of beef per hectare. The beef price will be set, taking into account the price per kilo of beef quoted on Mercado de Hacienda de Liniers, the previous week of the payment date. In addition, the parties have agreed in a productivity prize of 15% of the weight that the cattle achieve above we, IRSA and IRSA Commercial Properties continue240.000kg. This prize will be payable on September 2016. This lease contemplates the possibility of extension up to be independent in regard to the executiontwo periods per year. Currently being agreed conditions of their business and strategic decisions. Costs and benefits are allocated on the basis of operating efficiency and fairness without pursuing economic benefits for the companies.
its extension.
 
Legal Services
 
We hire legal services from Estudio Zang, Bergel & Viñes, in which Saúl Zang is a partner. Mr. Zang is a member of our Board of Directors and that of our related companies. During the fiscal years ended June 30, 2016, 2015 and 2014 and 2013, we and our subsidiaries paid Zang, Bergel & Viñes Abogados an aggregate amount of approximately Ps.4.7Ps.6 million, Ps.4.2Ps.5 million and Ps.3.3Ps.4 million, respectively, as payment for legal services. Certain of our directors are partners of Zang, Bergel & Viñes Abogados.
Security Loans
 
Purchase of agrochemicals from Adama
Adama is a company specialized in agrochemicals, particularly used in farming, and is a worldwide leader in active ingredients used in agricultural production. CRESUD, in the normal course of its business, acquires agrochemical products and/or hires services from Adama.  On August 6, 2008, Agrology (merged with Cresud) entered into a securities loanJuly 17, 2016, DIC reported that it had signed an agreement with IFISA,ChemChina to sell 40% of Adama Agricultural Solutions Ltd.’s shares, indirectly controlled by virtue if which Agrology granted 1,275,022 Global Depositary Shares, representing 10 common shares with a face value of Ps.1.0 per shareIDBD through DIC. For more information see “Recent Developments.”
Hospitality Services
We and our related parties hire, in certain occasions, hotel services and lease conference rooms for events to Nuevas Fronteras S.A. and Hoteles Argentinos S.A., subsidiaries of IRSA.
 
This loan does not imply
Purchase and sale of goods and/or service hiring
In the transfernormal course of any voting or economic rights related to the Global Depositary Shares which will be held by Agrology. With regards to the voting rights, the parties agreed that we will grant a power of attorney to IFISAits business and with the respective voting instructions. With regards to dividends, IFISA will transfer the funds to Agrology. This loan will accrue interest at a monthly rate equivalent to 3-month LIBOR, plus 150 basis points. It will be effectiveaim of making resources more efficient, we, or our related parties, including our parent company, in certain occasions purchases and/or hires services which later sells and/or recovers for 30 days and may be renewed for up to a maximum of 360 days. Later on, IFISA returned 21,080 Global Depositary Shares to Agrology S.A., representing 10 common shares, with a face value of Ps.1.0 per share.companies or other related parties, based upon their actual utilization.
 
Borrowings
In the normal course of its activities, we enter into diverse loan agreements or credit facilities between our subsidiaries and/or other related parties. These borrowings generally accrue interests at market rates.
Financial and service operations
We work with several financial entities in Argentina for operations including, but not limited to, credit, investment, purchase and sale of securities and financial derivatives. Such entities include Banco Hipotecario S.A. and its subsidiaries. Furthermore, on July 30, 2009, AgrologyBanco Hipotecario S.A. made an offer to IFISA, which was accepted, to extend the agreed due date of the loan for 360 days, modifying the amount of Global Depositary Shares of IRSA grantedand BACS Banco de Crédito y Securitización S.A. usually act as underwriters in loan from 1,275,022 to 1,253,942 million which are free of encumbrances and are freely available to Agrology S.A. On July 25, 2010, Agrology made a new offer, which was also accepted by IFISA, to extend the agreed due date of the loan for an additional 360 days. On September 8, 2010, Agrology S.A.Capital Market transactions.
In addition, we have entered into a new loan agreementagreements with IFISA which granted 800,000 additional Global Depositary Shares of IRSA, under the same terms and conditions as the previous loan.BHSA, who provides collection services for our Shopping Centers.
 
167

Transactions with IFISA
 
On July 20, 2011, Agrology made a new offer, which was also accepted byFebruary 10, 2015, Dolphin, sold 71,388,470 IDBD shares to IFISA, to extend the agreed due date of the original loan for an additional 360 days. The companies agreed that the credit can be taken completely or partially at any moment and that IFISA can ask for the Global Depositary Sharesamount of IRSA or ordinary equity, and to lower the spread over Libor rate from 150 bps to 50 bps. On September 1, 2011, Agrology made a new offer, to extend the “800,000 additional Global Depositary Shares of IRSA” agreed due date of the loan for an additional 360 days. The offer to IFISA included the possibility for them to take the credit completely or partially at any moment, to ask either for the Global Depositary Shares of IRSA or for ordinary equity, and to lower the spread over Libor rate from 150 bps to 50 bps. On September 3, 2011, IFISA accepted the September 1, 2011 offer. On April 20, 2012, we entered into a securities loan agreement with IFISA, by virtueUS$ 25.6 million, US$ 4.0 million of which we granted 2,000,022 Global Depositary Shares, representing 10 common shares withwere paid upon execution and the remaining balance of US$ 21.6 million were financed for a face value of Ps.1.0 per share of IRSA.
On August 22, 2012, we agreed with IFISA that due to our merger with Agrology, the three above-mentioned agreements will be combined into one agreement between IFISA and us.
On July 15, 2013, we signed a renewable credit line with Inversiones Financieras del Sur S.A. ("IFISA"), in which the company is the lender and IFISA the borrower. The credit line consists in the sumterm of up to 4,053,942 ADRs of IRSA, of which 3,334,517 have already been lended.360 days and priced at Libor 1M (one month) + 3%. On June 26, 2015May 9, 2016, the parties agreed to extend the credit line and the maturity of this credit facility agreement was set toexpiration date for 30 days withas from execution of the possibilityaddenda, to be automatically renewable every 30 days for a maximum term of 180 days, and increasing the rate to 9% since February 10, 2016.
On May 31, 2015, IRSA, through Dolphin, sold to IFISA 46 million of warrants Series 4 for a total amount of NIS 0.46 million (equivalent to US$ 0.12 million at the time of the transaction), provided IFISA agreed to exercise them fully when Dolphin were so required by IDBD.
On July 28, 2015, Dolphin granted a loan to IFISA for an amount of US$ 7.2 million, due in July 2016, which accrues interest at Libor 1M (one month) + 3%. On May 9, the parties agreed to extend itthe expiration date to upJune 8, 2016, to 365be automatically renewable every 30 days for a maximum term of 180 days, and increased the rate to 9%.
On October 9, 2015, IRSA granted a loan in the amount of US$ 40 million to IFISA. The term of the loan is one year calculated from the disbursement and will bear interest at an applicable annuala rate of 3 month3% + Libor + 50 bp.1M, to be determined monthly. On October 9, 2016, the parties agreed to extend the expiration date to be automatically renewable every 30 days for a maximum term of 180 days and increase the rate to 9%.
 
In February 2016, DN B.V., a subsidiary of Dolphin, entered into an option contract with IFISA whereby Dolphin is granted the right, but not the obligation to acquire 92,665,925 shares of IDBD held by IFISA at a share price of NIS 1.64 plus an annual interest of 8.5%. The exercise date for the option extends for two years.
Credit facility IFISA-Cresud.
All transactions are carried out at arm’s length.
 
On June 25,2014, the Company – through its subsidiary, Real Estate Investment Group IV LP – renewed a credit facility granted by IFISA, a company indirectly controlled by Eduardo Sergio Elsztain, for a total amount of 1.4 million shares of Hersha Hospitality Trust. The transaction was agreed upon for a term of 30 days, which could be renewed for up to 360 days; the facility was priced at Libor (3 months) + 50 bp. This credit facility was cancelled after the end of fiscal year 2014 in order to sell the remaining amount of Hersha.
As of June 30, 2016 we had current a credit line with IFISA of shares and/or GDRs of IRSA for up to 3,500,000 GDRs. The expiration of this line will operate in June 2017 and bears an annual fixed rate of 6%.

On June 18, 2012 we entered a credit facility agreement with IFISA, pursuant to which we agreed to lend to IFISA up to US$ 6.0 million, for a term of 180 days, at an annual interest rate of 7.75%. Onwhich will mature on November 24, 2012, this agreementthen it was renegotiated and as a result extended for another 365 days,until November 24, 2015, at an annual interest rate equivalent to LIBOR (12 months) + 300 bp., date in which was canceled.
Investment in mutual funds of 5.5%. BACS Administradora de Activos S.A. S.G.F.C.I.
We invest from time to time our liquid fund in mutual funds managed by BACS Administradora de Activos S.A. S.G.F.C.I., which is a subsidiary of Banco Hipotecario, among other entities.
Credit line with IRSA Propiedades Comerciales S.A.
On November 22, 2013 the parties agreed to extendJuly 5, 2016, IRSA renewed and increased the credit line with IRSA Propiedades Comerciales S.A. for another 365 days and decided to set a rate equivalent to 1 year Libor + 300 bp.
On December 18, 2014 the parties agreed to extend the credit line in the sum up to US$6.000.000 for another 365 days starting upon 120 million, in which IRSA Propiedades Comerciales S.A. is the termination oflender and IRSA is, directly or indirectly, the current agreement operating on November 25, 2015. In this negotiation, the parties agreed to setborrower. The loan bears annual interest at a rate of 1 year Libor + 3% (annual interest rate).
Credit facility IRSA – Cresud
In September 2011, we entered into a credit facility agreement with IRSA, pursuant to which IRSA agreed to lend us up to US$25 million for a term of 90 days, , at an annual interest rate of 7.75%. In May 2012, we entered into a credit facility agreement with IRSA, pursuant to which IRSA agreed to lend us up to US$7 million for a term of 180 days, at an annual interest rate of 7.5%.
As of9% and matures on June 30, 2015, all amounts due under this line of credit were cancelled.
Loan agreement between FYO and us24, 2017.
 
As of December, 2013, we entered intothe date of this annual report, the total amount due by IRSA to IRSA Commercial Properties amounts to US$45 million.
Farmland Lease Agreement San Bernardo
We lease a credit facility agreement with FYO,farmland located in the Province of Córdoba, from San Bernardo de Córdoba S.A. (formerly known as Isaac Elsztain e Hijos S.C.A.), pursuant to a lease agreement effective as of August 2015. The leased farmland has an extension of 12,600 hectares.
The rent to be paid is the equivalent in Pesos of 3,5kg of beef per hectare. The beef price will be set, taking into account the price per kilo of beef quoted on Mercado de Hacienda de Liniers, the previous week of the payment date. In addition, the parties have agreed in a productivity prize of 15% of the weight that the cattle achieve above 240.000kg. This prize will be payable on September 2016. This lease contemplates the possibility of extension up to two periods per year. Currently being agreed conditions of its extension.
Consulting Agreement
Pursuant to the terms of the Consulting Agreement with Consultores Asset Management effective as of November 7, 1994, Consultores Asset Management provides us advisory services on matters related to capital investments in all aspects of the agricultural business. One of our shareholders and the Chairman of our board of directors is the owner of 85% of the capital stock of Consultores Asset Management and our First Vice Chairman of the board of directors holds the remaining 15% of its capital stock.
Pursuant to the terms of the Consulting Agreement, Consultores Asset Management provides us with the following services:
advises with respect to the investment of our capital in all aspects of agricultural operations, including, among others, sales, marketing, distribution, financing, investments, technology and business proposals;
acts on our behalf in such transactions, negotiating the prices, conditions, and other terms of each operation; and
gives advice regarding securities investments with respect to such operations.
The Consulting Agreement expressly provides that Consultores Asset Management may not advise us with respect to transactions that are entirely related to real estate.
Under the Consulting Agreement, we pay Consultores Asset Management for its services, an annual fee equal to 10% of our annual after-tax net income.
During fiscal year ended June 30, 2016 and 2014 there were not charges for consulting agreement fees. During fiscal year ended June 30, 2015 the charge for consulting agreement fees was of Ps. 11.4 million.
The Consulting Agreement is subject to termination by either party upon not less than 60 days prior written notice. If we terminate the Consulting Agreement without cause, we will be liable to Consultores Asset Management for twice the average of the amounts of the management fee paid to Consultores Asset Management for the two fiscal years prior to such termination.
Sale of Advertising Space in Media
We and our related parties usually execute agreements with third parties by which we agreedsell/acquire, for their future use rights to lend FYO up to US$4.3 million, which may be payableadvertise in Pesos at an exchangemedia (TV, radio, newspapers, etc.) that are later used in complianceadvertising campaigns.
Purchase and sale of goods and/or service hiring
In the normal course of its business and with the Communication “A” 3500aim of the Central Bank. The term of this loan agreement extends up to August, 2014, with an interest rate of 3.0%. This loan was fully cancelled.making resources more efficient, we, or our related parties, including our parent company, in certain occasions purchases and/or hires services which later sells and/or recovers for companies or other related parties, based upon their actual utilization.
 
Loan agreement between IRSA and usInvestment in Dolphin Fund Ltd.
 
As of November, 2013, we entered into a loan agreement in favor of IRSA for a total amount of approximately US$ 26.5 million, which may be payable in Pesos at an exchange in compliance with the Communication “A” 3500 of the Central Bank. The termdate of this loan agreementannual report, we have invested approximately US$544 million in Dolphin, through our subsidiaries. Dolphin Fund Ltd, is set on 6 months, with an interest rateinvestment fund incorporated under the laws of 1.5%. This loan was fully cancelled.
Line of Credit with Cyrsa
On August 27 2012, Cyrsa granted IRSA and Cyrela, its shareholders (50% each)Bermuda, whose investment manager is Consultores Venture Capital Uruguay S.A., individual credit line for a maximum amount of Ps. 190 million, each, maturing in February 2017. Daily interest accrued on each disbursed amount will be based on the Badlar Privada interest Rate.
Sale of Cresca S.A. to BrasilAgro Companhia Brasileira de Propriedades Agricolas S.A.
In December 2013, we sold to BrasilAgro Companhia Brasileira de Propriedes Agrícolas S.A.company controlled indirectly by our indirect interest in Cresca S.A. which amounted to 50% of its capital stock, for a total amount of US$18.5 million. CrescaChairman, Eduardo S. Elsztain. Dolphin Netherlands is a company owning 141,931 hectaressubsidiary of rural landDolphin Fund Ltd, incorporated in Paraguay, of which approximately 71,000the Netherlands. Such investments were arable atmade in order to carry out the moment of the transaction but less than 12,000 hectares of which were cultivated when acquired and approximately 71,000 hectares were protected by environmental regulation. In addition, Cresca has an option granted by Carlos Casado for the purchase of 100,000 additional hectares locatedinvestment in Paraguay. As of the closing date, Brasilagro made an initial payment of US$ 5 million and the remaining balance plus accrued interest was collected on December 2014.
Loan agreements with Banco Hipotecario
As of June 30, 2015 we have loans from Banco Hipotecario for a total amount of approximately Ps.29.8 million, which include credit facility for production investment (not includes bank overdraft), with an average interest rate of 17.3%, forIDB Development Corp. For more information please see “LiquidityItem 4. Information on the Company – A. History and Capital Resources Exchange Rates and Exchange Controls - Indebtedness”. We believe that eachdevelopment of these loans was made by Banco Hipotecario in the ordinary courseCompany – “Investment of its consumer credit business, is of a type generally made available by Banco Hipotecario to the public and was made on market terms.IDB Development Corporation Ltd. (IDBD).
 
Master agreement for US Dollar-denominated forward transactions with Banco Hipotecario
 
We entered into a master agreement for the performance of Dollar-denominated forward transactions with Banco Hipotecario. This master agreement provides that the parties may carry out this type of transactions by fixing a certain forward price (“the Agreed Price”). Such transactions are settled in cash by paying the difference between the Agreed Price and the quoted price of the US Dollar on the settlement date. As of June 30, 2015 we have not derivative financial instruments from Banco Hipotecario.
Sale of “La Adela” Farmfarmland "La Adela"
 
In July 2014 we sold to our subsidiary IRSA the “La Adela” farm, with an area approximately 1,058 hectares, located in the District of Luján, Province of Buenos Aires, for a total amount of Ps. 210 million. Given its degree of development and closeness to the City of Buenos Aires, this farm has a high urbanistic potential; therefore, the purpose of selling it to IRSA is for it to launch a new real estate development.
Agreement for the lease or use of spaces in Shopping Centers
IRSA Commercial Properties regularly lease different spaces in its Shopping Centers (stores, stands, storage units and/or advertising spaces) to related parties such as Tarshop or Banco Hipotecario, among others.
The lease agreements generally have a three year term with monthly payments, percentages of participation over the maintenance fees and over the collective promotion fund, and the payment of expenses and taxes. The monthly payment is indexed on an annual basis. The agreements also establish the payment of a right of admission and a special payment regarding the collective promotion fund which is paid at the beginning of each agreement.
The right to use the stands located in the shopping centers generally is given by use permit agreements or, in particular cases, comodato agreements. In the first case, the agreements have a term that might be of one or two years, establish monthly payments and a down payment used for the payment of maintenance fees and the applicable charges to the collective promotion fund and the applicable taxes and charges in proportion to the leased space. In the comodato agreements, the gratuitous bailee is in charge of any maintenance fees and expenses related to the stand, but has not any monthly lease payment or any fee related to the collective promotion fund.
Regarding the storage units, these agreements are accessory to the lease of stores or the use of the stands, so as a consequence, their term matches the term of the main agreement. These agreements only establish the payment of a monthly lease, which is indexed on an annual basis, and does not include the payment of fees to the collective promotion fund or maintenance fees.
Moreover, IRSA Commercial Properties and our controlling companies offer different spaces located in its shopping centers for advertising of different businesses, brands and/or products (non-traditional advertising). The taxes generated due to the execution of these agreements are generally burden by the counterparty.
 
Transfer of tax credits
 
During the fiscal year ended June 30, 2015, We and Sociedad Anónima Carnes Pampeanas S.A (a company controlled by us),S.A. (subsidiary of Cresud) and Cresud, assigned uponcredits to IRSA Propiedades Comerciales S.A., Ps.1.63 millionCP and Ps.30.4 million, respectively,other related parties corresponding to Value Added Taxvalue added tax export refunds related to such company’scompanies’ business activity.
 
168

Related party Agreement with PAMSA
On December 1, 2006, IRSA Commercial Properties entered into an administration agreement with PAMSA. (IRSA commercial Properties control 80% of PAMSA). The management fee set forth in such agreement amounts to 12% of revenues from common maintenance expenses and collective promotion fund, plus 12% of capital expenditures and maintenance cost of the Dot and adjoining buildings.
Acquisition of investment properties from IRSA and intercompany loan between IRSA Commercial Properties and IRSA.
On December 22, 2014, IRSA transferred to IRSA Commercial Properties, 83,789 m2 of its premium office portfolio including the República building, Bouchard 710, Della Paolera 265, Intercontinental Plaza and Suipacha 652 and the “Intercontinental II” plot of land in order to consolidate a vehicle which main corporate purpose is to develop and operate commercial properties in Argentina.
The total amount of the transaction was US$308 million, US$61.6 million of which have already been paid, and the balance of US$246.4 million has been financed at an annual effective rate of 8.5% maturing on January 23, 2017 and July 13, 2020.
Convertible Notes of IRSA Commercial Properties.
IRSA Commercial Properties’ Convertible Notes originally matured on July 19, 2006. But a meeting of noteholders resolved to extend the maturity date of such Convertible Notes through July 19, 2014, the remaining terms and conditions remain unchanged. The Convertible Notes accrue interest (payable semi-annually) at a fixed annual rate of 10% and are convertible, at any time at the option of the holder, into shares of IRSA Commercial Properties’ common stock, par value of Ps. 0.10. The conversion rate per U.S. Dollar is the lesser of Ps. 3.08642 and the result obtained from dividing the exchange rate in effect at the conversion date by the par value of IRSA Commercial Properties’ common shares.
On December 31, 2012, the outstanding principal amount of such convertible notes was US$ 31.8 million, and IRSA owned US$ 31.7 millon principal amount of such convertible note on such date. On January 14, 2013, IRSA accepted the repurchase offer submitted by IRSA Commercial Properties for an amount face value of US$ 31.7 million, for a total price of US$ 35.4 million. On January 15, 2013, IRSA Commercial Properties paid to us the amount of Ps. 175.2 million.
IRSA Commercial Properties’ Convertible Notes expired on July 19, 2014.
Debt assignment
During the month of December 2014, IRSA Commercial Properties acquired the obligations arising from a line of credit for US$13.1 million that Panamerican Mall S.A. had granted to, IRSA´s subsidiary, Tyrus. As a result, we assumed the obligations of Tyrus as debtor in such line of credit.
Investment in mutual funds of BACS Administradora de Activos S.A. S.G.F.C.I.
We invest from time to time our liquid fund in mutual funds administrated by BACS Administradora de Activos S.A. S.G.F.C.I., which is a subsidiary of Banco Hipotecario. As of June 30, 2015, our investments in the mutual funds administrated by BACS Administradora de Activos S.A. S.G.F.C.I. amounted to Ps.28.7 million.
Investment in Dolphin Fund Ltd.
As of the date of this annual report, we have invested approximately US$300 million  in Dolphin Fund Ltd., trough our subsidiaries. Dolphin Fund Ltd, is an investment fund incorporated under the laws of Bermuda, whose investment manager is Consultores Venture Capital Uruguay S.A., a company controlled indirectly by our Chairman, Eduardo S. Elsztain. Such investments were made in order to carry out the investment in IDB Development Corp. For more information please see Item 4. Information on the Company – A. History and development of the Company – “Investment of IDB Development Corporation Ltd. (IDBD).
Line of Credit granted to IRSA
In November 2012, IRSA Commercial Properties and IRSA entered into an agreement by which IRSA Commercial Properties granted a line of credit for up to US$ 14.5 million for a period of one year at a rate of 5.5% to IRSA. In November 2013, the line of credit was renewed and in April 2014, was extended for up to a total amount of US$ 20 million.
On June 25, 2014, IRSA Commercial Properties has extended the Line of Credit, for up to US$ 60 million, due June 2015, at the rate of Libor 1 year + 3.0%. Additionally, the parties involved in the agreement were modified, including IRSA Commercial Properties and any of its subsidiaries as lenders and as loan takers Tyrus and IRSA. As of the date of this annual report the total amount granted from IRSA Commercial Properties to IRSA amounts to US$49.5 million.
Consequently, as of June 30, 2014, disbursements were made from ERSA to Tyrus of US$ 2.6 million, from IRSA Commercial Properties to Tyrus of US$ 10.6 million, and from Pamsa to Tyrus of US$ 10.2 million. As of June 30, 2015 the amounts described above were cancelled.
Line of Credit Inversiones Financieras del Sur S.A.
In June 2014, IRSA, through its subsidiary, Real Estate Investment Group IV LP, renewed a line of credit with Inversiones Financieras del Sur S.A. for an amount of up to 1.4 million shares of Hersha Hospitality Trust. The transaction was set for 30 days renewable for up to 360 calendar days and with an annual interest rate of Libor 3 months plus 50 basic points. This line of credit was cancelled during fiscal year 2015.
Loan agreements with Inversiones Financieras del Sur S.A.
On July 28, 2015, IRSA´s subsidiary Dolphin granted a loan to IFISA, a company indirectly controlled by Eduardo Sergio Elsztain for an aggregate amount of US$7.2 million, which will mature on July 2016 and will accrue interests at a rate of f Libor 1M + 3%.
In addition, on October 9, 2015, though IRSA's subsidiary Reig V, IRSA granted another loan for an aggregate amount of US$40 million to IFISA, which will mature on October 2016 and will accrue interests at a rate of f Libor 1M + 3%.
Shares and Convertible Notes of BACS Banco de Crédito y Securitización S.A.

IRSA through Tyrus, subscribed a purchase-sale agreement of shares of BACS Banco de Crédito y Securitización S.A., representing an interest of 6.125%. The transaction amounts to US$ 1.35 million. This operation is yet to be approved by the Banco Central de la República Argentina, according to regulations in force. The advance payment related to this transaction is disclosed in “Trade and other receivables”.

On June 17, 2015, IRSA subscribed Convertible Notes, issued by BACS Banco de Crédito y Securitización S.A. for a nominal value of 100,000,000, which are convertible into common stock.
 
 
This section is not applicable.
 
Item 8.                      Financial Information
 
 
See Item 18 for our Audited Consolidated Financial Statements.
 
Legal or arbitration proceedings
 
We are not engaged in any material litigation or arbitration and no material litigation or claim is known to us to be pending or threatened against us, other than those described below.
 
169

 
Litigation with Exagrind S.A.
 
Cresud filed a lawsuit through Inversiones Ganaderas S.A. (IGSA) (a former subsidiary merged with the Company) on claims for damages and losses produced by a fire in one of the Company's farms, “San Rafael” farm, which is close to Exagrind’s property, Tali Sumaj, in the Province of Catamarca, Argentina. The fire took place on September 6, 2000. Exagrind claimed an amount of Ps. 2.9 million at that date. The extraordinary appeal to the High Court of Justice of the Province of Catamarca, questioning the resolution that ended the term to respond the case, arguing that at that moment, the period was not completed, was favorably received. Therefore, Cresud finally responded the case and showed proofs. As of the consolidated financial statements date, the parties have been notified that the term to submit allegations has started to run. In March 2007, the court ordered an inhibition of assets which was subsequently lifted. This decision was lifted in June 2007 and Tali Sumaj farm on attachment has been accepted in replacement. Exagrind S.A. requested that the measure be extended with an attachment of bank accounts; this ruling has been challenged and to date the accounts have not been attached. In June, 2010, the Company sold the farm to a third party. Since the litigation is still pending, the bond posted in favor of the buyer remains effective as security for the obligations undertaken The Company has recorded a provision amounting to Ps. 1.5 million, which is included within “Labor, legal and other claims”.
 
In addition, the Company is involved in several legal proceedings, including tax, labor, civil, administrative and other matters for which the Company has not established provisions based on the information assessed to date. In the opinion of management, the ultimate disposition of any threatened or pending matters, either individually or collectively, will not have a material adverse effect on the consolidated financial position, liquidity and results of operations of the Company. For ease of presentation, the Company has categorized these matters between those arising out of the Company’sour agricultural and agro-industrial activities and those arising out of the Company’sour investment and development properties business activities.
 
IRSA’s and IRSA Commercial Properties’ legal or arbitration proceedings
Operations Center in Argentina
 
Set forth below is a description of certain material legal proceedings to which IRSA and IRSA Commercial Properties are a party. IRSA and IRSA Commercial Properties are not engaged in any other material litigation or arbitration and no other material litigation or claim is known to IRSA to be pending or threatened against it or its subsidiaries. Nevertheless, IRSA may be involved in other litigation from time to time in the ordinary course of business.
 
Acquisition of the building known as Ex- Escuela Gobernador Vicente de Olmos (City of Córdoba)
On November 20, 2006, the Company, through IRSA Commercial Properties, acquired through a public bidding the building known as Ex-Escuela Gobernador Vicente de Olmos located in the city of Córdoba for the amount of Ps. 32,522. As explained in Note 29, this property is affected to a concession contract.
After the title deed was made, the government of the province of Córdoba declared the property to be of public use and subject to partial expropriation in order to be used exclusively for the Libertador San Martin theatre.
IRSA Commercial Properties has answered a complaint in an action and to challenge the law that declared such public interest on unconstitutional grounds. In the alternative, it has challenged the appraisal made by the plaintiff and, additionally, it has claimed damages not included in the appraisal and resulting immediately and directly from expropriation.
At June 30, 2015, the property is still operated by the Company and is recorded under Investment properties.
Puerto Retiro
 
On November 18, 1997, in connection with our acquisition of our subsidiary Inversora Bolívar, we indirectly acquired 35.2% of the capital stock of Puerto Retiro. Inversora Bolívar had purchased such common shares of Puerto Retiro from Redona Investments Ltd. N.V. in 1996. In 1999, we, through Inversora Bolívar, increased our interest in Puerto Retiro to 50.0% of its capital stock. On April 18, 2000, Puerto Retiro was served notice of a filing made by the Argentine government, through the Ministry of Defense, seeking to extend the bankruptcy of Indarsa to the Company. Upon filing of the complaint, the bankruptcy court issued an order restraining the ability of Puerto Retiro to dispose of, in any manner, the real property it had purchased in 1993 from Tandanor. Puerto Retiro appealed the restraining order which was confirmed by the Court on December 14, 2000.
 
In 1991, Indarsa had purchased 90% of Tandanor, a former goverment-ownedgovernment-owned company, which owned a piece of land near Puerto Madero of approximately 8 hectares, divided into two parcels: Planta 1 and 2. After the purchase of Tandanor by Indarsa, in June 1993, Tandanor sold “Planta 1” to Puerto Retiro, for a sum of US$18 million pursuant to a valuation performed by J.L. Ramos, a well-known real estate brokerage firm in Argentina. Indarsa failed to pay to the Argentine government the price for its purchase of the stock of Tandanor, and as a result the Ministry of Defense requested the bankruptcy of Indarsa. Since the only asset of Indarsa was its holding in Tandanor, the Argentine government is seeking to extend Indarsa’s bankruptcy to other companies or individuals which, according to its view, acted as a single economic group. In particular, the Argentine government has requested the extension of Indarsa’s bankruptcy to Puerto Retiro which acquired Planta 1 from Tandanor.
 
The deadline for producing evidence in relation to these legal proceedings has expired. The parties have submitted their closing arguments and are awaiting a final judgment. However, the judge has delayed his decision until a final judgment in the criminal proceedings against the former Defense Minister and former directors of Indarsa has been delivered. It should be noticed, regarding the abovementioned criminal procedure, that on February 23, 2011 it was resolved to declare its expiration, and to dismiss certain defendants. However, this resolution is not final because it was appealed. We cannot give you any assurance that we will prevail in this proceeding, and if the plaintiff’s claim is upheld by the courts, all of the assets of Puerto Retiro would likely be used to pay Indarsa’s debts and our investment in Puerto Retiro, would be lost. As of June 30, 2014,2016, we had not established any reserve with respect of this contingency.

 
Tandanor has filed a civil action against Puerto Retiro and the people charged in the referred criminal case looking forward to be reimbursed from all the losses which have arose upon the fraud committed. On 7th March,2015March 7, 2015 Puerto Retiro respondresponded filing certain preliminary objections, such as prescription among others. Toor limitation, lack of information to respond the date, this proceeding has not been resolved.lawsuit, lack of legitimacy (active and passive). On July 12, 2016 Puerto Retiro was legally notified of the decision adopted by the Tribunal Oral Federal N° 5 related to the preliminary objections above mentioned. Two of them were rejected –lack of information and lack of legitimacy (passive). We filed an appeal with regard to the rejection of these two objections. But, on the other hand, the other two objections will be studied at the moment of deliver the sentence, which is an important step in order to obtain a favorable decision.
 
Legal issues with the City Hall of Neuquén
 
In June 2001, Shopping Neuquén requested that the City of Neuquén allow it to transfer certain parcels of land to third parties so that each participant in the commercial development to be constructed would be able to build on its own land. Neuquén´sn’s Executive Branch previously rejected this request under Executive Branch Decree No. 1437/2002 which also established the expiration of the rights arising from Ordinance 5178 due to not building the shopping center in time, including the loss of the land and of any improvement and expenses incurred. As a result, Shopping Neuquén had no right to claim indemnity charges and annulled its buy-sell land contracts.
 
Shopping Neuquén submitted a written appeal to this decision on January 21, 2003. It also sought permission to submit a revised schedule of time terms for the construction of the shopping center, taking into account the economic situation at that time and including reasonable short and medium term projections. Neuquén´sn’s Executive Branch rejected this request in their Executive Branch Decree 585/2003. Consequently, on June 25, 2003, Shopping Neuquén filed an “Administrative Procedural Action” with the High Court of Neuquén requesting, among other things, the annulment of Executive Branch Decrees 1,437/2002 and 585/2003 issued by the City Executive Branch. On December 21, 2004, the High Court of Neuquén communicated its decision that the administrative procedural action that Shopping Neuquén had filed against the City of Neuquén had expired. Shopping Neuquén filed an extraordinary appeal for the case to be sent to the Argentine Supreme Court.
170

 
On December 13, 2006, while the case was under study in the Argentine Supreme Court, Shopping Neuquén signed an agreement with both the City and the Province of Neuquén that put an end to the lawsuit between them and stipulated a new timetable for construction of the commercial and housing enterprises (the “Agreement”). Also, Shopping Neuquén was permitted to transfer certain parcels to third parties so that each participant in the commercial development to be constructed would be able to build on its own land, with the exception of the land in which the shopping center would be constructed. The Legislative Council of the City of Neuquén duly ratified the Agreement. The City Executive Branch promulgated the ordinance issued on February 12, 2007.
 
The only pending issue was the determination of the City of Neuquén attorneys’ fees that were to be borne by Shopping Neuquén. As the date of their annual report Shopping Neuquén came to an agreement orand paid all of the City´sCity’s lawyers, but one, with whom the amount of theincluding pending fees are being contested in Court.court.
 
Shopping Neuquén finished the construction and opened the shopping center in March, 2015, obtaining also all necessary provincial and city authorizations for it.
 
Arcos del Gourmet
 
In December 2011, IRSA Commercial Properties started to develop, through our subsidiary Arcos, the “Arcos” project located in the neighborhood of Palermo, City of Buenos Aires. On December 10, 2013, Administrative and Tax Contentious Court of Appeal of the City of Buenos Aires ratified an injunction that suspends the opening of the shopping center on the grounds that it has failed to obtain certain government permits. Despite the fact that the construction has all government permits in place, IRSA Commercial Properties has filed an appeal against the decision and have requested that the injunction be lifted, with favorable expectations.lifted. In such sense, on April 10, 2014, the government of the City of Buenos Aires issued a new environmental compliance certificate. TheIRSA Commercial Properties obtained a favorable decision on this case based on procedural grounds. Notwithstanding, the plaintiff appealed this decision, and the file has beenwas placed on the Court of Appeal sinceon September 23, 2014.
 
On the other hand, there is another judicial process currently being heard entitled “Federación de Comercio e Industria de la Ciudad de Buenos Aires y Otros c/ Gobierno de la Ciudad Autónoma de Buenos Aires s/ Amparo”. On August 29, 2014 the lower court rendered a decision rejecting the case.Thiscase. This resolution was appealed but afterwards, was confirmed in December, 2014. Therefore, on December 18th, 2014, the “Arcos” Project was opened to the public, operating normally nowadays. Notwithstanding, the plaintiff appeared before the Superior Court of the City of Buenos Aires to request the review of the case based on the constitutional’s matters involved. The Court has not rendered a decision yet.
 
Furthermore,Moreover, on May 18,18th, 2015 IRSA Commercial Properties was notified of the revocation of the Agreement for the Reorganization for Use and Exploitation Nº AF000261 (“Contrato de Readecuación de Concesión de Uso y Explotación NºAF000261AF000261” issued by the Agency for the Management of the State Assets (“Agencia de Administración de Bienes del EstadoEstado” or “AABE”) through Resolution Nº 170/2014. This Resolution was not enacted due to breach of contract by Arcos del Gourmet nor it has implied up to the date of this annual report the interruption of the economic exploitation neither of the functioning of the shopping center that IRSA Commercial Properties operate there. IRSA Commercial Properties has filed the proper administrative and judicial motions to revoke the Resolution and as of the date of this annual report these proceedings are ongoing.
 
Notwithstanding the aforesaid, the “Federación de Comercio e Industria de la Ciudad de Buenos Aires” has filed a motion for the unhold of the injuction. On March 17, 2015 this request was rejected. As a consequence, it has filed a complaint appeal, process that has not been ended yet.
Other Litigation
 
As of July 5, 2006, the Administración Federal de Ingresos Públicos (“AFIP”) filed a preliminary injunction with the Federal Court for Administrative Proceedings against IRSA Commercial Properties for an aggregate amount of Ps.3.7 million, plus an added amount, provisionally estimated, of Ps.0.9 million for legal fees and interest. The main dispute is about the income tax due for admission rights. In the first instance, AFIP pleaded for a general restraining order. On November 29, 2006, the Federal Court issued an order substituting such restraining order for an attachment on the parcel of land located in Caballito neighborhood, City of Buenos Aires, where IRSA Commercial Properties is planning to develop a shopping center. As of June 30, 2011, under court proceedings, the building was subject to a legal attachment for Ps. 36.8 million. On December 12, 2012, the legal attachment was lifted and accredited in the file concerned in February 2013.
 
After we sold the Edificio Costeros, dique II, on November 20, 2009, we requested an opinion to the Argentine Antitrust Authority as to whether it was necessary to report this transaction. The Argentine Antitrust Authoriry advise us that it was required to notify the transaction. We challenged this decision, but it was confirmed. On December 5, 2011, we notified the transaction and on April 30, 2013 the transaction was appovedapproved by the Argentine Antitrust Authority by Resolution 38.No. 38 as a result of that this legal proceeding was concluded.
 
On January 15, 2007 we were notified of two claims filed against us before the Argentine Antitrust Authority, one by a private individual and the other one by the licensee of the shopping center, both opposing the acquisition from the province of Córdoba of a property known as Ex-Escuela Gobernador Vicente de Olmos. On February 1, 2007 we responded the claims. On June 26, 2007, the Argentine Antitrust Authority notified us that it has initiated a summary proceeding to determine whether the completion of the transaction breaches the Antitrust Law. As of the date of this filing the result of this proceeding has not been determined.
 

On December 3, 2009, IRSA Commercial Properties filed a request for the Argentine Antitrust Authority’s opinion regarding IRSA Commercial Properties’ acquisition of common shares of Arcos del Gourmet S.A. The Argentine Antitrust Authority advised the parties that the transaction has to be notified. On December, 2010 the transaction was filed with the Argentine Antitrust Authority. As of the date of this annual report, the decision of the Argentine Antitrust Authority is still pending.
 
On April 11, 2011, Quality Invest requested the Argentine Antitrust Authority opinion regarding Quality’s acquisition Property of a warehouse owned by Nobleza Piccardo S.A.I.C. y F. located in San Martín, Province of Buenos Aires. The Argentine Antitrust Authority stated that there was an obligation to notify the situation, but Quality Invest filed an appeal against this decision. Subsequently, the Court of Appeals confirmed the Argentine Antitrust Authorities'Authorities’ decision regarding the obligation to notify and, therefore, on February 23, 2012, the transaction was filed. As of the date of this annual report, the Argentine Antitrust Authority is analyzing this decision.
 
On Augustaugust 23, 2011, IRSA Commercial Properties notified the Argentine Antitrust Authority the direct and indirect adquisitionacquisition of common shares of NPSF, the transaction involved the direct acquisition of 33.33% of NPSF and 16.66% through our controlled vehicle Torodur S.A. As of the date of this annual report the transaction is being analyzed by the Argentine Antitrust Authority.
 
On June 16, 2012, we sold to Cabaña Don Francisco S.A. certain Costeros Dique IV´sIV’s functional units, to be used for office space, and complementary units to be used for parking. In addition, we assigned upon the purchaser all rights and interests arising from lease agreements involving the conveyed units. As a result, an advisory opinion was requested from the Argentine Antitrust Authority as to the need to report such transaction. The Argentine Antitrust Authority resolved that the transaction was exempt from report on May 21, 2014.2014, so this legal process was finished.
 
On December 7, 2012, we filed with the Argentine Antitrust Authority the adquisition of EHSA, which has the beneficial ownership of 50% of La Rural S.A That company runs an exposition center known as Predio Ferial de Palermo. As of the date of this annual report, the Argentine Antitrust Authority is analyzing the transaction.
 
Through the issuance of Resolution No.N°. 16,521 dated February 17, 2011 the CNV commenced a summary proceeding against the members of IRSA´sIRSA’s board of directors and its supervisory committee members (all of them at that time, including among others Mr. Eduardo S. Elsztain), alleging certain formal errors in the Inventory and Balance Sheet Book, specifically the failure by the Company to comply with certain formalities in the presentation of a table included in the Memoria (Annual Report)(annual report); arising from an investigation carried out by the CNV in October 2010. Applicable law requires that the corrections of any errors in the Annual Reportannual report include a legend identifying each error and the way in which it was corrected, including insertion of the holographic signature from the chairman of the board. In this case, we first corrected the mistake and after the request from the CNV included the legend and the holographic signature of the chairman, required by the relevant formalities.
171

 
IRSA´s response to the CNV’s allegations containing the arguments for the defense was filed in March 2011 and the first hearing was held in May 2011. In April, 2013, the CNV imposed (as a result of the aforementioned alleged charge) a fine on the members of IRSA´s board of directors and its supervisory committee members. The fine imposed by the CNV amounts to Ps. 270,000 equivalent to US$ 49,632 and it was imposed to IRSA and the members of the board together. The amount of the fine demonstrates the immaterial nature of the alleged violations. Even though the fine was paid, in April 2013, IRSA appealed such resolution, which is still ongoing in Court Room No.N°. IV of the National Chamber of Appeals in Federal Administrative Procedures (Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal).
 
For more information see “Item. 3(d) Risk Factors—Risk related to our Business—Our business is subject to extensive regulation and additional regulations may be imposed in the future”.
 
DividendsClass actions in the United States
              On May 9, 2016, a putative shareholder class action was filed in the United States District Court for the Eastern District of Pennsylvania against IRSA, certain of its officers and dividenddirectors, and Cresud. The complaint asserts violations of the federal securities laws on behalf of persons that purchased IRSA’s American Depositary Receipts between November 3, 2014 and December 30, 2015, and alleges that defendants made materially false and misleading statements and omissions relating to IRSA’s investment in IDBD.  More specifically, the complaint alleges that IRSA’s disclosures during that time period misrepresented and failed to disclose that (1) IDBD’s US$6.7 billion net debt should have been consolidated in IRSA’s financial statements and (2) as so consolidated, IRSA’s debt would violate the covenants specified in IRSA’s Global Notes Indenture.
               This class action was transferred to the United States District Court for the Southern District of New York on July 14, 2016, and referred to Judge Vernon S. Broderick on July 19, 2016.  A putative class representative has filed a motion to be appointed as lead plaintiff and to appoint class counsel. Such motion remains pending before the Court. Defendants believe that there is no merit to the claims alleged and intend to vigorously defend these actions. Nevertheless, no assurance can be given that we will be successful in defending these claims.
Operations Center in Israel
Litigation against IDB
In recent years there has been an increasing trend of filing derivative and class action claims in the area of corporate and securities laws in Israel. While taking into account such issues and the financial position of IDB and its holding structure, claims in considerable amounts may be filed against IDB, including in connection with its financial position and cash flows, with offerings that it makes, and transactions that were carried out or not completed, including with regards to the contentions and claims of the controlling shareholders that took place in IDB.
Arbitration proceedings relating to the obtainment of control in IDBD.
On May 7, 2014, a transaction was agreed whereby the Company, acting indirectly through Dolphin, acquired jointly with ETH (a non-related company established under the laws of the State of Israel, which was presented to Dolphin as a company controlled by Mordechay Ben Moshé), an aggregate number of 106.6 million common shares in IDBD, representing 53.30% of its stock capital, under the scope of the debt restructuring Arrangement of IDBH, IDBD's parent company, with its creditors.
Under the terms of the agreement entered into between Dolphin and ETH (the “Shareholders’ Agreement”), Dolphin acquired 50% interest in this investment, and ETH acquired the remaining 50%. The initial total investment amount was NIS 950, equivalent to approximately US$ 272 at the exchange rate prevailing on that date.
On May 28, 2015, ETH launched the BMBY mechanism provided in the Shareholders’ Agreement (clause which establishes that each party of the Shareholders' Agreement may offer to the counterparty to acquire (or sell, as the case may be), the shares it holds in IDBD at a fixed price). In addition, ETH further added that the purchaser thereunder required to assume all obligations of seller.

On June 10 and 11, 2015, Dolphin gave notice to ETH of its intention to buy all the shares of IDBD held by ETH.
After certain aspects of the offer were resolved through an arbitration process brought by Dolphin and ETH, on September 24, 2015, the competent arbitrator resolved that: (i) Dolphin and IFISA (related company to the Company) were entitled to act as buyers in the BMBY process, and ETH had to sell all of the IDBD shares held by it (92,665,925 shares) at a price of NIS 1.64 per share; (ii) The buyer had to fulfill all of the commitments included in the Arrangement, including the commitment to carry out Tender Offers; (iii) The buyer had to pledge in favor of the Arrangement Trustees the shares that were previously pledged in favor of the Arrangement Trustees by the seller.
On October 11, 2015, the BMBY process concluded, and IFISA acquired all IDBD's shares of stock held by ETH. Consequently, the Shareholders' Agreement ceased and members of IDBD's Board of Directors representing ETH submitted their irrevocable resignation to the Board, therefore Dolphin was hence empowered to appoint the new members to the Board. Additionally, on the same date, Dolphin pledged additional shares as collateral to secure compliance with the IDBD stock purchase agreement, thereby increasing the number of pledged shares to 64,067,710. As a consequence, the Company gained control of IDBD and started to consolidate financial statements as from that date.
In addition to the competent arbitrator’s decision issued on September 24, 2015, ETH and Dolphin still have counterclaims of different kinds which are subject to such arbitration proceeding. As of the filing date of this Annual Report, the proceeding is still being heard.
Litigation against Clal Insurance and its subsidiaries
This exposure is especially high in the areas of long-term savings and long-term health insurance in which Clal Insurance operates, inter alia, in view of the fact that in these areas the policies were issued decades ago, while at present, after significant changes in the regulatory environment and against the background of developments in legal precedent and the Israeli authority’s position, the same policies may be interpreted differently, retrospectively, and may be subjected to different interpretation standards than those that were customary at the time that the policies were made. Moreover, in these areas the policies are valid for dozens of years and, therefore, there is a risk that in those cases in which a customer’s claim is accepted and a new interpretation is given to the policy, the future profitability of Clal Insurance in respect of the existing policy portfolio will also be affected. This is in addition to the possible compensation that could be given to the customers due to past activity.
Alongside these aspects, during 2015 amendments were made to reflect a significant reform in the field of approving an insurance program which allows the Israeli authority, under certain conditions, to order the insurer to stop introducing an insurance policy or to order an insurer to make a change to an insurance policy, even with regard to policies that have already been marketed by the insurer. It is not possible to foresee to what extent insurers are exposed to claims in connection with the provisions of the policy, the manner of implementing the Israeli authority’s powers pursuant to the insurance policy reform and its implications, which may be raised, inter alia, by means of the procedural mechanism provided in the Israeli Class Actions Law.
There are claims that have been recognized as class action suits, claims for which there are pending motions to have them certified as class action suits, and other claims which are immaterial. These claims include mainly claims of improper actions, not in accordance with laws, licenses or breaches of agreements with customers or performance of tort damages toward customers (especially misleading a customer, or a negligent misrepresentation), causing damage, either monetary or non-monetary, to customers. A significant amount of these claims also include claims of charging excessive premiums and payment of lower than called for insurance compensation. In addition, there are pending motions to have claims certified as derivative actions.
Sale of shares of Clal Insurance Enterprises Holdings Ltd
On August 21, 2013, on the background of concerns about the ability of the previous controlling shareholders of IDBD (Dankner group) to meet the requirements to have control over an insurance company, set forth by the Commissioner of Capital Markets, Insurance and Savings (which is a division within the Ministry of Finance of Israel; the "Commissioner"), the Commissioner required that IDBD transfer 51% of the shares in Clal to Mr. Moshe Terry ("the Trustee") and to grant the Trustee an irrevocable power of attorney with regard to the voting of such shares in Clal.
On November 27, 2013, and as part of the debt arrangement In IDB Holdings Corporation Ltd., the Commissioner set forth an outline to enable the change of control in IDBD (as part of the debt arrangement), whereby the Commissioner would not view such change of control as being a breach of the Supervision of Financial Services (Insurance) Law, 1981 (the "Insurance Law"), subject to certain conditions, including terms whereby if until 31.12.2014 a control permit for Clal Insurance will not be obtained for the new controlling shareholders in IDBD, or, that an agreement for the sale of the controlling stake in Clal Insurance will not have been signed, then the Trustee will be authorized to sell the Clal Insurance shares that the Trustee holds. Both groups that had submitted proposals in the debt arrangement process (including the Dolphin group) approved such outline.
On December 30, 2014, the Commissioner sent an additional letter setting a term by which IDBD’s control over and equity interests in Clal were to be sold and giving directions as to the Trustee’s continuity in office, among other aspects.
The sale arrangement outlined in the letter involves IDBD’s and the Trustee’s interests in the sale process under different options and timeframes. As of June 30, 2016, the current sale arrangement involved the sale of the interest, as per the following detail and by the following dates:
a.   IDBD would have to sell at least 5% of its equity interest in Clal per each 4 month period beginning as of January 7, 2016.
b.   During each of the subsequent four-month periods, IDBD would have to sell at least an additional 5% of its equity interest in Clal.
c.   If IDBD sells more than 5% of its equity interest in Clal in any given four-month period, the percentage in excess of the required 5% would be offset against the percentage required in the following 4 month period.

IDBD would be required to continue to sell all of its holdings in Clal apart for such holdings that do not require a permit pursuant to applicable law, or, alternatively, such holdings that IDBD will be permitted to hold pursuant to applicable law.  
In case IDBD does not fulfill its obligation in the manner described in the above paragraph the Trustee would be entitled to act upon the specified arrangement in lieu of IDBD, pursuant to all powers that had been vested under the representations of the trust letter. The consideration for the sale would be transferred to IDBD, with the expenses incurred in the sale process to be solely borne by IDBD.
On May 7 ,2016 the Commissioner requested that the Trustee act to sell 5% of the shares of Clal Insurance according to the December 30, 2014 letter. IDBD has objected to such sale, and notified the Trustee that in case the Trustee shall sell shares then IDBD will consider claiming against the Trustee for damages. As a result, on July 13, 2016 the Trustee applied to the Tel Aviv District Court to obtain instruction on whether and how to sell such 5% of Clal Insurance shares.
On May 26, 2016 IDBD's board decided to commence a competitive process for the sale of a control stake in Clal. Following such decision, on July 1, 2016 IDBD entered into an agreement with JP Morgan to serve as an investment bank on behalf of IDBD for the sale of a control stake in Clal.

In addition, in June 2015, an application for a Israeli court to approve the commencement of a class action against IDBD, IDBD’s directors (some of which are also our directors), Dolphin Netherlands B.V. and C.A.A Extra Holdings Ltd. was filed by individuals who argue that IDBD’s controlling shareholders and board of directors acted in concert to frustrate the sale of shares of Clal Insurance Enterprises Holdings Ltd (or Clal) to JT Capital Fund. The applicants argue that this caused them material damages as under the terms of the debt restructuring of IDBD’s holding company, IDB Holdings Corporation Ltd. with its creditors, they would have been entitled to receive a larger payment had the above mentioned sale been consummated. Furthermore, they allege that the 2014 and 2015 rights offerings of IDBD discriminated against the minority shareholders.  On March 21, 2016, the respondents filed a motion to dismiss this class action application. On June 2, 2016, the Court partially accepted this motion, and ordered the applicants to file an amended class action application that would include only the arguments and remedies with respect to the said Clal transaction. On August 2, 2016, the respondents filed a motion to appeal (regarding the decision not to dismiss the arguments concerning the Clal transaction) and, on August 14, 2016, the applicants filed an appeal (regarding the decision to dismiss the arguments concerning the rights offering) both before the Israeli Supreme Court. As of the date of this annual report, the Supreme Court has decided that the motion to appeal and the appeal will be heard jointly, and has ordered stay of the proceedings.
Litigation against Cellcom and its subsidiaries
In the normal course of business, claims have been filed against Cellcom by its customers. These are mostly motions for approval of class actions, primarily concerning allegations of illegal collection of funds, unlawful conduct or breach of license, or a breach of agreements with customers, causing monetary and non-monetary damage to them.
In addition, in the normal course of business, claims have been filed against Cellcom in issues related to the environment, including claims regarding non-ionizing radiation from cellular handsets and claims in respect of sites belonging to Cellcom. These are mostly motions for approval of class actions, relating to allegations of unlawful conduct or breach of license causing monetary and non-monetary damage (including claims for future damages).
Litigation against Adama and its subsidiaries
In the normal course of business, Adama is involved in various legal claims involving environmental claims for smell and noise hazards relating to its site.  claims by employees, subcontractors, suppliers, authorities and others which concern, inter alia, claims for breaches of provisions of the law regarding termination of employment and obligatory payments to employees, claims for breach of contract and patent infringement, and compulsory payments to authorities.
Litigation against Shufersal
In the normal course of business, legal claims were filed against Shufersal by its customers. These are mostly motions for certification of class actions, which mainly concern claims of charging money unlawfully, acting contrary to the law or a license, or a breach of the agreements with customers, causing financial and non-financial loss to them.
In addition in the normal course of business, legal claims were filed with the courts against Shufersal by employees, subcontractors, suppliers, authorities and others, which relate mainly to claims of breaches of the provisions of the law in relation to the termination of workers’ employment and compulsory payments to employees, claims of breaches of contract and compulsory payments to authorities.

Dividends policy
 
Pursuant to Argentine law, the distribution and payment of dividends to shareholders is valid only if they result from net and realized earnings of the company pursuant to annual audited financial statements approved by the shareholders. The approval, amount and payment of dividends are subject to the approval by our shareholders at our annual ordinary shareholders meeting. The approval of dividends requires the affirmative vote of a majority of the shares entitled to vote at the meeting.
 
In accordance with Argentine law and our by-laws, net and realized profits for each fiscal year are allocated as follows:
 
5% of such net profits is allocated to our legal reserve, until such reserve amounts to 20% of our capital stock;
a certain amount determined at a shareholders’ meeting is allocated to compensation of our directors and the members of our supervisory committee; and
additional amounts are allocated for the payment of dividends or to optional reserve funds, or to establish reserves for whatever other purpose our shareholders determine.
 
The following table shows the dividend payout ratio and the amount of dividends paid on each fully paid common share for the mentioned years. Amounts in Pesos are presented in historical, non-inflation adjusted Pesos as of the respective payment dates and refers to our unconsolidated dividends.
 
Year Total Dividend  
Dividend per Common Share (1)
 Total Dividend
Dividend per Common Share (1)
 (in million of Ps.)  (in Ps.)             (in million of Ps.)                      (in Ps.)
2010  -   - --
2011  69.0   0.138 69.00.138
2012  63.8   0.149 63.80.149
2013  120.0   0.242 120.00.242
2014  120.0   0.242 120.00.242
2015  -   - --
2016--
(1)  
(1)  Corresponds to per share payments. To calculate the dividend paid per ADS, the payment per share should be multiplied by ten. Amounts in Pesos are presented in historical Pesos as of the respective payment date. See “Exchange Controls”.
Corresponds to per share payments. To calculate the dividend paid per ADS, the payment per share should be multiplied by ten. Amounts in Pesos are presented in historical Pesos as of the respective payment date. See “Exchange Controls”.
 
From December 12, 2014, as resolved at the Shareholders’ Meeting held on October 31, 2014 and reconvened on November 14, 2014, the ratable distribution among the shareholders of 5,565,479 treasury shares was approved, representing 0.0114% per share and 1.1406% of the outstanding capital stock of 487,928,660.Future dividends with respect to our common shares, if any, will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, business opportunities, provisions of applicable law and other factors that our shareholders at a general shareholders’ meeting may deem relevant. As a result, we cannot give you any assurance that we will pay any dividends at any time in the future.
 
 
Annual Shareholders’ Meeting
 
OnOur annual shareholders’ meeting will be held on October 30, 2015, was held the Ordinary and Extraordinary Shareholders’ Meeting in which was approved the following items:
•  Consideration of documents contemplated in section 234, paragraph 1, of the Argentine Companies Law No. 19,550 for the fiscal year ended June 30, 2015.
•  Reinstatement of the “Legal Reserve” account. Treatment of allocation of the “Additional Paid-In Capital” account. Consideration of Reclassification of Reserves.
•  Consideration of Board of Directors’ performance.
•  Consideration of Supervisory Committee’s performance.
•  Consideration of compensation payable to the Board of Directors for $14,310,941 (total compensation) for the fiscal year ended June 30, 2015. Delegation on the Board of Directors of powers to approve the Audit Committee’s budget.
•  Consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2015.
•   Determination of the number and election of Regular Directors and Alternate Directors, as applicable.
•  Appointment of Regular and Alternate Members of the Supervisory Committee.
•  Appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers.
•  Updating of report on Shared Services Agreement.
•  Treatment of amounts paid as personal assets tax levied on the shareholders.
•  Consideration of increase of the amount of the Global Note Program for a maximum outstanding amount of up to US$ 300,000,000 (three hundred million dollars) (or its equivalent in other currencies) the creation of which was approved by the shareholders’ meeting dated October 31, 2012 (the “Program”) by an additional amount of up to US$ 200,000,000 (two hundred million Dollars) (or its equivalent in other currencies).
•  Consideration of: (i) delegation to the Board of Directors of the broadest powers to implement the increase and/or reduction in the Program amount; (ii) renewal of the Board of Directors’ powers to (a) approve, enter into, deliver and/or execute any agreement, contract, document, instrument and/or security related to the Program and/or the issuance of the various series and/or tranches of notes thereunder; (b) apply for and process before the Argentine Securities Commission the authorization for the public offering of such notes; (c) if applicable, apply for and process before any authorized securities exchange or market of Argentina and/or abroad the authorization for listing and trading of such notes; and (d) carry out any acts, dealings, filings and/or proceedings related to the Program and/or the increase in its amount and/or the issuance of the various series and/or tranches of notes thereunder; and (iii) authorization for the Board of Directors to subdelegate the powers and authorizations referred to in items (i) and (ii) above to one or more of its members.
In addition it was approved to adjourn the Ordinary and Extraordinary Shareholders’ Meeting to November 26, 2015,31, 2016, in order to consider and approve, among others, the following items:
•  Consideration of net income for the fiscal year ended June 30, 2015 for $114,009 thousand. Consideration of payment of a cash dividend for up to $88,100 thousand.
•  Consideration of allocationmatters: (i) consideration of documents contemplated in section 234, paragraph 1, of the Argentine Companies Law No. 19,550 for the fiscal year ended June 30, 2016; (ii) Consideration of the result of the fiscal year ended June 30, 2016 which resulted in a loss for the amount of Ps. 1,401,856,585; (iii) consideration of Board of Directors’ performance; (iv) consideration of Supervisory Committee’s performance; (v) consideration of compensation payable to the Board of Directors for Ps. 18,985,218 (total compensation) for the fiscal year ended June 30, 2016; (vi) consideration of compensation payable to the Supervisory Committee for the fiscal year ended June 30, 2016; (vii) consideration of the appointment of Regular Directors and Alternate Directors, as applicable; (viii) appointment of Regular and Alternate Members of the Supervisory Committee; (ix) appointment of Certifying Accountant for the next fiscal year and determination of its compensation. Delegation of powers; (x) updating of report on Shared Services Agreement; (xi) treatment of amounts paid as personal assets tax levied on the shareholders; (xii) consideration of the renewal of the delegation to the Board of Directors of the broadest powers to establish the time and currency of issuance, and other terms and conditions of the issuance of notes under the global note program, for up to US$300.000.000 currently in force in accordance with approved by the shareholders' meeting dated October 31, 2012, and November 14, 2014 and its extension for an additional amount of US$200.000.000 in accordance with approved by the shareholders' meeting dated October 30, 2015; (xiii) consideration of granting indemnities to Messrs. Directors, Syndics and Managers who work or have worked in the Company in a manner subsidiary to D&O policies; (xiv) consideration of special financial merger statement of AGRO MANAGERS S.A .; special separate financial merger statements of Cresud and consolidated financial merger statements of Cresud with AGRO MANAGERS S.A. as June 30, 2016 as well as the reports of the supervisory committee and the auditor. Consideration of the preliminary merger by absorption with AGRO MANAGERS S.A. and other related documentation. Authorizations and delegations. Appointment of proxy to grant definitive agreements and other formalities; (xv) consideration of the distribution of treasury shares. Delegation of powers.
 
Item 9.                      The Offer and Listing
 
 
The following summary provides information concerning our share capital and briefly describes all material provisions of our bylaws and the Argentine Corporation Law.
 
Stock Exchanges in which our securities are listed
 
Our common shares are listed on the BASE under the trading symbol “CRES” and on NASDAQ under the trading symbol “CRESY.” As of June 30, 20152016 our outstanding capital stock consisted of 501,642,804 common shares, Ps.1.00 par value per share.
 
As of that date of this annual report: (1) we had no other shares of any class or series issued and outstanding; and (2) there are no outstanding convertible notes to acquire our shares. Our common shares have one vote per share. All outstanding shares are validly issued, fully paid and non assessable. As of June 30, 2015,2016, there were approximately 1,7414,782 holders of our common shares.

 
Price history of our stock on the Buenos Aires Stock Exchange and NASDAQ
 
Our common shares are traded in Argentina on the BASE, under the trading symbol “CRES.” Since March 1997, our ADRs, each presenting 10 common shares, have been listed on the NASDAQ under the trading symbol “CRESY.” The Bank of New York is the depositary with respect to the ADRs.
 
The table below shows the high and low daily closing prices of our common shares in Pesos and the quarterly trading volume of our common shares on the BASE for the first quarter of 20092012 through October 22, 2015.28, 2016. The table below also shows the high and low daily closing prices of our ADRs in U.S. Dollars and the quarterly trading volume of our ADRs on the NASDAQ. Each ADR represents ten common shares.
 

172

 
 BASE  NASDAQ 
BASE
NASDAQ
 Share Volume  Price Per Share (Ps.)  ADS Volume  US$ per ADS 
Share Volume
Price Per Share (Ps.)
ADS Volume
US$ per ADS
High  Low  High  Low 
High
Low
High
Low
Fiscal Year 2012                        
1st Quarter  812,635   7.03   5.30   5,037,399   16.49   10.70  812,6357.035.30 5,037,39916.4910.70
2nd Quarter   644,629   5.95   4.68   5,890,807   12.18   10.15  644,6295.954.68 5,890,80712.1810.15
3rd Quarter  609,305   6.90   5.33   10,708,801   13.38   11.20  609,3056.905.33 10,708,80113.3811.20
4th Quarter  1,328,881   6.45   4.45   15,006,469   12.06   6.86  1,328,8816.454.45 15,006,46912.066.86
Annual  3,395,450   7.03   4.45   36,643,476   16.49   6.86  3,395,4507.034.45 36,643,47616.496.86
Fiscal Year 2013                              
1st Quarter  1,324,543   5.87   4.83   6,183,866   8.80   7.35 1,324,5435.874.836,183,8668.807.35
2nd Quarter  644,473   5.80   4.95   3,520,607   8.48   7.79 644,4735.804.953,520,6078.487.79
3rd Quarter  1,376,099   8.10   5.70   6,124,332   9.66   8.29 1,376,0998.105.706,124,3329.668.29
4th Quarter  1,299,335   8.30   5.75   5,946,018   9.61   7.04 1,299,3358.305.755,946,0189.617.04
Annual  4,644,450   8.30   4.83   21,774,823   9.66   7.04 4,644,4508.304.8321,774,8239.667.04
Fiscal Year 2014                              
1st Quarter  2,178,046   8.30   5.70   5,589,075   8.73   8.73 2,178,0468.305.705,589,0758.737.15
2nd Quarter  2,188,815   11.10   7.95   5,872,993   11.51   11.51 2,188,81511.107.955,872,99311.518.56
3rd Quarter  1,022,808   11.20   8.60   3,422,480   9.87   9.87 1,022,80811.208.603,422,4809.878.37
4th Quarter  2,459,599   14.15   9.16   6,982,485   12.90   12.90 2,459,59914.159.166,982,48512.909.01
Annual  7,849,268   14.15   5.70   21,867,033   12.90   8.73 7,849,26814.155.7021,867,03312.907.15
Fiscal Year 2015                              
1st Quarter  1,688,010   16.45   12.00   5,524,817   14.08   10.58 1,688,01016.4512.00      5,524,81714.0810.58
2nd Quarter  2,259,425   15.80   10.80   3,634,128   12.04   9.18 2,259,42515.8010.80      3,634,12812.049.18
3rd Quarter  1,331,000   17.90   12.00   7,600,906   14.83   9.92 1,331,00017.9012.00      7,600,90614.839.92
4th Quarter  1,483,096   16.90   15.00   5,736,086   13.98   12.50 1,483,09616.9015.00      5,736,08613.9812.50
Annual  6,761,531   17.90   10.80   22,495,937   14.83   9.18 6,761,53117.9010.80    22,495,93714.839.18
Fiscal Year 2016                              
1st Quarter  728,810   17.50   12.10   4,299,192   13.14   9.33              728,81017.5012.10     4,299,19213.149.33
July 2015  231,643   17.50   12.10   1,256,840   13.14   11.24 
August 2015  188,699   15.50   13.00   1,806,420   11.67   9.49 
September 2015  308,468   14.55   12.10   1,235,932   10.41   9.33 
October, 2015  1,295,996   17.50   13.00   1,435,169   12.78   9.64 
November 12, 2015  775,333   19.70   17.80   1,100,206   13.51    12.71 
2nd Quarter         6,416,35019.7013.008,291,48013.519.64
3rd Quarter3,388,66418.7012.705,390,23112.639.22
4th Quarter51,785,67521.3014.1512,876,86314.139.88
Annual62,319,49921.3012.1030,857,76614.139.22
Fiscal Year 2017      
1st Quarter48,775,71327.5022.008,216,91018.0014.62
July 201625,327,61626.3522.004,118,01017.2414.62
August 2016             11,900,31227.0024.202,263,61817.7516.19
September 2016             11,547,78527.5024.70      1,835,28218.0016.32
October 28, 20169,553,28627.7026.21,807,16118.0517.31
Source: Bloomberg
 
As of June 30, 20152016 the outstanding ADRs represented 46,292,70241,803,722 ADSs (equivalent to 462,927,021418,037,220 common shares or 92.3%83.33% of our total common stock capital).
 
 
This item is not applicable.
 
 
Argentine Securities Markets
 
In December 2012 the Argentine government has enacted a new Capital Markets Law, No. 26,831, which sets out the rules to govern capital markets, its players, and the securities traded therein subject to the CNV regulation and monitoring.
 
On September 5, 2013, the CNV has enacted the Standards of the Comisión Nacional de Valores,CNV Rules, by virtue of which it regulates the new provisions of the Capital Markets Law for issuers of securities, in regard to the initial public offering and reporting duties.
 
Almost all the provisions of the former Executive branch Decree No. 677/2011 (the “Transparency Decree”) have been incorporated in the Capital MarketMarkets Law and in the Standards of the Comisión Nacional de Valores.CNV Rules. The Capital MarketMarkets Law provides rules and provisions guided by the following goals and principles:
 
·  Promoting the participation of small investors, union associations, industry groups and trade associations, professional associations and all public savings entities in the capital market, particularly encouraging mechanisms designed to promote domestic savings and channel such funds towards the development of production;
·  
Promoting the participation of small investors, union associations, industry groups and trade associations, professional associations and all public savings entities in the capital market, particularly encouraging mechanisms designed to promote domestic savings and channel such funds towards the development of production;
 
·  Strengthening mechanisms for the protection of and prevention of abuses against small investors for the protection of consumers’ rights;
·  
Strengthening mechanisms for the protection of and prevention of abuses against small investors for the protection of consumers’ rights;
 
·  Promoting access of small and medium-sized companies to the capital market;
·  
Promoting access of small and medium-sized companies to the capital market;
 
·  Fostering the creation of a federally integrated capital market through mechanisms designed to achieve an interconnection of computer systems from different trading markets, with the use of state-of-the-art technology;
·  
Fostering the creation of a federally integrated capital market through mechanisms designed to achieve an interconnection of computer systems from different trading markets, with the use of state-of-the-art technology;
 
·  Encouraging simpler trading procedures available to users to attain greater liquidity and competitiveness in order to provide the most favorable conditions for the implementation of transactions.
·  
Encouraging simpler trading procedures available to users to attain greater liquidity and competitiveness in order to provide the most favorable conditions for the implementation of transactions.
 

The CNV is a self-administered agency of the Argentine Government with jurisdiction covering the territory of Argentina, governed by the provisions contained inof the Capital MarketMarkets Law, and the Standards of the CNV Rules among other related statutory regulations. The relationship of the CNV and the Argentine Executive is maintained through the Ministerio de Economía y Finanzas Públicas (Ministry of Economy and Public Finance), which shall hear any appeals filed against decisions made by the CNV, notwithstanding any other legal actions and remedies contemplated in the Capital MarketMarkets Law.
 
The CNV supervises and regulates the authorized markets in which the securities and the collective investment products are traded, the corporations authorized in the public offer regime, and all the other players authorized to operate in the public offer regime, as the registered agents, the trading agents, the financial advisors, the underwriters and distributors, the brokers, the settlement and clearing agents, the managers of collective investment products, the custodians of collective investment products, the collective depositories, and the risk rating agencies, among others. Argentine institutional investors and insurance companies are regulated by separate government agencies, whereas financial institutions are regulated mainly by the Argentine Central Bank.
173

 
Before offering securities to the public in Argentina, an issuer must meet certain requirements established by the CNV with regard to the issuer’s assets, operating history and management. Only securities approved for a public offering by the CNV may be listed on a stock exchange. However, CNV approval does not imply any kind of certification as to the quality of the securities or the solvency of the issuer, even though issuers of listed securities are required to file unaudited quarterly financial statements and audited annual financial statements in accordance with IFRS, as issued by the IASB (excluding financial institutions under the supervision of the Argentine Central Bank, insurance companies under the supervision of the Insurance Superintendence and medium and small enterprises) and various other periodic reports with the CNV and the stock exchange on which their securities are listed, as well as to report to the CNV and the relevant stock exchange any event related to the issuer and its shareholders that may affect materially the value of the securities traded.
 
In Argentina, debt and equity securities traded on an exchange must, unless otherwise instructed by their shareholders, be deposited with a Central Securities Depository, in Argentina. Currently the only depositary authorized to act in accordance with the Capital MarketMarkets Law and Standards of the CNV Rules, is Caja de Valores S.A. a corporation owned by the BASE,BCBA, the Mercado de Valores de Buenos Aires (the “MERVAL”)MVBA and certain provincial exchange, and provides central depositary facilities, as well as acting as a clearinghouse for securities trading and as a transfer and paying agent for securities transactions.
 
Before the enactment of the Capital Markets Law and the Standards of the CNV Rules there were 12 securities exchanges in Argentina, which were located in the City of Buenos Aires, Bahía Blanca, Chaco, Corrientes, Córdoba, La Plata, La Rioja, Mendoza, Rosario, Salta, Santa Fe, and Tucumán. Six of these exchanges (the BASE, Rosario, Córdoba, La Rioja, Mendoza, and Santa Fe) had affiliated stock markets in accordance with the requirements of Law No. 17,811 which was derogated by the Capital MaretsMarkets Law.
 
Pursuant to the new Capital Markets Law, the CNV has authorized 96 stock markets since September 2014, which are: Mercado Abierto Electrónico S.A. (“MAE”), Mercado a Término de Buenos Aires S.A., Mercado a Término de Rosario S.A., Mercado de Valores de Buenos Aires S.A.,MVBA, Mercado de Valores de Córdoba S.A., y Mercado de Valores de Mendoza S.A., Mercado de Valores de Rosario S.A., Mercado de Valores del Litoral S.A. and Mercado FederalArgentino de Valores S.A.
 
The principal exchange for the Argentine securities market under the previous legislation was the BASE.BCBA. Under the new Capital Markets Law the BASEBCBA has been authorized to operate as qualified entity, under the appointment of the MERVAL.MVBA. As a result of the foregoing, we estimate that the MERVAL will beMVBA is currently the principal exchange market in Argentina in which the securities will beare listed.
 
The MERVALMVBA is a corporation consisting of 134183 shareholders who used to be the sole and exclusive individuals or entities authorized to trade in the BASE,MVBA, either as principals or agents, before Capital Markets Law became into force. Since then, all agents registered and authorized to act as intermediaries by the CNV will be able to trade in any securities exchange, including the BASEBCBA as long as they obtain a membership of such stock exchange, not applying any longer the requirements to be a shareholder of such stock exchange.
 
The securities that may be listed on the MERVALMVBA are: Stocks, Corporate Bonds, Convertible Corporate Bonds, Close-ended Investment Funds, Financial Trust, Indexes, Derivativesstocks, corporate bonds, convertible corporate bonds, close-ended investment funds, financial trust, indexes, derivatives and Public Bonds.public bonds. The MERVALMVBA is legally qualified for admission, suspension, and delisting of securities according to its own rules approved by the CNV. Furthermore, the MERVAL works very closely with the CNV in surveillance activities.
 
Another relevant exchange of the securities market in Argentina is the Mercado Abierto Electrónico S.A. (“MAE”),MAE, which was recently authorized to operate by the CNV under the new regulations of the Capital Markets Law.regulations. The MAE works as an electronic platform to process Over the Counter transactions. It is an electronic exchange where both government securities and corporate bonds are traded through spot and forward contracts.
 
MAE brokers/dealers members, include national banks, provincial banks, municipal banks, private national banks, foreign banks, cooperative banks, financial institutions, foreign exchange entities and pure brokers/dealers (exclusively engaged in brokerage activities). Both Argentine or foreign capital banks and financial institutions may be the MAE’s brokers/dealers. Securities to be traded must be registered with the pertinent supervising authorities and may be traded in the MAE, in other exchanges or in both of them concurrently.
 
Argentina’s equity markets have historically been composed of individual investors, though in recent years there has been an increase in the level of investment by banks and insurance companies in these markets; however, Argentine mutual funds (fondos comunes de inversión) continue to have very low participation.
 
Acording to the informationInformation regarding the Argentine Institute of Capital Markets:BCBA:
 
 As of June 30,  As of June 30,
 2015  2014  2016 2015
Market capitalization (Ps. billion)  4,025   3,958  3,625 4,025
Average daily trading volume (Ps. million)  149.6   43,9 
Average daily trading volume(1) (Ps. million)
Average daily trading volume(1) (Ps. million)
310 150
Number of listed companies  99   104  100 99
(1)  
During the month of June.
 
Although companies may list all of their capital stock on the MVBA, in many cases a controlling block is retained by the principal shareholders resulting in only a relatively small percentage of many companies’ stock being available for active trading by the public on the MVBA. As of June 30, 2016, approximately 100 companies had equity securities listed on the MVBA. The Argentine securities markets are substantially more volatile than the securities markets in the United States and certain other developed countries The Merval Index experienced a 30.1% decrease in 2011, a 15.9% increase in 2012, a 88.9% increase in 2013, a 59.1% increase in 2014, a 36.1% increase in 2015 and a 35.9%25.8% increase during the first six months of 2015.2016. In order to control price volatility, the MERVALMVBA operates a system pursuant to which the negotiation of a particular stock or debt security is suspended for a 15 minute period when the price of the security registers a variation on its price between 10% and 15% and between 15% and 20%. Any additional 5% variation on the price of the security after that results in additional 10 minute successive suspension periods.
 

 
This sectionitem is not applicable.
 
 
This sectionitem is not applicable.
 
 
This sectionitem is not applicable.
 
Item 10.                      Additional Information
 
 
This sectionitem is not applicable.
 
174

 
 
Our Corporate Purpose
 
Our legal name is Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria. We were incorporated under the laws of Argentina on December 31, 1936 as a sociedad anónima (Stock Corporation) and were registered with Public Registry of Commerce on February 19, 1937 under number 26, on page 2, book 45 of National by-laws Volume. Pursuant to our by-laws, our term of duration expires on June 6, 2082.
 
Pursuant to article 4 of our by-laws our purpose is to perform the following activities:
 
•           commercial activities with respect to cattle and products pertaining to farming and animal husbandry;
 
•           real estate activities with respect to urban and rural properties;
 
•           financial activities, except for those regulated by Law No. 21,526 of financial entities;
 
•           farming and animal husbandry activities, for properties owned by us or by third parties; and
 
•           agency and advice activities for which there is not required a specific qualifying title.
 
Limited Liability
 
Shareholders’ liability for losses is limited to their equity interest in us. Notwithstanding the foregoing, under the Argentine Corporation Law No. 19,550, shareholders who voted in favor of a resolution that is subsequently declared void by a court as contrary to Argentine law or a company’s by-laws (or regulation, if any) may be held jointly and severally liable for damages to such company, other shareholders or third parties resulting from such resolution. In addition, a shareholder who votes on a business transaction in which the shareholder’s interest conflicts with that of the company may be liable for damages under the Argentine Corporation Law, but only if the transaction would not have been validly approved without such shareholder’s vote.
 
Capitalization
 
We may increase our share capital upon authorization by our shareholders at an ordinary shareholders’ meeting. Capital increases must be registered with the public registry of commerce referred to as the Public Registry of Commerce, and published in the Boletín Oficial. Capital reductions may be voluntary or mandatory and must be approved by the shareholders at an extraordinary shareholders’ meeting (asamblea extraordinaria). Reductions in capital are mandatory when losses have depleted reserves and exceeded 50% of capital. As of june 30, 20152016 our share capital consisted of 501,642,804 common shares.
 
Our bylaws provide that preferred stock may be issued when authorized by the shareholders at an extraordinary shareholders’ meeting (asamblea extraordinaria) and in accordance with applicable regulations. Such preferred stock may have a fixed cumulative dividend, with or without additional participation in our profits, resolved by the shareholders’ meetings. We currently do not have outstanding preferred stock.
 
Preemptive Rights and Increases of Share Capital
 
Pursuant to our by-laws and Argentine Corporation Law No. 19,550, in the event of an increase in our share capital, each of our existing holders of our common shares has a preemptive right to subscribe for new common shares in proportion to such holder’s share ownership. For any shares of a class not preempted by any holder of that class, the remaining holders of the class will be entitled to accretion rights based on the number of shares they purchased when they exercised their own preemptive rights. Rights and accretion rights must be exercised simultaneously within 30 days following the time in which notices to the shareholders of a capital increase and of the rights to subscribe thereto are published for three days in the Boletín Oficial and a widely circulated newspaper in Argentina. Pursuant to the Argentine Corporation Law, such 30-day period may be reduced to 10 days by a decision of our shareholders adopted at an extraordinary shareholders’ meeting (asamblea extraordinaria).
 
Additionally, the Argentine Corporation Law permits shareholders at an extraordinary shareholders’ meeting (asamblea extraordinaria) to suspend or limit the preemptive rights relating to the issuance of new shares in specific and exceptional cases in which the interest of the Company requires such action and, additionally, under the following specific conditions:
 
•           the issuance is expressly included in the list of matters to be addressed at the shareholders’ meeting; and
 
•           the shares to be issued are to be paid in-kind or in exchange for payment under pre-existing obligations.
 
Furthermore, Article 12 of the Negotiable Obligations Law permits shareholders at an extraordinary shareholders’ meeting (asamblea extraordinaria) to suspend preemptive subscription rights for the subscription of convertible bonds under the above-mentioned conditions. Preemptive rights may also be eliminated, so long as a resolution providing so has been approved by at least 50% of the outstanding capital stock with a right to decide such matters and so long as the opposition to such resolution does not surpass 5% of the share capital.

 
Shareholders’ Meetings and Voting Rights
 
Our bylaws provide that shareholders’ meetings may be called by our board of directors or by our Supervisory Committee or at the request of the holders of shares representing no less than 5% of the common shares. Any meetings called at the request of shareholders must be held within 30 days after the request is made. Any shareholder may appoint any person as its duly authorized representative at a shareholders meeting, by granting a proxy. Co-owners of shares must have single representation.
 
In general, the following matters can be considered only at an extraordinary shareholders’ meeting (asamblea extraordinaria):
 
matters that may not be approved at an ordinary shareholders’ meeting;
the amendment of our bylaws;
reductions in our share capital;
redemption, reimbursement and amortization of our shares;
mergers, and other corporate changes, including dissolution and winding-up;
limitations or suspensions to preemptive rights to the subscription of the new shares; and
issuance of debentures, convertible negotiable obligations and bonds that do not qualify as notes (obligaciones negociables)(obligaciones negociables).
 
175

In accordance with our by-laws, ordinary and special shareholders’ meetings (asamblea extraordinaria) are subject to a first and second quorum call, the second to occur upon the failure of the first. The first and second notice of ordinary shareholders’ meetings may be made simultaneously. In the event that both are made on the same day, the second must occur at least one hour after the first. If simultaneous notice was not given, the second notice must be given within 30 days after the failure to reach quorum at the first. Such notices must be given in compliance with applicable regulations.
 
A quorum for an ordinary shareholders’ meeting on the first call requires the presence of a number of shareholders holding a majority of the shares entitled to vote and, on the second call, the quorum consists of the number of shareholders present, whatever that number. Decisions at ordinary shareholders’ meetings must be approved by a majority of the votes validly exercised by the shareholders.
 
A quorum for an special shareholders’ meeting (asamblea extraordinaria) on the first call requires the presence of persons holding 60% of the shares entitled to vote and, on the second call, the quorum consists of the number of shareholders present, whatever that number. Decisions at special shareholders’ meeting (asamblea extraordinaria) generally must be approved by a majority of the votes validly exercised.
 
However, pursuant to the Argentine Corporation Law, all shareholders’ meetings, whether convened on a first or second quorum call, require the affirmative vote of the majority of shares with right to vote in order to approve the following decisions:
 
advanced winding-up of the company;
transfer of the domicile of the company outside of Argentina;
fundamental change to the purpose of the company;
total or partial mandatory repayment by the shareholders of the paid-in capital; and
a merger or a spin-off, when our company will not be the surviving company.
 
Holders of common shares are entitled to one vote per share. Owners of common shares represented by ADRs exercise their voting rights through the ADR Depositary, who acts upon instructions received from such shareholders and, in the absence of instructions, votes in the same manner as our majority of the shareholders present in the shareholders’ meeting.
 
The holders of preferred stock may not be entitled to voting rights. However, in the event that no dividends are paid to such holders for their preferred stock, the holders of preferred stock are entitled to voting rights. Holders of preferred stock are also entitled to vote on certain special matters, such as a transformation of the corporate type, early dissolution, change to a foreign domicile, fundamental change in the corporate purposes, total or partial replacement of capital losses, mergers in which our company is not the surviving entity, and spin-offs. The same exemption will apply in the event the preferred stock is traded on any stock exchange and such trading is suspended or canceled.
 
Dividends and Liquidation Rights
 
The Argentine Corporation Law establishes that the distribution and payment of dividends to shareholders is valid only if they result from realized and net earnings of the company pursuant to an annual balance sheet approved by the shareholders. Our board of directors submits our financial statements for the previous fiscal year, together with the reports of our Supervisory Committee, to the Annual Ordinary Shareholders’ Meeting. This meeting must be held by October 30 of each year to approve the financial statements and decide on the allocation of our net income for the year under review. The distribution, amount and payment of dividends, if any, must be approved by the affirmative vote of the majority of the present votes with right to vote at the meeting.
 
The shareholders’ meeting may authorize payment of dividends on a quarterly basis provided no applicable regulations are violated. In that case, all and each of the members of the board of directors and the supervisory committee will be jointly and severally unlimitedly liable for the refund of those dividends if, as of the end of the respective fiscal year, the realized and net earnings of the company are not sufficient to allow the payment of dividends.
 
When we declare and pay dividends on the common shares, the holders of our ADRs, each representing the right to receive ten ordinary shares, outstanding on the corresponding registration date, are entitled to receive the dividends due on the common shares underlying the ADRs, subject to the terms of the Deposit Agreement dated March 18, 1997 executed by and between us, The Bank of New York, as depositary and the eventual holders of ADRs. The cash dividends are to be paid in Pesos and, except under certain circumstances, are to be converted by the Depositary into U.S. Dollars at the exchange rate prevailing at the conversion date and are to be paid to the holders of the ADRs net of any applicable fee on the dividend distribution, costs and conversion expenses, taxes and public charges. Since January 2002 and due to the devaluation of the Peso, the exchange rate for the dividends will occur at a floating market rate.
 
Our dividend policy is proposed from time to time by our board of directors and is subject to shareholders’ approval at an ordinary shareholders’ meeting. Declarations of dividends are based upon our results of operations, financial condition, cash requirements and future prospects, as well as restrictions under debt obligations and other factors deemed relevant by our board of directors and our shareholders.
 
Dividends may be lawfully paid only out of our retained earnings determined by reference to the financial statements prepared in accordance with Argentine GAAP. In accordance with the Argentine Corporation Law, net income is allocated in the following order: (i) 5% is retained in a legal reserve until the amount of such reserve equals 20% of the company’s outstanding capital; (ii) dividends on preferred stock or common shares or other amounts may be retained as a voluntary reserve, contingency reserve or new account, or (iii) for any other purpose as determined by the company’s shareholders at an ordinary shareholders’ meeting.
 

Our legal reserve is not available for distribution. Under the applicable regulations of the Comisión Nacional de Valores, dividends are distributed pro rata in accordance with the number of shares held by each holder within 30 days of being declared by the shareholders for cash dividends and within 90 days of approval in the case of dividends distributed as shares. The right to receive payment of dividends expires three years after the date on which they were made available to shareholders. The shareholders’ meeting may authorize payment of dividends on a quarterly basis provided no applicable regulations are violated. In such case, all and each of the members of the board of directors and the supervisory committee will be jointly and severally liable for the refund of those dividends if, at the end of the respective fiscal year, the realized and net earnings of the company are not sufficient to allow for the payment of dividends.
 
to be applied to satisfy its liabilities; and
to be proportionally distributed among holders of preferred stock in accordance with the terms of the preferred stock. If any surplus remains, our shareholders are entitled to receive and share proportionally in all net assets available for distribution to our shareholders, subject to the order of preference established by our bylaws.
176

 
Approval of Financial Statements
 
Our fiscal year ends on June 30 of each year, after which we prepare an annual report which is presented to our board of directors and Supervisory Committee. The board of directors submits our financial statements for the previous fiscal year, together with the reports of our Supervisory Committee, to the annual ordinary shareholders’ meeting, which must be held within 120 days of the close of our fiscal year, in order to approve our financial statements and determine our allocation of net income for such year. At least 20 days before the ordinary shareholders’ meeting, our annual report must be available for inspection at our principal office.
 
Right of Dissenting Shareholders to Exercise Their Appraisal Right
 
Whenever certain actions are approved at an extraordinary shareholders’ meeting (asamblea extraordinaria) (such as the approval of a merger, a spin-off (except when the shares of the acquired company are publicly traded), a fundamental change of corporate purpose, a transformation from one type of corporation to another, a transfer of the domicile of our company outside of Argentina or, as a result of the action approved, the shares cease to be publicly traded) any shareholder dissenting from the adoption of any such resolution may withdraw from our company and receive the book value per share determined on the basis of our latest financial statements, whether completed or to be completed, provided that the shareholder exercises its appraisal rights within ten days following the shareholders’ meeting at which the resolution was adopted.
 
In addition, to have appraisal rights, a shareholder must have voted against such resolution or act within 15 days following the shareholders’ meeting if the shareholder was absent and can prove that he was a shareholder of record on the day of the shareholders meeting. Appraisal rights are extinguished with respect to a given resolution if such resolution is subsequently overturned at another shareholders’ meeting held within 75 days of the previous meeting at which the original resolution was adopted. Payment on the appraisal rights must be made within one year of the date of the shareholders’ meeting at which the resolution was adopted, except where the resolution involved a decision that our stock ceases to be publicly traded, in which case the payment period is reduced to 60 days from the date of the resolution.
 
Ownership Restrictions
 
The CNV regulations require that transactions that cause a person’s holdings of capital stock of a registered Argentine company, to hold 5% or more of the voting power, should be immediately notified to the CNV. Thereafter, every change in the holdings that represents a multiple of 5% of the voting power should also be notified.
 
Directors, senior managers, executive officers, members of the supervisory committee, and controlling shareholders of an Argentine company whose securities are publicly listed, should notify the CNV on a monthly basis, of their beneficial ownership of shares, debt securities, and call and put options related to securities of such companies and their controlling, controlled or affiliated companies.
 
Holders of more than 50% of the common shares of a company or who otherwise have voting control of a company, as well as directors, officers and members of the supervisory committee, must provide the CNV with annual reports setting forth their holdings in the capital stock of such companies and monthly reports of any change in their holdings.
 
Tender Offers
 
Tender offers under Argentine law may be voluntary or mandatory. In either case, the offer must be made addressed to all shareholders. In the case of a mandatory tender offer, the offer must also be made to the holders of subscription rights, stock options or convertible debt securities that directly or indirectly may grant a subscription, acquisition or conversion right on voting shares.
 
Capital Markets Law No. 26,831 establishes that a person or entity wishing to acquire a “significant holding” (“participaciones significativas”) shall be required to launch a mandatory tender offer:
 
-  A mandatory tender offer will not be required in those cases in which the purpose of the acquisition of the “significant holding” is not to acquire the control of a company.
-  
A mandatory tender offer will not be required in those cases in which the purpose of the acquisition of the “significant holding” is not to acquire the control of a company.
 
The CNV defines a “significant holding” as holdings that represent an equal or a higher percentage than 15% and 51% of the voting shares as the case may be:
 
-  When a person or an entity intends to acquire more than 15% of the shares of a company, a mandatory tender offer to purchase 50% of the corporate voting capital is required by law.
-  
When a person or an entity intends to acquire more than 15% of the shares of a company, a mandatory tender offer to purchase 50% of the corporate voting capital is required by law.
 
-  If a person or an entity owns between 15% and 51% of the shares of a company, and wishes to increase its holdings by at least 6% within a 12 month period, a mandatory tender offer to acquire shares representing at least 10% of the voting capital will be legally required.
-  
If a person or an entity owns between 15% and 51% of the shares of a company, and wishes to increase its holdings by at least 6% within a 12 month period, a mandatory tender offer to acquire shares representing at least 10% of the voting capital will be legally required.
 
-  When a person or an entity wishes to acquire more than 51% of the shares of a company, a mandatory tender offer to acquire 100% of the voting capital will be legally required.
-  
When a person or an entity wishes to acquire more than 51% of the shares of a company, a mandatory tender offer to acquire 100% of the voting capital will be legally required.
 
-  Finally, when a shareholder controls 95% or more of the outstanding shares of a company, (i) any minority shareholder may, at any time, demand that the controlling party make an offer to purchase all of the remaining shares of the minority shareholders and (ii) the controlling party can issue a unilateral statement of intention to acquire all of the remaining shares owned by the other stockholders.
-  
Finally, when a shareholder controls 95% or more of the outstanding shares of a company, (i) any minority shareholder may, at any time, demand that the controlling party make an offer to purchase all of the remaining shares of the minority shareholders and (ii) the controlling party can issue a unilateral statement of intention to acquire all of the remaining shares owned by the other stockholders.

 
Pursuant to the Argentine Corporation Law we may redeem our outstanding common shares only under the following circumstances:
 
to cancel such shares and only after a decision to reduce our capital stock (with shareholder approval at an extraordinary shareholders’ meeting (asamblea extraordinaria);
to avoid significant damage to our company under exceptional circumstances, and then only using retained earnings or free reserves that have been fully paid, which action must be ratified at the following ordinary shareholders’ meeting; or
in the case of the acquisition by a third-party of our common shares.
 
The Capital Markets Law provides for other circumstances under which our company, as a corporation whose shares are publicly listed, can repurchase our shares. The following are necessary conditions for the acquisition of our shares:
 
the shares to be acquired shall be fully paid,
there shall be a board of directors’ resolution containing a report of our supervisory committee and audit committee. Our board of director’s resolution must provide the purpose of the acquisition, the maximum amount to be invested, the maximum number of shares or the maximum percentage of capital that may be acquired and the maximum price to be paid for our shares. Our board of directors must give complete and detailed information to both shareholders and investors,
the purchase shall be carried out with net profits or with free or optional reserves, and we must prove to the CNV that we have the necessary liquidity and that the acquisition will not affect our solvency,
under no circumstances may the shares acquired by our company, including those that may have been acquired before and held by us as treasury stock, be more than 10% of our capital stock or such lower percentage established by the CNV after taking into account the trading volume of our shares.
177

 
Any shares acquired by us that exceed 10% of our capital stock must be disposed of within 90 days from the date of acquisition originating the excess without prejudice of the liability corresponding to our board of directors.
 
Transactions relating to the acquisition of our own shares may be carried out through open market transactions or through a public offering:
 
in the case of acquisitions in the open market, the amount of shares purchased daily cannot exceed 25% of the mean daily traded volume of our shares during the previous 90 days.
in either case, the CNV can require the acquisition to be carried out through a public offering if the shares to be purchased represent a significant percentage in relation to the mean traded volume.
 
Regulation of the CNV as amended, provides general requirements that any company must comply with in the case of the acquisition of its shares under the Corporations Law or under the Capital Markets Law. The acquisition of its shares by a company must be:
 
approved by a resolution of the board of directors with a report of its supervisory committee,
notice must be given to the CNV with the expression of the motives of the decision,
be carried out with net profits or free reserves from the last financial statements and approved by the board of directors,
the board of directors has to prove to the CNV, that the company has the necessary liquidity and that the acquisition does not affect its solvency,
all shares acquired by the company, including those that may have been acquired before and held by it as treasury stock, may not exceed 10% of its capital stock.
 
There are no legal limitations to ownership of our securities or to the exercise of voting rights pursuant to the ownership of our securities, by non-resident or foreign shareholders.
 
Registrations and Transfers
 
Our common shares are held in registered, book-entry form. The registry for our shares is maintained by Caja de Valores S.A. at its executive offices located at 25 de mayo 362, (C1002ABH) Buenos Aires, Argentina. Only those persons whose names appear on such share registry are recognized as owners of our common shares. Transfers, encumbrances and liens on our shares must be registered in our share registry and are only enforceable against us and third parties from the moment registration takes place.
 
Amendment to the by-laws.
 
On the shareholders’ meeting held on October 10, 2007, our shareholders decided to amend the following sections of the by-laws: (i) Section Thirteen in order to adapt the performance bonds granted by directors to current rules and regulations, and (ii) Section Sixteen in order to incorporate the possibility of holding remote board meetings pursuant the provisions of section 65 of Executive Branch Decree 677/01.
 
On the shareholders’ meeting held on October 31, 2012, our shareholders decided to amend the Section XVII of the by-laws in order to modify the quorum and majorities of the remote board meetings.
 
On the shareholder´s meeting held on October 31, 2014, our shareholders decided to amend the following sections of the by-laws: (i) Section First in order to comply with the Capital Markets Law No. 26,831 and (ii) Section Twenty-Four in order to incorporate the regulation of the shareholders’ meeting held with shareholders present or communicated through teleconference technologies.

 
We do not have any material contract entered into outside the ordinary course of business other than some of the operations previously described under the Related Party Transactions, the Recent Developments and Our Indebtedness sections.
 
 
Foreign Currency Regulation
 
All transactions involving the purchase and sale of foreign currency must be settled through the single free exchange market (Mercado Único Libre de Cambios, or “MULC”) where the Argentine Central Bank supervises the purchase and sale of foreign currency. Under Executive Branch Decree No. 260/No.260/2002, the Argentine government had set up an exchange market through which all foreign currency exchange transactions are made. Such transactions arewere subject to the regulations and requirements imposed by the Argentine Central Bank. Under Communication “A” 3471, as amended, the Argentine Central Bank established certain restrictions and requirements applicable to foreign currency exchange transactions. If such restrictions
Under Communication “A” 6037, dated August 8th, 2016, no further authorization is required for residents and requirements are not met, criminal penalties shall be applied.non-residents to have access to local exchange market and there is no amount or matter that limits the access thereto.
 
Outflow and Inflow of Capital
 
Inflow of capital
 
Under Argentine Foreign Investment Law No. 21,382, as amended, and the wording restated under Executive Branch Decree No. 1853/1993, the purchase of stock of an Argentine company by an individual or legal entity domiciled abroad or by an Argentine “foreign capital” company (as defined under the Foreign Investment Law) represents a foreign investment.
 
Under Executive Branch Decree No. 616/2005, as amended by Decree Nº. 3/2015, the Argentine government imposedsoftened certain restrictions on the inflow and outflow of foreign currency into and from the Argentine exchange market, including that inflowing new indebtedness and debt renewals by persons domiciled abroad must be agreed and cancelled within periods not shorter than 365120 calendar days –instead of the 365.day period as originally established-, irrespective of the method of payment. Additionally, such debt may not be prepaid before the lapse of such period. Such restrictions do not apply to (i) foreign trade financing, or (ii) primary public offering of equity or debt instruments issued under the public offering procedure and listed on self-regulated markets.
 
178

Pursuant to Communication “A” 4359, as amended, which regulated the Executive Branch Decree N° 616/2005, a registered, non-transferable and non-interest bearing deposit must be kept in Argentina for a period of 365 calendar days, in an amount equal to 30% of any inflow of funds into the domestic exchange market arising from (i) foreign debt (excluding foreign trade); and (ii) purchase of interests in Argentine companies that are not listed on self-regulated markets, except for direct investments and other transactions that may result in the inflow of foreign currency, or in indebtedness of a resident towards a nonresident. However, primary debt offerings by means of public offerings which are listed on a self-regulated market are exempted from such requirements. The mandatory deposit must be made in US Dollars and held in Argentine financial institutions and it may not be used to guarantee or as collateral of any type of credit transactions.
Communication “A” 4377, amended by Communication “A” 4762, 4933 and 5532, exempted from keeping the 30% mandatory deposit the following transactions:
i) Inflows of funds made by Multilateral and Bilateral Credit Agencies, either directly or through their related agencies.
ii) Financial indebtedness with non-resident financial or private sector, to the extent the funds, net of taxes and expenses, are applied to the purchase of foreign currency for the payment of external debt services or the formation of long-term assets.
iii) Any other financial indebtedness with non-resident financial or private sector, to the extend the inflows had been incurred and repaid in an average term no less than two years, including principal and interests and, to the extent, the funds are applied to investment in non financial assets by the private sector.
iv) Foreign currency settlements by Argentine residents derived from foreign currency loans granted by local financial institutions.
v) Direct investment contributions in local companies (pursuant to Communication “A” 4237 which defines “direct investment” as the participation in the capital stock which must be no less than 10%) and sale of interests in the capital stock of local companies to direct investors.
With respect to item v), there are some requirements aiming to comply with the accurate capitalization of the direct investment contribution regarding the actual capitalization and registration of the contribution with the Public Registry of Commerce in a term of 540 calendar days, otherwise, the mandatory deposit shall be made within 10 calendar days. This term shall be considered from the date in which the local company resolves not to accept the contribution and/or the rejection and/or suspension thereof.  Regarding the sale of interest in the capital stock of a local company by a direct investor, it shall be required the filing of the sale and purchase agreement or the public offer of acquisition, as the case may be. Within 20 business days of the settlement of the transaction through the MULC, it shall be required the filing of the registration of the amendment to the by-laws with the Public Registry of Commerce or a legalized copy of the Ledger Book, depending on the type of company (corporation or limited liability company).
Additionally, Communication “A” 4901, dated February 5, 2009, exempts from the obligation to keep such mandatory deposit in the case of inflows into the exchange market made by non residents, when the Pesos resulting from the settlement of the foreign currency are applied within the following ten business days to any of the purposes set forth by the classification of current transactions in international accounts, namely: a) discharge of advance payments or liabilities for income and personal asset taxes payable by individuals who are regarded as residents from a tax standpoint; b) payment by nonresidents of contributions to the social security system or payments to employee-owned or prepaid healthcare systems; c) payment of other taxes which, given their nature, are borne by nonresidents in their capacity as taxpayers, and always provided that such payment does not entitle the nonresident to claims vis-à-vis the tax authorities or third parties; and d) other rates and services supplied by residents. In addition, such exemption on mandatory deposits, subject to certain additional requirements, is also applicable to funds remitted from abroad by nonresident companies on behalf of employees from international corporate groups who are temporarily abroad, to local companies responsible for the settlement of taxes and for making the relevant payments.
As result of the enactment of Communication “A” 5604, dated on July 10, 2014, which introduced item 2.7. in the Communication “A” 5526 as it is mentioned below, which in turn was modified by Communication “A” 5643, including direct investments, and the latter modified by Communication “A” 5692, direct investments made by non residents to local companies, shall be maintained in local account in foreign currency from October 9 until December 31, 2015 to the extent such funds comply with the provisions set forth in item 2.7. of Communication “A” 5526.

Obligation for the settlement of funds through the MULC.
 
General rules. Exports.
 
Pursuant to Executive Decree No. 1606/2011 and Communications “A” 3602 and “A” 3493 of the Central Bank any foreign currency derived from foreign trade must be settled through the MULC.
 
Pursuant to Communication “A” 5300, as amended, within 15 businessWithin 365 running days as of the date of the disbursement of the funds abroad, corresponding to the payment of exportation of goods, advance payments of exports and pre financing loans for exports, such funds must be settled through the MULC. In all cases, the due date for the settlement of the funds derived from exports shall be the shortest time between 15 business day and the date applicable to the specific good according to the current rules. Such funds shall be credited in a local bank account duly opened in favor of the client.
In connection with the fundsclient, which were disbursedmay be either in bank accounts abroad, for the same concept referred toPesos or in the paragraph above, the due date for the transfer of such funds to a representative account of a local bank entity is 10 business days.
According to several regulations enacted by Argentine Central Bank, it is allowed the application of payment for exports abroad for the cancellations of exporter’s debt in the following cases:
a. advance payments and prefinancing loans for exports.
b. financing of local new investment projects for the increase of production of exportable goods or  importation substitutes, among others.
c. other financial indebtedness for bonds offering abroad and financial loans granted by foreign banks.
d. financial indebtedness with local financial entities to the extent the term (no less than 10 years), an average term (no less than 5 years) and interest rate (up to a 100 b.p. over labor 180 days) has been accomplished.
another currency.
 
Services
 
Communication “A” 5264 set forth that the payments in foreign currency received by residents for the export of services and payment of losses for insurance policies hired with non residentsnonresidents under the applicable rules must be settled through the MULC within fifteen business365 running days as of its collection abroad or locally or its deposit in foreign bank accounts.
179

 
Such funds are exempted to be settled through the MULC to the extent such exemption is actually contemplated in the foreign exchange regulations and such amounts are applied for the cancellation of foreign financial indebtedness.
 
Outflow of capital, including the availability of cash or cash equivalents
 
Exchange Transactions Inquiry Program
 
OnCommunication “A” 5850, of December 2015, revoke Communication “A” 5245 that regulated an Exchange Transaction Inquiry Program established on October 28, 2011, by the Federal Administration of Public Revenues (Administración Federal de Ingresos Públicos, “AFIP”) established an Exchange Transactions Inquiry Program (“Inquiry Program”) through which the entities authorized by the Central Bank to deal in foreign exchange mustwere supposed to inquire and register through an IT system the total Peso amount of each exchange transaction at the moment it is closed.
 
All foreign exchange sale transactions, whether involving foreign currency or banknotes, irrespective of their purpose or allocation, are subject to this inquiry and registration system, which determines whether transactions are “Validated” or “Inconsistent”.
Pursuant to Communication “A” 5239, later replaced by Communication “A” 5245, in the case of sales of foreign exchange (foreign currency or banknotes) for the formation of off-shore assets by residents without the obligation of subsequently allocating it to specific purpose, entities authorized to deal in foreign exchange may only allow transactions through the MULC by those clients who have obtained the validation and who comply with the rest of the requirements set forth in the applicable foreign exchange regulations. The following are exempted from the Inquiry Program, among others: a) international agencies and institutions that act as official export credit agencies, diplomatic and consular offices, bilateral agencies established under International Treaties; and b) local governments.
Sales of foreign exchange other than for the formation of off-shore assets by residents without a specific purpose are also exempted from the Inquiry Program, although, the financial entities must verify that the other requirements established by the MULC are accomplished.
On December 20, 2012, Resolution No. 3421 replaced Resolution No. 3356, both enacted by AFIP. The latest one sets forth a unified registration system to be fulfilled for the access to the foreign exchange market, in particular for the outflow of funds made by residents or non residents, in whichever purpose or destiny. Such resolution is related with Communications “A” 5245.
Financial Indebtedness
 
In accordance with Communication “A” 5265, as amended by Communication “A” 5604 (as of July 10, 2014) theAny transactions arising from financial indebtedness of the financial sector, private non-financial sector and local governments mustare no longer subject to be settled in the foreign exchange market. However, if settled in the foreign exchange market, then according to Decree No. 616/2005 and 3/2015, these cannot be set off before the minimum term of stay, which is 120 running days (except for bonds listed in the authorized exchange stock markets).
 
The provisions reach indebtedness with bonds, financial loans and any other transaction by which a disbursement of funds from a non-resident had been carried out. The obligation of settlement through the MULC shall be conducted within 30 calendar days from the date of the disbursement abroad and the transfer shall be deposited in a local bank account.
Any new financial indebtedness paid through the MULC and any debt renewal with financial non-residents and private non-residents shall be settled, maintained and renewed for at least 365 calendar days from the date of the disbursement, and they may not be prepaid before such term, whatever the manner of the cancellation of the obligation with the creditor had been agreed and independently of whether said cancellation is channeled through the MULC or not.
The primary issuance of publicly securities traded in self regulated markets is exempted of the foregoing provisions.
On January 8, 2015, through Communication “A” 5692, the Central Bank extended the term established by Communication “A” 5643 through which the conditions established in item 2.7. of the Communication “A” 5526 related to the purchase of foreign currency for the formation of off-shore assets by residents, shall be applied to the financial indebtedness from October 9, 2014 until December 31, 2015. The inflow of funds through this channel shall be subject to provisions set forth in Decree 616/2005, meaning that mandatory deposit of 30% shall apply. Nevertheless, it shall be considered the final destination of the funds that are exempted from such mandatory deposit (i.e. financial indebtedness with non-resident financial or private sector, to the extend the inflows had been incurred and repaid in an average term no less than two years, including principal and interests and, to the extent, the funds are applied to investment in non financial assets by the private sector). By this regulation, the funds may be maintained in local account in foreign currency during the term authorized thereof.
Formation of off-shore assets by residents with and without subsequent allocation to specific purposes
 
On January 27, 2014,Under Communication “A” 5850, 5899 and 6037 of the Argentine Central Bank, enacted Communication “A” 5526 which abrogated item II of Communication “A” 5318 (as of July 5, 2012) rule that, in turn, had suspended item 4.2. of Communication “A” 5236 (as of October 27, 2011) relatedresidents shall have access to the local exchange market without prior authorization of the Central Bank in order to purchase of foreign currency for the formation of off-shore assets by residents.. Communication “A” 5526, by entirely replacing item 4 of Communication “A” 5236 (which regulated the outflow of funds for the formation of off-shore assets for subsequent allocation without specific purposes to individuals who were Argentine residents, legal entities organized in Argentina and trust set up with contributions from the national public sector), made void the restrictions to the foreign exchange market to individuals who are residents, allowing them to purchase foreign currency as savings based on the income declared with the AFIP, prior to a validation system to be accomplished by such individuals. Additionally, the referred rule rearranged and, therefore replaced Annex to Communication “A” 5236.
 
On July 10, 2014, through Communication “A” 5604, the Argentine Central Bank made some additional changes to Communication “A” 5526, including the item 2.7. This item was amended by Communication “A” 5604 and Communication “A” 5757, the latter dated on May 21, 2015. As a result of such amendments it was set forth that new bond offerings and debt instruments issued under public offering procedure and listed on self regulated markets by local governments and /or private non-financial sector, that may be considered as external issuance, it shall be allowed the access to the foreign exchange market for the purchase of foreign currency to be deposited in local financial institutions (in a fixed term or special foreign currency account), simultaneously to the settlement of the funds received for the acquisition of such bonds or debt instruments abroad. Such permit shall be made for the total amount of the funds settled through the foreign exchange market and for a term of no longer than 270 calendar days. At least 80% of such funds must be applied to any future needs of net foreign currency required by the company involved. After the due date of 270 calendar days established by the Communication, the funds that had not been used, must be settled through the foreign exchange market within 10 business days. The referred funds shall not be subject to the mandatory deposit of 30% regulated by Communication “A” 4359, as amended.
 
Outflow of funds for payment to non-residents
 
According to Communication “A” 5264, amended by Communication “A” 5377 (issued on December 14, 2012) and Communication “A” 5604,6037, there are no limits or restrictions applicable for residents who access the foreign exchange market to pay services, debts and profits to non-residents. The access to the MULC requires the filing of certain documentation by residents demonstrating the validity of transactions in which the funds are purchased for its remittance abroad.
 
Payment of services
 
As it was mentioned above, there is no restriction applicable for payments to be made to non-residents for performed services. The regulation covers all types of services without making any specifications. The financial entity shall require the filing of documentation supporting the authenticity of the transaction, the service rendered by the non-resident to the resident and the amount to be transferred abroad.
 
180

Should performed services are not related to the activities actually developed by the resident; the financial entity shall require a copy of the contract by which the payment obligation arises from and an auditor report. Such requirements intend to demonstrate the actual rendering of services to the non-resident and the existence of the debt.

 
Payment of rents (interest, profits and dividends)
 
As of January 8, 2003, Communication “A” 3859, item 3, allowed Argentine companies to transfer abroad profits and dividends related to closed financial statements certified by independent accountants without being required to obtain the prior authorization of the Central Bank. Such Communication was replaced by Communication “A” 5264, amended by Communication “A” 5377.5377 and Communication “A” 6037.
 
The payments of profits and dividends to non-residents or ADR’s areis authorized, insofar such payments are made according to financial statements duly closed, audited and approved by shareholders’ meeting.
The financial entity shall verify the accomplishment of the formalities established by Communication “A” 3602, as amended, and the fulfillment of the report of direct investment ruled by Communication “A” 4237 (please see below the Reporting System).
 
Payment of foreign financial indebtedness
 
Access to the exchange market is allowed for payments of principal amounts due, with the exception of the financial institutions subject to rediscounts granted by the Central Bank and which have restructured their debt with foreign creditors (Executive Branch Decree No. 739/2003 and Communication “A” 3940 of the Central Bank).due.
 
In general terms, access to MULC for payment of principal, interest and prepayment of financial indebtedness incurred by Argentine residents in the private non-financial sector and financial sector are allowed subject to regulations set forth by Communications “A” 5265 as6037 of January 3, 2012.August 8th, 2016.
 
The sale of foreign currencyPursuant to Communication “A” 6037, no settlement in the local exchange market is required for the paymentrepayment of financial indebtedness must be made through check issued by the resident or debit to the resident local bank account. The financial entity must verifyprincipal and interests, as long as it has been verified that the reporting system has been complied with in accordance with Communication “A” 3602. Additionally, the payment may only proceed if the funds disbursed remain in Argentina for at least 365120 calendar days, in accordance with Executive Branch Decree N° 616/No.616/2005.
 
Interest payments: Pursuant to Communication “A” 5264, item 3.7., modified by Communication “A” 5604 on July 10, 2014 (after several amendments since its issuance), the access to the MULC for the purchase of foreign currency to pay interests for financial indebtedness may be made:
a.  Up to 10 business day prior to the due date of each interest installment and to pay interest accrued within such interest period;
b.  To pay interest accrued from the date of the settlement of the disbursement through the local foreign exchange market; or
c.  To pay interest accrued from the date of the actual disbursement; provided that the funds disbursed abroad were credited in correspondent accounts of entities authorized to settle such funds through the local exchange market, within 48 hours from the date of their disbursement.
In all cases, the financial entity must verify the filing of the documents required by Communication “A” 3602 (affidavit related to the financial indebtedness) and Communication “A” 4237 (reporting of direct investment owned by non-residents) in case the creditor is part of the debtor’s economic group.
Principal Repayments and Prepayments: Pursuant to Communication “A” 5265, amended by Communication “A” 5604 (enacted on July 10, 2014) foreign currency necessary to pay principal on foreign indebtedness owed by the private non-financial sector may be acquired:
a.  within 10 business days prior to the stated maturity of the applicable obligation; provided that the funds disbursed under such obligation have remained in Argentina for at least 365 days; or
b.  with the anticipation required from an operating standpoint in order to pay to the creditor at maturity, in case of principal installments the payment of which depends on the satisfaction of specific conditions expressly contemplated in the contracts executed by and between the parties involved.
c.  with an anticipation of more than 10 business day –partial or full- to the extent the disbursed funds have remained in Argentina for at least 365 and the payment is financed with the inflow of funds from abroad for capital contribution.
d.  with the anticipation of more than 10 business day –partially or full- to the extent the minimum term of 365 days as of the disbursement of the funds has been accomplished and the prepayment is fully offset with the inflow through the MULC of new external financial with international entities and their agencies, official credit entities and financial entities from abroad, to the extent that such cancellation implies a condition for the new indebtedness and/or for the new bond offerings and debt instruments issued under public offering procedure and listed on self regulated markets, that may be considered as external issuance. In each case, it is a condition: (a) the average term of the new indebtedness is higher than the average term of the outstanding debt that it is prepaid considering both capital and interest, and (b) it may not imply an increase in the present value of the indebtedness for the debtor.
Direct Investment Reporting System
 
Direct Investments made in Argentina by non residentsnonresidents
 
Under Communication “A” 4237, the Argentine Central Bank established a reporting system in connection with direct investments and real estate investments made by non residentsnonresidents in Argentina and by residents abroad.
 
Non residentsNonresidents must comply every semester with the above mentioned reporting system if the amount of the investment in Argentina reaches or exceeds US$U.S. 500,000. If such amount is not reached, the reporting system is optional.
 
Direct investments made outside Argentina by Argentine residents
 
Argentine residents are required to meet the reporting system set forth in Communication “A” 4237 every year if the value of their investments abroad reaches or exceeds US$1.0 million and its under US$5.0 million, and every semester if it reaches or exceeds US$5.0 million. If the value of such investments abroad does not reach US$1.0 million, compliance with the reporting system is optional.
 
181

Sales of foreign exchange to non residentsnonresidents
 
The consentAccess to local exchange market shall be given as well to non residents for them to transfer to their own foreign accounts the payments collected in the country. Specific documentation that backs up the cause of the Argentinepayment may be required by the Central Bank is not required, unless the following conditions are met:
a.  evidence is given that a smaller amount of foreign currency than the one intended to be purchased previously entered through the MULC during the nonresident’s period of stay in Argentina;
b.  the original foreign exchange certificate through which the foreign currency entered is produced;
c.  an equivalent to US$ 5,000 per client and per period of stay in Argentina is not exceeded.
Bank.
 
For further details regarding the exchange regulations applicable in Argentina, investors should consult their professional advisers and read the full text of Executive Branch Decree 616/No.616/2005, Resolution No. 365/2005and Communication “A” 6037  of the Ministry of Economy and Production and Criminal Exchange Law No. 19,359, as well as the relevant regulations and supplementary provisions.Central Bank. Interested parties may consult such regulations through the website of the Ministry of Economy and Public Finance (http://www.infoleg.gob.ar) or the Central Bank (http://www.bcra.gob.ar).
 
Money Laundering
 
Argentine Law No. 25,246, as amended by Laws No. 26,118,Nos.26,118, 26,268 and 26,683, categorizes money laundering as a crime, which is defined as the exchange, transfer, management, sale or any other use of money or other assets obtained through a crime, by a person who did not take part in such original crime, with the potential result that such original assets (or new assets resulting from such original assets) have the appearance of having been obtained through legitimate means. In spite of the fact that there is a specific amount for the money laundering category (Ps.300,000), the crimes committed for a lower amount are also punished, but the prison sentence is reduced.
 
After the enactment of Law 26,683, money laundering was included in the Penal Code as an independent crime against economic and financial order and it was split from the title “Concealment” as originally disposed. Therefore, money laundering is a crime which may be prosecuted independently.
 
The money laundering law created the Financial Information Unit (“UIF”)(UIF). The UIF is in charge of the analysis, treatment and transmission of information to prevent and impede the money laundering originating from, among others:
 
a.  Crimes related to the traffic and illegal commercialization of drugs (Law No.a) Crimes related to the traffic and illegal commercialization of drugs (Law N° 23,737)
 
b.  Crimes related to arms traffic (Law No.b) Crimes related to arms traffic (Law N° 22,415);
 
c.  c) Crimes related to illegal association of terrorist association o terrorist association;
 
d.  d) Crimes committed by illegal associations organized to commit crimes for political or racial purposes;
 
e.  Crimes against Public Administration;
e) Crimes against Public Administration
 
f.  Crimes of minor’s prostitution and child pornography;
f) Crimes of minor’s prostitution and child pornography
 
g.  Crimes related to terrorism financing.
g) Crimes related to terrorism financing
 
The UIF analyzes the information received by entities that have the obligation to report suspicious activities or operations and, as the case may be, inform the Public Ministry to carry out the investigations that may be considered relevant or necessary.
 
The money laundering legal framework in Argentina also assigns information and control duties to certain private sector entities, such as banks, agents, non-profits organizations, stock exchanges, insurance companies, according to the regulations of the Financial Information Unit, and for financial entities, the Argentine Central Bank. These regulations apply to many Argentine companies, including us. These obligations consist mainly of: (i) maintaining internal policies and procedures aimed at money laundering prevention and financing of terrorism, especially through the application of the policy “know your client”; (ii) reporting any suspicious activity or operation and (iii) acting according the Money Laundering Law with respect to the confidentiality of the information obtained from the clients. For that purpose, each entity involved must appoint an officer responsible for the monitoring and control under the Money Laundering Law.
 
On May 8, 2009, and in its capacity as obliged subject under the rules enacted by UIF, the CNV issued Resolution No. 554 which incorporated within the exchange market many provisions aimed at comply with money laundering prevention pursuant to Law 25,246, as amended. In that regard, such resolution established that any entity subject to the supervision of CNV could only take part in securities transactions if they were ordered by parties that were registered or domiciled in jurisdictions not included in the list of tax havens detailed in Executive Branch Decree No 1344/98. Furthermore, the Resolution provided that securities transactions made by parties registered or domiciled in jurisdictions that are not included in such list, but that act as intermediaries of securities’ markets under the supervision of an agency similar to the CNV, were allowed only if such agency has signed a memorandum of mutual understanding with the CNV.
 

On February 2, 2012, Resolution No. 554 was replaced by Resolution No. 602 so as to adapt and complement the instructions issued by UIF applying to the entities under the supervision of CNV, including some payment modalities and control proceedings for the reception and deliver of funds to the clients, fixing amounts and instruments to be used. Moreover, such resolution updated the reference to the Executive Branch Decree which referred to tax havens (No.(N° 1,037).
 
As part of a more comprehensive modification of the rules that govern the scope of supervision of CNV, derive from the enactment of the Capital Markets Law No. 26,831,and the CNV Rules, which approvedstablished a new regulatory regime for the public offer of securities, CNV issued a new re-arranged text of its rules. By Resolution No. 622/2013,Through the CNV Rules, the CNV incorporates a new chapter of Money Laundering and Terrorist Financing including dispositions related to the fulfillment of duties to be complied by “Agentes de Negociación”, “Agentes de Liquidación y Compensación”, “Agentes de Distribución y Colocación” and “Agentes de Administración de Productos de Inversión Colectiva”, considered as obliged subject under the terms of sections 4, 5 and 22 of article 20 of Law No. 25,246. Such agents are obliged to comply with any provision arising from Law No. 25,246 and its amendments, regulations enacted by UIF, including decrees of National Executive Power with reference to the decisions adopted by the United Nations Security Council, in the fight against terrorism and to comply with the resolutions issued by the Ministry of Foreign Affairs, International Trade and Religion. Furthermore, “Agentes de custodiaCustodia de productosProductos de inversióInversión colectivaColectiva (Sociedades Depositarias de Fondos Comunes de Inversión”); “Agentes de corretaje”, “Agentes de depósito colectivo” and listed companies with respect to contribution, irrevocable contributions or indebtedness made by a shareholder or a third person to become a shareholder in the future, are also reached by the resolution.
 
Those subjects must send by internet (through the online application of CNV) their tax identification number. Additionally, in case of companies, it must be informed the personal data of the “Compliance Officer” (both regular and alternate).
 
The CNV regulationsRules provide that the subjects under their jurisdiction, may only take action to transactions in the scope of public offering of securities, stipulated, future or optional contracts of any nature and other instruments and financial products when made or directed by registered, domiciled or domestic subjects or those who reside in dominions, jurisdictions, territories or associated states that appear included in the list of cooperating countries provided in article 2º, subsection b) of executive branch Decree 589/2013.
182

 
When those subjects are not included in the referred list and, in their origin jurisdictions, are only registered intermediates of an entity subject to control and supervision of a body who fulfills similar duties such as the CNV, the transactions shall only have effect provided that the body in their origin jurisdiction has signed a memorandum of understanding, cooperation and exchange of information with the CNV.
 
With the purpose of strengthen the requirements in order to grant the authorization to operate in the exchange market, some new requisites were established in connection with: (i) competence and capacity; (ii) moral integrity and honesty and (iii) solvency. Such requisites are subject to the appraisal of CNV and must be fulfilled by managers, directors, auditors and any other individual who perform duties or activities within the company.
 
Pursuant to Decree 360/2016 dated February 16, 2016, the Argentine government created the “National Coordination Program for Combating Money Laundering and Terrorist Financing” within the purview of the Ministry of Justice and Human Rights. Its purpose is to rearrange, coordinate and strengthen the anti-money laundering and anti-terrorist financing system at national level, in light of the actual risks that could impact the Argentine territory and the global requirements to be met under the scope of the obligations and international recommendations of the United Nations and FATF standards.
Moreover, Law No. 27.260, which introduced certain tax modifications and a new regime for residents to disclose undeclared assets, established that the UIF would now be within the purview of the Ministry of Economy and Finances.
Some other measures are set forth related to listed companies or their shareholders or beneficial owners who had been convicted or condemned in connection with money laundering and/or terrorist financing activities or appeared in the list published by the United Nation Security Council.
 
E.  TAXATION
 
United States Taxation
 
The following summary describes the material United States federal income tax consequences of the ownership of our common shares and ADSs as of the date hereof. The discussion set forth below is applicable to U.S. Holders (as defined below). Except where noted, this discussion deals only with U.S. Holders that hold our common shares or ADSs as capital assets. This summary does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
 
a bank;
a dealer in securities or currencies;
a financial institution;
a regulated investment company;
a real estate investment trust;
an insurance company;
a tax exempt organization;
a person holding our common shares or ADSs as part of a hedging, integrated or conversion transaction, constructive sale or straddle;
a trader in securities that has elected the mark-to-market method of accounting for your securities;
a person liable for alternative minimum tax;
a person who owns or is deemed to own 10% or more of the voting stock of our company;
a partnership or other pass-through entity for United States federal income tax purposes; or
a person whose “functional currency” is not the U.S. Dollar.
 
Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. This summary does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not address the Medicare tax on net investment income, or the effects of any state, local or non-United States tax laws. In addition, this summary is based, in part, upon representations made by the depositary (the “Depositary”) to us and assumes that the deposit agreement governing the ADSs, and all other related agreements, will be performed in accordance with their terms.
 

As used herein, the term “U.S. Holder” means a beneficial owner of common shares or ADSs that is for United States federal income tax purposes:
 
an individual citizen or resident of the United States;
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to United States federal income taxation regardless of its source; or
a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States person.
 
If a partnership holds our common shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common shares or ADSs, you should consult your tax advisors.
 
IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF COMMON SHARES OR ADSS YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO YOU AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
 
ADSs
 
In general, for United States federal income tax purposes, U.S. Holders of ADSs will be treated as the owners of the underlying common shares that are represented by the ADSs. Accordingly, deposits or withdrawals of our common shares by U.S. Holders for ADSs will not be subject to United States federal income tax.
 
Distributions on Common Shares or ADSs
 
Subject to the discussion under “Passive Foreign Investment Company” below, the gross amount of distributions on our common shares or ADSs (including amounts withheld to reflect Argentine withholding taxes, if any) will be taxable as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under United States federal income tax principles). Such income (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of common shares, or by the Depositary, in the case of ADSs. Such dividends will not be eligible for the dividends-received deduction allowed to corporations under the Code.
183

 
With respect to non-corporate United States investors, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on shares (or ADSs representing such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs (which are listed on the NASDAQ), but not our common shares, are readily tradable on an established securities market in the United States. Thus, we do not believe that dividends that we pay on our common shares that are not represented by ADSs currently meet the conditions required for these reduced tax rates. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met.
 
The amount of any dividend paid in Pesos will equal the U.S. Dollar value of the Pesos received calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you, in the case of common shares, or by the Depositary, in the case of ADSs, regardless of whether the Pesos are converted into U.S. Dollars. If the Pesos received are not converted into U.S. Dollars on the day of receipt, you will have a basis in the Pesos equal to their U.S. Dollar value on the date of receipt. Any gain or loss you realize on a subsequent conversion or other disposition of the Pesos will be treated as United States source ordinary income or loss.
 
Subject to certain significant conditions and limitations, Argentine tax withheld from dividends, if any, may be treated as foreign income tax eligible for credit or deduction against your United States federal income tax liability. For purposes of the foreign tax credit, dividends paid on the common shares or ADSs will be treated as income from sources outside the United States and will generally constitute passive category income. Further, in certain circumstances, if you have held ADSs or common shares for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on ADSs or common shares. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
 
To the extent that the amount of any distribution (including amounts withheld to reflect Argentine withholding taxes, if any) exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or common shares, and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed above).
 
Taxation of Capital Gains
 
Subject to the discussion under “Passive Foreign Investment Company” below, upon the sale, exchange or other disposition of common shares or ADSs, you generally will recognize capital gain or loss equal to the difference between the U.S. Dollar value of the amount realized upon the sale, exchange or other disposition and the adjusted tax basis of the common shares or ADSs, determined in U.S. Dollars. The capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other disposition you have held the common shares or ADSs for more than one year. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss you recognize will generally be treated as United States source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any Argentine tax imposed on the disposition of common shares or ADSs unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.
 

Passive Foreign Investment Company
 
Based on the current and projected composition of our income and the valuation of our assets, including goodwill, we do not believe we were a PFIC for United States federal income tax purposes for the taxable year ending June 30, 2015,2016, and we do not currently expect to become a PFIC, although there can be no assurance in this regard. The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may be a PFIC in the current or any future taxable year due to changes in our asset or income composition or if our projections are not accurate. The volatility and instability of Argentina’s economic and financial system may substantially affect the composition of our income and assets and the accuracy of our projections. In addition, this determination is based on the interpretation of certain U.S. Treasury regulations relating to rental income, which regulations are potentially subject to differing interpretation.
 
In general, we will be a PFIC for any taxable year in which either (i) at least 75% of the gross income of our company for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person), annuities and gains from assets that produce passive income. If we own at least 25% by value of the stock of another corporation, we will be treated for purposes of the PFIC tests as owning a proportionate share of the assets of the other corporation, and as receiving directly a proportionate share of the other corporation’s income.
 
If we are a PFIC for any taxable year during which you hold common shares or ADSs in our company, unless you make the mark-to-market election discussed below, you will be subject to special tax rules discussed below.
 
If we are a PFIC for any taxable year during which you hold our common shares or ADSs, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of such common shares or ADSs. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the common shares or ADSs will be treated as excess distributions. Under these special tax rules (i) the excess distribution or gain will be allocated ratably over your holding period for the common shares or ADSs, (ii) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and (iii) the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
 
If we are a PFIC for any taxable year during which you hold our common shares or ADSs and any of our non-United States subsidiaries is also a PFIC, you would be treated as owning a proportionate amount (by value) of the common shares of the lower tier PFIC for purposes of the application of these rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
 
In addition, non-corporate U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.
 
184

In certain circumstances, in lieu of being subject to the excess distribution rules discussed above, you may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method provided that such stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election is only available for stock traded on certain designated United States exchanges and foreign exchanges which meet certain trading, listing, financial disclosure and other requirements to be treated as a qualified exchange under applicable United States Treasury regulations. Consequently, the mark-to-market election may be available to you with respect to the ADSs because the ADSs are listed on the NASDAQ, which constitutes a qualified exchange under the regulations, although there can be no assurance that the ADSs will be regularly traded. You should note that only the ADSs and not the common shares are listed on the NASDAQ. The common shares are listed on the BASE. Consequently, the BASE would need to meet the trading, listing, financial disclosure and other requirements of the United States Treasury regulations. The ADSs or common shares would also need to be regularly traded on such exchanges in order for the ADSs or common shares to be potentially eligible for the mark-to-market election.
 
If we are a PFIC in any taxable year in which you hold our common shares or ADSs, but you do not make a mark-to-market election until a subsequent taxable year, you will be subject to special rules in the taxable year of the election. You should consult your own tax advisors regarding the application of the mark-to-market election in your particular situation.
 
If you make an effective mark-to-market election, you will include in income each year that we are a PFIC as ordinary income, rather than capital gain, the excess, if any, of the fair market value of your common shares or ADSs at the end of the taxable year over your adjusted tax basis in the common shares or ADSs and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of such common shares or ADSs over their fair market value at the end of each such taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. Your basis in the common shares or ADSs will be adjusted to reflect any such income or loss amounts. Any gain or loss on the sale of the common shares or ADSs will be ordinary income or loss, except that such loss will be ordinary loss only to the extent of the previously included net mark-to-market gain.
 
If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the common shares or ADSs are no longer regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. Mark-to-market inclusions and deductions will be suspended during taxable years in which we are not a PFIC, but would resume if we subsequently become a PFIC. You are urged to consult your own tax advisor about the availability of making such a mark-to-market election.
 
Alternatively, a United States investor that owns common shares or ADSs in a PFIC can sometimes avoid the rules described above by electing to treat the company as a “qualified electing fund” under Section 1295 of the Code. This option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.
 
A United StatesU.S. Holder who owns common shares or ADSs during any year that we are a PFIC must generally file IRS Form 8621.
 
You should consult your own tax advisors concerning the United States federal income tax consequences of holding the common shares or ADSs if we are considered a PFIC in any taxable year.
 
Argentine Personal Assets Tax
 
Amounts paid on account of the Argentine personal assets tax, if any, will not be eligible as a credit against your United States federal income tax liability, but may be deductible subject to applicable limitations in the Code.
 
Information Reporting and Backup Withholding
 
In general, information reporting requirements will apply to distributions on common shares or ADSs and to the proceeds of sale of a common share or ADS paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient. Backup withholding may apply to such payments if you fail to provide a correct taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income.
 
Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided you furnish the required information to the Internal Revenue Service.
 

Argentine Taxation
 
The following discussion is a summary of certain Argentine tax considerations associated with an investment in, ownership or disposition of, the common shares or the ADSs by (i) an individual holder that is resident in Argentina, (ii) an individual holder that is neither domiciled nor resident in Argentina, (iii) a legal entity organized under the laws of Argentina, (iv) a permanent establishment in Argentina of a foreign entity and (v) a legal entity that is not organized under the laws of Argentina, that does not have a permanent establishment in Argentina and is not otherwise doing business in Argentina on a regular basis. The discussion is for general information only and is based on current Argentine tax laws. Moreover, while this summary is considered to be a correct interpretation of existing laws in force as of the date of this filing, no assurance can be given that the courts or administrative authorities responsible for the administration of such laws will agree with this interpretation or that changes in such laws or interpretations will not occur.
 
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES ARISING UNDER ANY TAXING JURISDICTION.
 
Income tax
 
Law No. 26,893, enacted on September 12, 2013 and published in the Official Gazette on September 23, 2013, introduced several amendments to Income Tax Law No. 20,628 in connection with, among others,  the taxation of dividend distributions and gains derived from transfers of shares and other securities, including the derogation of Section 78 of Decree No. 2,284/1991, which provided that foreign holders with no permanent establishment in Argentina were exempt from paying income tax on the capital gains arising from the sale or other disposition of shares or ADSs.
 
On February 7, 2014, the Executive Branch issued Decree No. 2,334/13, which regulates Law No. 26,893.
 
The changes introduced by Law No. 26,893 are effective from the date of publication of such law in the Official Gazette and are applicable to taxable events consummated from such date onwards.
 
Taxation of Dividends
 
Until Law No. 26,893 became effective, dividends, whether in cash, in shares or in kind, approved by our shareholders were not subject to income tax withholding except for the application of the “Equalization Tax” described below.
 
 
From the effectiveness of Law No. 26,893, dividends are subject to an income tax withholding (the “Dividend Tax”) at a 10% rate on the amount of such dividends in respect of both Argentine and non-Argentine resident shareholders.  However, dividends receivedThe “Dividend Tax” has been repealed by Argentine entities (generally entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) are not subject to the 10% tax .
185

Law No. 27.260 for dividend payments since July 22, 2016.
 
 
Notwithstanding the foregoing, according to Argentine law, and irrespective of the 10% tax mentioned in the previous paragraph, an additionalAn income tax withholding will be applied to the amount of dividends distributed in excess of a company’s net taxable income determined in accordance with general income tax regulations for the fiscal years preceding the date of the distribution of such dividends (the “Equalization Tax”). The legislation requires that companies withhold 35% of the amount of distributed dividends in excess of the net taxable income of such distribution, as determined in accordance with the income tax law.  Dividends distributed by an Argentine company are not subject to this tax to the extent that those dividends arise from dividend income or other distributions received by such company from other Argentine companies.
 
Dividend distributions made in kind (other than cash) will be subject to the same tax rules as cash dividends. Stock dividends on fully paid shares are neithernot subject to Dividend Tax nor to Equalization Tax.
 
In case both the Dividend Tax and the Equalization Tax apply, the latter should be applied first and then the 10% rate of the Dividend Tax should be applied on the remaining amount of dividends (i.e. the effective rate of both taxes on dividends would be 41.5%). Certain tax treaties contemplate the application of a ceiling tax rate on dividends (i.e. 10% on gross dividends).
 
Taxation of Capital Gains
 
From the effectiveness of Law No. 26,893 income from sale, exchange, disposition or transfer of shares or ADSs is subject to income tax, irrespective of the person that obtains such income, exception made of transactions made by resident individuals involving shares and other securities that are listed on securities exchanges or markets and/or authorized to be offered to the public.
 
Resident individuals
 
Capital gains obtained by resident individuals from the sale of shares and other securities  are subject to income tax at a 15% rate on net income, unless such securities were traded in stock markets and/or have public offering authorization, in which case an exemption applies. The amendments introduced by the implementing Decree No. 2,334/13 state that the exemption includes income derived from the sale of shares and other securities made through a stock exchange market duly authorized by the CNV.
 
 It is not clear whether the term “includes” (as used in the implementing Decree 2334/2013) means that the exemption only refers to sales of securities made through a stock exchange market duly authorized by the CNV or whether the implementing Decree 2334/2013 intended to clarify that such sales were just one of the possibilities that may be covered by the exemption (in addition to publicly offering authorized securities, as provided in the Argentine Income Tax Law). Certain qualified tax authorities have publicly opined that the exemption exclusively refers to sales of securities made through a stock exchange market duly authorized by the CNV.
 
Losses arising from the sale, exchange or other disposition of shares or ADSs can be applied only to offset such capital gains arising from the sale, exchange or other disposition of these securities, for a five-year carryover period.
 
 
186

Foreign beneficiaries
 
Capital gains obtained by non-Argentine individuals or non-Argentine entities from the sale, exchange or other disposition of shares  are subject to income tax, as the abovementioned exemption for shares is not applicable to non-Argentine beneficiaries. Therefore, the gain derived from the disposition of shares by foreign beneficiaries is subject to Argentine income tax at a 15% rate on the net capital gain or at a 13.5% rate on the gross price at the seller´s election. However there is currently no regulation under Argentine law with respect to how this election is made. When both seller and buyer are non-residents, the person liable to pay the tax shall be the buyer of the shares, quotas, equity interests and other securities transferred. However, as of the date of this annual report , no regulations have been issued stipulating the withholding and payment mechanism that the non-resident buyer should follow.
 
Notwithstanding the above, based on certain tax precedents, there may be support to argue that gains obtained by a non-resident from the disposal of ADSs should be regarded as foreign source income and, therefore, not subject to Argentine income tax. As this is a controversial issue, further analysis is required.
 

Argentine entities
 
Capital gains obtained by Argentine entities (in general entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of shares or ADSs are subject to income tax at the rate of 35%.
 
Losses arising from the sale, exchange or other disposition of shares or ADSs can be applied only to offset such capital gains arising from the sale, exchange or other disposition of these securities, for a five-year carryover period.
 
WE RECOMMEND PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES CONCERNING THE SALE OR OTHER DISPOSITIONS OF SHARES AND ADSs.
 
Value Added Tax
 
The sale, exchange, disposition, or transfer of common shares or ADSs is not subject to Value Added Tax.
 
Tax on Personal Assets
 
Argentine entities, such as us, have to pay the personal assets tax corresponding to Argentine and foreign domiciled individuals and foreign domiciled entities for the holding of our shares. The applicable tax rate for fiscal year 2016 is 0.5%0.25% and is levied on the proportional net worth value (valor patrimonial proporcional), or the book value, of the shares arising from the last balance sheet of the Argentine entity calculated under Argentine GAAP. Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine domiciled individuals and/or foreign domiciled shareholders.
 
Our shareholders approved the absorption of personal asset tax by us for the years 2002 to 2014.2015. There can be no assurance that in the future this tax will be absorbed by us.
 
Tax on Minimum Notional Income (Impuesto a la Ganancia Mínima Presunta, “IGMP”)
 
Entities domiciled in Argentina, partnerships, foundations, sole proprietorships, trusts, certain mutual funds organized in Argentina, and permanent business establishments owned by foreign persons, among other taxpayers, shall apply a 1% rate to the total value of assets held by such persons, above an aggregate nominal amount of Ps.200,000. Nevertheless, common shares and ADSs issued by entities subject to such tax are exempt from the IGMP.
 
Law No. 27.260 has repealed this tax for fiscal years commenced since January 1, 2019.
 
187

 
Turnover Tax
 
 The gross turnover tax is a local tax; therefore, the rules of the relevant provincial jurisdiction should be considered, which may levy this tax on the purchase and sale, exchange or other disposition of common shares or ADSs, and/or the collection of dividends at an average rate of 6%, unless an exemption is applicable. In the particular case of the City of Buenos Aires, any transaction involving common shares and/or the collection of dividends and revaluations is exempt from this tax.
 
There is no gross income tax withholding system applicable to the payments made to foreign beneficiaries.
 
Stamp Tax
 
Stamp tax is a local tax that is generally levied on the formal execution of onerous transactions within a certain provincial jurisdiction or outside a certain provincial jurisdiction but with effects in such jurisdiction;jurisdiction. Therefore, the rules of the relevant provincial jurisdiction should be considered for the issuance of instruments which implement onerous transactions (including issuance, subscription, placement and transfer) involving the common shares or ADSs, executed in those jurisdictions, or with effects in those jurisdictions.
 
Notwithstanding, for the City of Buenos Aires, any instrument related to the transfer of shares which public offering is authorized by the CNV is exempt from this tax.
 
Tax on Credits and Debits in Bank Accounts
 
Credits to and debits from bank accounts held at Argentine financial institutions, as well as certain cash payments, are subject to this tax, which is assessed at a general rate of 0.6%. There are also increased rates of 1.2% and reduced rates of 0.075%. Owners of bank accounts subject to the general 0.6% rate may consider 34% of the tax paid upon credits to such bank accounts as a tax credit while taxpayers subject to the 1.2% rate may consider 17% of all tax paid upon credits to such bank accounts as a credit. Such amounts can be utilized as a credit for income tax or tax on presumed minimum income.
 
Other Taxes
 
There are no Argentine federal inheritance or succession taxes applicable to the ownership, transfer or disposition of our common shares or ADSs. The provinces of Buenos Aires and Entre Ríos establish a tax on free transmission of assets, including inheritance, legacies, donations, etc. Free transmission of our shares could be subject to this tax. In the case of litigation regarding the shares before a court of the City of Buenos Aires, a 3% court fee would be charged, calculated on the basis of the claim.
 
Tax Treaties
 
Argentina has entered into tax treaties with several countries. There is currently no tax treaty or convention in effect between Argentina and the United States.
 

 
This section is not applicable
 
 
This section is not applicable.
 
 
We file annual, quarterly and other information with the SEC. You may read and copy any document that we file at the public reference rooms of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. Our Internet address is http://www.cresud.com.ar. It should be noted that nothing on our website should be considered part of this annual report on Form 20-F. You may request a copy of these filings at no cost, by writing or calling the office at +54 (11)-4814-7800.
 
 
This section is not applicable.
 
Item 11.                      Quantitative and Qualitative Disclosures about Market Risk
 
 In the normal course of business, we are exposed to foreign exchange risk, interest rate risks and other price risk, primarily related to changes in exchange rates and interest rates. We manage our exposure to these risks through the use of various financial instruments, none of which are entered into for trading purposes. We have established policies and procedures governing the use of financial instruments, specifically as they relate to the type and volume of such financial instruments. For further information on our market risks, please see Note 4 to our Audited Consolidated Financial Statements.
 
Item 12.                      Description of Securities Other than Equity Securities
 
 
This item is not applicable
 
 
This item is not applicable
 
 
This item is not applicable
 
188

 
 
The Bank of New York Mellon, as depositary for the ADSs (the “Depositary”) collects its fees for delivery directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal. The Depositary also collects taxes and governmental charges from the holders of ADSs. The Depositary collects these fees and charges by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees (after attempting by reasonable means to notify the holder prior to such sale).
 
The Depositary has agreed to reimburse or pay on our behalf, certain reasonable expenses related to our ADS program and incurred by us in connection with the program (such as NASDAQ listing fees, legal and accounting fees incurred with preparation of Form 20-F and ongoing SEC compliance and listing requirements, distribution of proxy materials, investor relations expenses, etc). The Depositary has covered all such expenses incurred by us. During fiscal yearus for the period 2014 - 2015 no such reimbursement was received.for an amount of US$ 50,000, net of taxes.
 
The amounts the Depositary reimbursed or paid are not perforce related to the fees collected by the depositary from ADS holders.
 
The following charges shall be incurred by any party depositing or withdrawing shares or by any party surrendering receipts or to whom receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange regarding the receipts or deposited securities or a distribution of receipts), whichever applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of shares generally on the share register of the Company or foreign registrar and applicable to transfers of shares to the name of the Depositary or its nominee or the custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and fax transmission expenses as are expressly provided in the deposit agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency (5) a fee of US$ 5.00 or less per 100 ADS (or portion), (6) a fee of US$ 0.02 or less per ADS (or portion) for any cash distribution made pursuant to the deposit agreement including, but not limited to, and (7) a fee for the distribution of securities, such fee being in an amount equal to the fee for the execution and delivery of ADS referred to above which would have been charged as a result of the deposit of such securities, but which securities are instead distributed by the Depositary to owners.
 
 
Item 13.                      Defaults, Dividend Arrearages and Delinquencies
 
This section is not applicable.
 
Item 14.                      Material Modifications to the Rights of Security Holders and Use of Proceeds
 
A. This section is not applicable.
 
B. This section is not applicable.
 
C. This section is not applicable.
 
D. This section is not applicable.
 
E. This section is not applicable.
 
Item 15.                      Controls and Procedures
 
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer and Chief Administrative Officer, to allow our management to make timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. In connection with the preparation of this Annual Report on Form 20-F, we carried out an evaluation under the supervision and with the participation of members of our management team, including our Chief Executive Officer and Chief Financial Officer and Chief Administrative Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2015.2016. Based upon this evaluation our Chief Executive Officer and Chief Financial Officer and Chief Administrative Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 20-F were effective at the reasonable assurance level.
 
We have been unable to obtain financial statements for IDBD for the year ended December 31, 2014 audited in accordance with U.S. GAAS that may be required to be included in this Annual Report on Form 20-F by Rule 3-09. As of June 30, 2015, we held 49% of IDBD and, as such, we did not control IDBD and did not have the power to direct IDBD or its management to provide us with such audited consolidated financial statements. In reliance on Rule 12b-21 promulgated under the Exchange Act we have provided unaudited consolidated financial statements for IDBD for the year ended December 31, 2014, which do not comply with Rule 3-09. As a result of including such financial information, we do not believe that the omission of the audited consolidated financial statements in accordance with Rule 3-09 will have a material impact on a reader’s understanding of our financial condition or our results of operations.
We are in the process of requesting a waiver from the SEC for filing the audited consolidated financial statements of IDBD for the year ended December 31, 2014 as may be required by Rule 3-09. We cannot provide you with any assurances that we will obtain this waiver. If the SEC does not grant this waiver to us, we will have to file an amendment to this annual report including the financial statements of IDBD for the year ended December 31, 2104 audited in accordance with U.S. GAAS as soon as such financial statements become available. See “Item 3. Key Information – D. Risk Factors.”
 
Our management is responsible for establishing and maintaining adequate Internal Control over Financial Reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our Internal Control over Financial Reporting includes a series of procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with International Financial Reporting Standards and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with International Financial Reporting Standards and that a company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
 
Because of its inherent limitations, Internal Control over Financial Reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
 
Management assessed the effectiveness of our Internal Control over Financial Reporting as of June 30, 2015.2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control–Integrated Framework (1992)(2013). Based on this evaluation, management concluded that our Internal Control over Financial Reporting was effective as of June 30, 2015.
189

Remediation2016. However, the management has excluded IDB Development from its assessment of Prior Year Material Weakness

We have previously disclosedInternal Control over Financial Reporting as of June 30, 2016 because it was acquired by us in purchase business combinations during the fiscal year 2016. IDB Development is an indirect subsidiary (through Tyrus S.A.) whose total assets and total revenues represent 89% and 80%, respectively, of our annual report on Form 20-FAudited Consolidated Financial Statements amount as of and for the year ended June 30, 2014 that we and our independent registered public accounting firm identified the following material weakness. The material weakness related to the failure to effectively interpret the impact of significant, non-routine complex contractual clauses associated with the investment in the associate IDBD.

A material weakness is a deficiency, or combination of deficiencies, in Internal Control over Financial Reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We have undertaken the following remedial steps to address the material weakness:
·Hired additional qualified accounting personnel versed in the technical requirements of IFRS at the subsidiary level to interpret, analyze and account for significant complex contractual provisions;
·Implemented a process to collect and consolidate all material contractual provisions at the subsidiary level to assist in the appropriate evaluation and documentation requirements required by IFRS;

·Implemented additional review by management to confirm proper identification, analysis and implementation of relevant accounting standards going forward; and
·Trained personnel at both corporate and subsidiary levels to better assess and evaluate contractual provisions and the impact of derivative financial instruments.

We have implemented and executed these actions above as part of our remediation plans and we have successfully tested them. As of June 30, 2015, we have concluded that the material weakness described in our annual report on Form 20-F for the year ended June 30, 2014 has been remediated.2016.
 

 
The effectiveness of the Company’s internal control over financial reporting as of June 30, 20152016 has been audited by Price Waterhouse & Co S.R.L, Buenos Aires Argentina- member firm of PricewaterhouseCoopers International Limited-, an independent registered public accounting firm, as stated in their report which appears herein.

 

Other than the implementation and refinement of the controls necessary to remediate the previous year’s material weakness, thereThere was no change in our internal control over financial reporting occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16.
 
 
 
In our annual ordinary shareholders’ meeting held on October 31, 2003, the audit committee was unanimously approved. Pursuant to this plan, the board of directors had to appoint the members of the audit committee who hold expertise in corporate administration, finance and accounting.
 
Our board of directors established an audit committee which would assist the Board in exercising its duty of care on disclosure requirements, the enforcement of accounting policies, management of our business risks, the management of our internal control systems, ethical conduct of our businesses, monitoring the sufficiency of our financial statements, our compliance with laws, independence and capacity of independent auditors and performance of our internal audit and our external auditors.
 
On November 3, 2008,5, 2015, our board of directors officially appointed Jorge Oscar Fernández, Daniel Mellicovsky, and Pedro Damaso Labaqui Palacio, Daniel Elías Mellicovsky and Gabriel Adolfo Gregorio Reznik, all of them independent members, as members of the audit committee. The board of directors named Jorge Oscar Fernández isas the financial expert in accordance with the relevant SEC rules. We have a fully independent audit committee as per the standardstandards provided in Rule 10(A)-3(b)(1).
 
214
 
We have adopted a code of ethics that applies to our directors, officers and employees. Our code of ethics is posted in our website www.cresud.com.ar. On July 25, 2005, our Code of Ethics was amended by our board of directors. The amendment was reported in a report on Form 6K on August 1, 2005.
 
If we make any substantive amendment to the code of ethics or if we grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver in a Form 6-K or in our next Forms 20-F to be filed with the SEC.
 
 
Audit Fees
During the fiscal years ended June 30, 20152016 and 2014,2015, we were billed a total amount of Ps. 9.715.7 million and Ps. 8.09.7 million, respectively, for professional services rendered by our principal accountants for the audit of our financial statements and other services normally provided in connection with regulatory filings or engagements.
190

Audit-Related Fees
During the fiscal year ended june 30, 2016 no audit-related services were provided. while as of June 30, 2015 and 2014 we were billed a total amount of Ps. 0.1 million and Ps. 0.1 million, respectively, for professional services rendered by our principal accountants for other services related to the audit of our financial statements and other services normally provided in connection with regulatory filings or engagements.
Tax Fees
During the fiscal year ended June 30, 20152016 and 2014,2015, we were billed a total amount of  Ps. 0.01nil and Ps.0.01 million, and Ps. 0.03, respectively for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
planning
All Other Fees
During the fiscal years ended June 30, 2015, no such services were provided, while as of June 30, 2014,2016 we were billed for a total amount of Ps. 0.8 million for other professional services rendered by our principal accountants.,  while as of June 30, 2015 no such services were provided.
 
Audit Committee Pre-Approval Policies and Procedures
 
Our audit committee approves, in advance, the engagement of auditors and their fees for audit and non-audit services pursuant to paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X.
 
Our Audit Committee pre-approves all services, fees and services provided by the external auditors to ensure auditors’ independence. One of the main tasks of the Audit Committee is to give it opinion in relation to the appointment of the external auditors, proposed by the Board of Directors to the General Shareholder’s Meeting. In order to accomplish such task, the Audit Committee shall:
 
•           Require any additional and complementary documentation related to this analysis;
 
•           Verify the independence of the external auditors;
 
•           Analyze different kinds of services that the external auditor would provide to the company. This description must also include an estimate of the fees payable for such services, specifically in order to maintain the principle of independence;
 
•           Inform the fees billed by the external auditor, separating the services related to audit services and other special services that could be not included in the audit services previously mentioned.
 
•           Take notice of any strategy proposed by of the external auditors and review it in accordance with the reality other business and the risks involved;
 
•           Analyze and supervise the working plan of the external auditors considering the business’ reality and the estimated risks;
 
•           Propose adjustments (if necessary) to such working plan;
 
•           Hold meetings with the external auditors in order to: (a) analyze the difficulties, results and conclusions of the proposed working plan; (b) analyze eventual possible conflicts of interests, related party transactions, compliance with the legal framework and information transparency;
 
•           Evaluate the performance of external auditors and their opinion regarding the Financial Statements.
 
 
This section is not applicable.
 
 
Issuer Purchases of Equity Securities
 
On August 26, 2008, our Board of Directors decided to establish a share repurchase plan (the “2009 Plan”) under the provisions of the former Section 68 of the Law No. 17,811 (as amended by the transparency decree), currently amended and restated by the Capital Markets Law, in order to help reduce the decline and fluctuations of the price of our shares in the market.
 

During the fiscal year 2009, under the 2009 Plan, we purchased 30,000,000 common shares, for which we paid US$ 21.0 million and Ps.1.7 million, thus fulfilling the terms and conditions of the 2009 Plan. As a result, by the end of the fiscal year 2009 our investment in our own shares amounted to 5.98% of total capital stock.
 
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share (Ps.)Total Number of Shares Purchased as Part of the Publicly Announced PlanMaximum Number of Shares that may yet be purchased under the plan
08/29/08 – 08/31/0831,0003.3831,0009,969,000
09/01/08 – 09/30/082,122,8863.362,153,8867,846,114
10/01/08 – 10/31/089,650,4932.0311,804,37918,195,621
11/01/08 – 11/30/08 5,756,140 2.02 17,560,519 12,439,481
12/01/08 – 12/31/084,382,7832.6321,943,3028,056,698
01/01/09 – 01/31/092,047,4612.9423,990,7636,009,237
02/01/09 – 02/28/092,173,8602.7026,164,6233,835,377
03/01/09 – 03/31/09563,6922.6126,728,3153,271,685
04/01/09 – 04/30/09428,0522.9127,156,3672,843,633
05/01/09 – 05/31/092,843,6333.4530,000,000-
Total30,000,000   

 
In addition, during November 2009, our Board of Directors, in accordance with the resolutions of the Shareholders’ Meeting dated October 29, 2009, decided to initiate the process of distribution among the shareholders, on a pro rata basis, of 25,000,000 common shares, repurchased under the 2009 Plan. The allotment of shares was calculated over the outstanding capital stock up to October 29, 2009 of Ps. 471,538,610 (0.05301792784 shares per ADR). As a result of the calculation of the allotment, the fractions were settled in cash. 754 shares were not distributed.
191

 
On April 11, 2014 our Board of Directors decided to initiate a new shares repurchase plan (the “2014 Plan”), under the terms of Article 64 of the Capital Markets Law and the rules of the CNV. Such repurchases were made with our liquid and realized profits and free reserves. As of November 14, 2014, we finalized the 2014 Plan having repurchased a total of 8,633,316 shares, equivalent to 1.72% of the share capital, by a total of Ps. 87.1 million.

Period 
Total Number of Common Shares Purchased (1)
  Average Price Paid per Share  Total Number of ADR’s Purchased  Average Price Paid per Share  
Total Number of Shares Purchased as Part of the Publicly Announced Plan (2)
  Maximum Number of Shares that may yet be purchased under the plan 
     (Ps.)     (US$)       
04/17/2014 - 04/30/2014  14,7   6.74   59,162   11.18   606,32   18,506,949 
05/01/2014 - 05/31/2014  33,537   10.23   171,5   12.11   1,748,537   16,758,412 
06/01/2014 - 06/30/2014  100,512   12.81   313,011   12.33   3,230,622   13,527,790 
07/01/2014 - 07/31/2014  4   13.40   115,111   13.62   1,155,110   12,372,680 
08/01/2014 - 08/31/2014  13,657   13.23   142,989   12.28   1,443,547   10,929,133 
09/01/2014 - 09/30/2014  -   -   44,918   11.86   449,18   10,479,953 
       Total  166,406       846,691       8,633,316     
 
Period
Total Number of Common Shares Purchased(1)
Average Price Paid per ShareTotal Number of ADR’s PurchasedAverage Price Paid per Share
Total Number of Shares Purchased as Part of the Publicly Announced Plan (2)
Maximum Number of Shares that may yet be purchased under the plan
  (Ps.) (US$)  
04/17/2014 - 04/30/201414,7             6.7459,162           11.18606,32             18,506,949
05/01/2014 - 05/31/201433,537           10.23171,5           12.111,748,537             16,758,412
06/01/2014 - 06/30/2014100,512           12.81313,011           12.333,230,622             13,527,790
07/01/2014 - 07/31/20144           13.40115,111           13.621,155,110             12,372,680
08/01/2014 - 08/31/201413,657           13.23142,989           12.281,443,547             10,929,133
09/01/2014 - 09/30/2014                 -                   -44,918           11.86449,18             10,479,953
       Total166,406 846,691           8,633,316 
(1)
As of the date of transaction.
(2)
Correspond to the sum of common shares and ADR’s purchased. Each ADR represents 10 common shares.
 
In addition, during December 2014, our Board of Directors, in accordance with the resolutions of the Shareholders’ Meeting dated November 14, 2014, decided to initiate the process of distribution among the shareholders, on a pro rata basis, of 5,565,479 common shares, repurchased under the 2014 Plan. The allotment of shares was calculated over the outstanding capital stock up to December 12, 2014 of Ps. 487,928,660 (10 shares per ADR). As a result of the calculation of the allotment, the fractions were settled in cash. 746 shares were not distributed.
 
As a result as of the date of this annual report, theJune 30, 2016, our investment in own shares amounts to 1,37%1.30% of total capital stock.stock.
 
 
This section is not applicable.
 
 
Compliance with NASDAQ listing standards on corporate governance
 
Significant differences between our corporate governance practices and U.S. companies’ practices under NASDAQ Rules:
 
Our corporate governance practices are governed by the applicable Argentine law; particularly, the Argentine Corporations Law, the Capital Markets Law and the rules of the CNV, as well as by ours by-laws.
 
We have securities that are registered with the Securities and Exchange Commission and are listed on the NASDAQ, and are therefore subject to corporate governance requirements applicable to NASDAQ-listed non-US companies (a “NASDAQ-listed” company).
 
Pursuant to NASDAQ Rule 5615(a)(3), NASDAQ -listed non-U.S. companies that are categorized as “Foreign Private Issuers” may follow home country corporate governance practices in lieu of certain of the corporate governance requirements provided in NASDAQ Rules, provided that the foreign private issuer complies with certain mandatory sections of NASDAQ Rules, discloses each requirement that it does not follow and describes the home country practice followed in lieu of such requirement. The requirements of the NASDAQ Rules and the Argentine corporate governance practices that we follow in lieu thereof are described below:
 
192


 

 
NASDAQ Standards for U.S. companiesCRESUD’S CORPORATE PRACTICES
Rule 5250(d) - Distribution of Annual and Interim Reports.
In lieu of the requirements of Rule 5250(d), we follow Argentine law, which requires that companies issue publicly a Spanish language annual report, including annual Audited Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in Argentina, by filing such annual report with the CNV and the stock exchange in which the securities are listed, within 70 calendar days following the close of our fiscal year. Interim reports must be filed with the CNV and the stock exchange in which the securities are listed within 42 calendar days following the close of each fiscal quarter. We provide our shareholders a copy of the annual and interim financial reports upon request. English language translations of our annual reports and interim reports are filed with the SEC on Form 20-F and Form 6-K, respectively. We also send the English language translation of our annual report and quarterly press releases on its website. Furthermore, under the terms of the Deposit Agreement, dated as of March 18, 1997, among us, The Bank of New York Mellon, as depositary, and owners of ADSs issued thereunder, we are required to furnish The Bank of New York Mellon with, among other things, English language translations of their annual reports. Annual reports are available for inspection by ADR holders at the offices of The Bank of New York located at, 101 Barclay Street, 22 Floor, New York, New York. Finally, Argentine law requires that 20 calendar days before the date of a shareholders’ meeting, the board of directors must provide to our shareholders, at our executive office or through electronic means, all information relevant to the shareholders’ meeting, including copies of any documents to be considered by the shareholders (which includes the annual report).
Rule 5605(b)(1) - Majority of Independent Directors.In lieu of the requirements of Rule 5605(b)(1), we follow Argentine law which does not require that a majority of the board of directors be comprised of independent directors. Argentine law instead requires that public companies in Argentina, such as, us must have a sufficient number of independent directors to be able to form an audit committee of at least three members, the majority of which must be independent pursuant to the criteria established by the CNV.
Rule 5605(b)(2) - Executive Sessions of the Board of Directors.In lieu of the requirements of Rule 5605(b)(2), we follow Argentine law which does not require independent directors to hold regularly scheduled meetings at which only such independent directors are present (i.e., executive sessions). Our board of directors as a whole is responsible for monitoring our affairs. In addition, under Argentine law, the board of directors may approve the delegation of specific responsibilities to designated directors or non-director managers of the Company. Also, it is mandatory for public companies to form a supervisory committee (composed of “syndics”) which is responsible for monitoring our legal compliance under Argentine law and compliance with our by-laws. Finally, our audit committee has regularly scheduled meetings and, as such, such meetings will serve a substantially similar purpose as executive sessions.
Rule 5605(d)(B) - Compensation of Officers.In lieu of the requirements of Rule 5605(d)(B), we follow Argentine law which does not require companies to form a compensation committee comprised solely of independent directors. For the determination of the compensation of the chief executive officer and all other executive officers no decision of a majority of independent directors or a compensation committee comprised solely of independent directors is required under Argentine law. Under Argentine law, the board of directors is the corporate body responsible for determining the compensation of the chief executive officer and all other executive officers, so long as they are not directors. In addition, under Argentine law, the audit committee shall give its opinion about the reasonableness of management’s proposals on fees and option plans for our directors or managers.
Rule 5605(e) - Nomination of Directors.In lieu of the requirements of Rule 5605(e), we follow Argentine law which requires that directors be nominated directly by the shareholders at the shareholders’ meeting and that they be selected and recommended by the shareholders themselves. Under Argentine law, it is the responsibility of the ordinary shareholders’ meeting to appoint and remove directors and to set their compensation.
Rule 5605(c)(1) - Audit Committee Charter.In lieu of the requirements of Rule 5605(c)(1), we follow Argentine law which requires that audit committees have a charter but does not require that companies certify as to the adoption of the charter nor does it require an annual review and assessment thereof. Argentine law instead requires that companies prepare a proposed plan or course of action with respect to those matters which are the responsibility of our audit committee. Such plan or course of action could, at the discretion of our audit committee, include a review and assessment of the audit committee charter. We believe that we are in compliance with the requirements for audit committee charters provided for in the Sarbanes Oxley Act.
Rule 5605(c)(2) - Audit Committee Composition.
Argentine law does not require that companies have an audit committee comprised solely of independent directors and it is equally not customary business practice in Argentina to have such a committee. Argentine law instead requires that companies establish an audit committee with at least three members comprised of a majority of independent directors as defined by Argentine law. Nonetheless, although not required by Argentine law, we have a three member audit committee comprised of entirely independent directors in accordance with Rule 10(A)-3(b)(1) of the General rules and regulations promulgated under the Securities Exchange Act of 1934, as independence is defined in Rule 10(A)-3(b)(1). Further, Argentine law does not require companies to identify or designate a financial expert. As such, Although all the members of the audit committee have large corporate experience, as of the date of this annual report, the Board of Directors have not named designated a financial expert in accordance with the relevant SEC ruleson the audit committee. Although it is noted that all members of the audit committee have had significant corporate experience. In addition, we have a supervisory committee (“comisión fiscalizadora”) composed of three ‘syndics’ which are in charge of monitoring the legality, under Argentine law, of the actions of our board of directors and the conformity of such actions with our by-laws.
Rule 5620(c) - Quorum.In lieu of the requirements of Rule 4350(f), we follow Argentine law and our bylaws, which distinguish between ordinary meetings and extraordinary meetings and require,both of them can be celebrated using teleconference technology, as long as the regulations related to accreditation, registration and quorum are complied with and the simultaneity of the shareholders and immediately of the process of verbal communication and issuance of votes is guaranteed. The supervisory committee shall state the regularity of the resolutions adopted. The board of directors shall establish the rules and technical matters related to remote participation pursuant to the current rules and in conformity with the National Exchange Commission regulations. Shareholders physically present at the time and those using teleconference technologies will be taken into consideration for the quorum. In connection with ordinary meetings, that a quorum consistconsists of a majority of stocks entitled to vote. If no quorum is present at the first meeting, a second meeting may be called, in which the shareholders present or communicated through teleconference technologies, regardless of their number, constitute a quorum. Resolutions may be adopted by an absolute majority of the votes present.present or communicated through teleconference technologies. Argentine law, and our bylaws, requires in connection with extraordinary meetings, that a quorum consist of 60% of the stock entitled to vote. However, if such quorum is not present at the first meeting, our bylaws provide that a second meeting may be called and may be held with the number of shareholders present.present or communicated through teleconference technologies. In both ordinary and extraordinary meetings, decisions are adopted by an absolute majority of votes present at the meeting or communicated through teleconference technologies, except for certain fundamental matters (such as mergers and spin-offs (when we are not the surviving entity and the surviving entity is not listed on any stock exchange), anticipated liquidation, change in its domicile outside of Argentina, total or partial recapitalization of its statutory capital following a loss, any transformation in our corporate legal form or a substantial change in our corporate purpose, or the issue of bonds) which require an approval by vote of the majority of all the stock entitled to vote (all stock being entitled to only one vote.vote).
Rule 5620(b) -- Solicitation of Proxies.In lieu of the requirements of Rule 5620(b), we follow Argentine law which requires that notices of shareholders’ meetings be published, for five consecutive days, in the Official Gazette and in a widely published newspaper in Argentina no earlier than 45 calendar days prior to the meeting and at least 20 calendar days prior to such meeting. In order to attend a meeting and be listed on the meeting registry, shareholders are required to submit evidence of their book-entry share account held at Caja de Valores S.A. up to three business days prior to the scheduled meeting date. If entitled to attend the meeting, a shareholder may be represented by proxy (properly executed and delivered with a certified signature) granted to any other person, with the exception of a director, syndic, member of the Supervisory Committee, manager or employee of the issuer, which are prohibited by Argentine law from acting as proxies. In addition, our ADS holders receive, prior to the shareholders’ meeting, a notice listing the matters on the agenda, a copy of the annual report and a voting card.
Rule 5630(s) -- Conflicts of InterestIn lieu of the requirements of Rule 5630(a), we follow Argentine law which requires that related party transactions be approved by the audit committee when the transaction exceeds one percent (1%) of the corporation’s net worth, measured pursuant to the last audited balance sheet,. Directors can contract with the corporation only on an arm’s length basis. If the contract is not in accordance with prevailing market terms, such transaction must be pre-approved by the board of directors (excluding the interested director). In addition, under Argentine law, a shareholder is required to abstain from voting on a business transaction in which its interests may be in conflict with the interests of the company. In the event such shareholder votes on such business transaction and such business transaction would not have been approved without such shareholder’s vote, such shareholder may be liable to the company for damages and the resolution may be declared void.
 

 
This section is not applicable.
 

 
193



 
 
Item 17.                      Financial Statements
 
We have responded to Item 18 in lieu of responding to this Item.
 
Item 18.                      Financial Statements
 
Reference is made to pages F-1 through F-374.F-309
 
Index to Financial Statements (see page F-1).
 

 
194


Item 19.  Exhibits
 
Exhibit No.Description of Exhibit
 
1.1*By-laws (Estatutos) of the registrant, which serve as the registrant’s articles of incorporation and by-laws, and an English translation thereof.
1.2****English translation of the amendment to the bylaws.
1.3*********Amended and restated English translation of the bylaws.
1.41.4**********bylaws.
2.1*******
Indenture dated September 7, 2011, among us, as issuer, the Bank of New York Mellon, as trustee, co-registrar, principal paying agent and transfer agent, Banco Santander Rio, S.A., as registrar, paying agent, transfer agent and representative of the trustee in Argentina, and The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg Paying and Transfer Agent, for the issuance of the U.S.$US$ 60,000,000, 7.50% Fourth Series, Class VIII Senior Notes Due 2014.
2.2Indenture, dated July 20, 2010, between IRSA Inversiones y Representaciones Sociedad Anónima as Issuer, The Bank of New York Mellon as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent, and Banco Santander Río S.A. as Registrar, Paying Agent, Transfer Agent and Representative of the Trustee in Argentina, with respect to IRSA Inversiones y Representaciones S.A.’s US$400,000,000 Global Note Program, pursuant to which US$150,000,000 aggregate principal amount of IRSA Inversiones y Representaciones Sociedad Anónima’s 11.500% Notes due 2020, Series No. 2, were issued.
2.3First Supplemental Indenture, dated March 28, 2016, between IRSA Inversiones y Representaciones Sociedad Anónima as Issuer and The Bank of New York Mellon as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent to the Indenture, dated July 20, 2010, between IRSA Inversiones y Representaciones Sociedad Anónima as Issuer, The Bank of New York Mellon as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent, and Banco Santander Río S.A. as Registrar, Paying Agent, Transfer Agent and Representative of the Trustee in Argentina, with respect to IRSA Inversiones y Representaciones Sociedad Anónima’s US$400,000,000 Global Note Program, pursuant to which US$150,000,000 aggregate principal amount of IRSA Inversiones y Representaciones Sociedad Anónima’s 11.500% Notes due 2020, Series No. 2, were issued.
2.4Indenture, dated March 23, 2016, between IRSA Propiedades Comerciales S.A. as Issuer, The Bank of New York Mellon as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent, and Banco Santander Río S.A. as Registrar, Paying Agent, Transfer Agent and Representative of the Trustee in Argentina, with respect to IRSA Propiedades Comerciales S.A.’s US$500,000,000 Global Note Program, pursuant to which US$360,000,000 000 aggregate principal amount of IRSA Propiedades Comerciales S.A.’s 8.750% Notes due 2023, Series No. 2, were issued.
2.5First Supplemental Indenture, dated March 23, 2016, between IRSA Propiedades Comerciales S.A., as Issuer and The Bank of New York Mellon, as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent, The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg Paying Agent and Luxembourg Transfer Agent and Banco Santander Río S.A., as Registrar, Paying Agent, Transfer Agent and Representative of the Trustee in Argentina to the Indenture, dated March 23, 2016, between IRSA Propiedades Comerciales S.A. as Issuer, The Bank of New York Mellon as Trustee, Co-Registrar, Principal Paying Agent and Transfer Agent, and Banco Santander Río S.A. as Registrar, Paying Agent, Transfer Agent and Representative of the Trustee in Argentina, with respect to IRSA Propiedades Comerciales S.A.’s US$500,000,000 Global Note Program, pursuant to which US$360,000,000 000 aggregate principal amount of IRSA Propiedades Comerciales S.A.’s 8.750% Notes due 2023, Series No. 2, were issued.
4.1*Consulting Agreement among Cresud S.A.C.I.F. y A. and Dolphin Fund Management S.A. dated October 25, 1994.
4.2**
4.3****
4.4*****
4.5******
4.6*******
4.7********
4.8*********
4.9*********
4.104.10**********
4.11English translation of the Eighth Agreement for the Implementation of the Amendment to the Corporate Services Master Agreement dated November 12, 2015.
8.1List of Subsidiaries.
11.1*** Code of Ethics.
12.1
12.2
13.1
13.2Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Financial Officer.
15.1Consolidated financial statements of IDBD Development Corporation Ltd. as of and for the year ended December 31, 2014 unaudited (not in compliance with U.S. GAAS)

*Incorporated herein by reference to the exhibit to the registrant’s registration statement on Form F-1 (File No. 333-06548) filed with the SEC on March 3, 1997.
 
** Incorporated herein by reference to the report statement on Form 6-K (File No. 333-06548) filed with the SEC on July 1, 2004.
 
*** Incorporated herein by reference to the registrant’s report on Form 6-K (File No. 333-06548) filed with the SEC on August 1, 2005.
 
**** Incorporated herein by reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on December 27, 2007.
 
***** Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on December 30, 2009.
 
****** Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on December 30, 2010.
 
******* Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on December 28, 2011.
 
******** Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on October 30, 2012.
 
********* Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on October 31, 2014.
 

********** Incorporated herein reference to the annual report on Form 20-F (File No. 333-06548) filed with the SEC on November 17, 2015.
 
195

 


SIGNATURES
 
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Form 20-Fannual report on its behalf.
 
 Cresud S.A.C.I.F. y A.CRESUD SOCIEDAD ANÓNIMA COMERCIAL INMOBILIARIA FINANCIERA Y AGROPECUARIA 
    
Date Novermber 17, 2015October 31, 2016By:/s/ MatíasMatias I. Gaivironsky 
  Name Matías I. Gaivironsky 
  Title Chief Financial and Administrative Officer
 


 219
196

 


 
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria 
Page
Report of Independent Registered Public Accounting Firm 
Glossary of terms F - 21
Consolidated Statements of Financial Position as of June 30, 20152016 and 20142015F - 42
Consolidated Statements of (Operations) / Income for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
 
F - 64
Consolidated Statements of Comprehensive (Operations) / Income for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
 
F - 75
Consolidated Statements of Changes in ShareholdersShareholders’ Equity for the fiscal years ended June 30, 2016, 2015 2014 and 2013
2014
 
F - 86
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
 
F - 119
Notes to the Consolidated Financial Statements  F - 1210
Schedule I
F – 194
Schedule II
F - 197
Schedule III
F - 199

 
F-1

 

Report of Independent Registered Public Accounting Firm
 


To the
Board of Directors and Shareholders of
Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria


In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria and its subsidiaries at June 30, 20152016 and 2014,2015, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 20152016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. In addition, in our opinion, the financial statement schedules listed in the accompanying indexpresent fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidatedfinancial statements. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2015,2016, based on criteria established in Internal Control - Integrated Framework (1992) 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in accompanying Management’s Annual Report on Internal Control Over Financial Reporting under Item 15.

Our responsibility is to express opinions on these financial statements,on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, there are risks and uncertainties in relation to the Company’s subsidiary IDB Development. These financial statements do not include any adjustments related to the valuation of IDBD’s assets and liabilities that would be required if IDBD were not able to continue as a going-concern.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 
F-2


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


As described in “Management´s Annual Report on Internal Control over Financial Reporting”, management has excluded IDB Development from its assessment of internal control over financial reporting as June 30, 2016 because it was acquired by the Company in a purchase business combination during 2016. We have also excluded IDB Development from our audit of internal control over financial reporting. IDB Development is an indirect subsidiary (through Tyrus S.A.) whose total assets and total revenue represent 89 % and 80 %, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2016.



PRICE WATERHOUSE & Co. S.R.L.
                                        
By:/s/Carlos Martin Barbafina(Partner)
/s/ Carlos Martín Barbafina (Partner)
Buenos Aires, Argentina
November 17, 2015October 31, 2016




 
 
F-3

 

Glossary of terms
The followings are not technical definitions, but help the reader to understand certain terms used in the wording of the notes to the Group’s Financial Statements.
TermsDefinitions
AcresAgropecuaria Acres del Sud S.A.
AdamaAdama Agricultural Solutions Ltd.
BACSBanco de Crédito y Securitización S.A.
BaicomBaicom Networks S.A.
BartanBartan Holdings and Investments Ltd.
BASEBuenos Aires Stock Exchange
BCRACentral Bank of the Argentine Republic
BHSABanco Hipotecario S.A.
BitaniaBitania 26 S.A.
BMBYBuy Me Buy You (Note 3.A.a)
BrasilagroBrasilagro-Companhia Brasileira de Propriedades Agrícolas
CAMSAConsultores Assets Management S.A.
Carnes PampeanasSociedad Anónima Carnes Pampeanas S.A.
CellcomCellcom Israel Ltd.
ClalClal Holdings Insurance Enterprises Ltd.
CNVSecurities Exchange Commission
CODMChief Operating Decision Maker
CondorCondor Hospitality Trust Inc.
Cresud, the Company or usCresud S.A.C.I.F. y A.
CyrsaCyrsa S.A.
DFLDolphin Fund Ltd.
DICDiscount Investment Corporation Ltd.
DN B.V.Dolphin Netherlands B.V.
DolphinDolphin Fund Ltd. and Dolphin Netherlands B.V.
EHSAEntertainment Holdings S.A.
ENUSAEntretenimiento Universal S.A.
ERSAEmprendimiento Recoleta S.A.
Financial StatementsConsolidated Financial Statements
ETHBETH Bioenergía S.A.
ETHC.A.A. Extra Holdings Ltd.
CPFCollective Promotion Funds
IASInternational Accounting Standards
IASBInternational Accounting Standards Board
IDB TourismIDB Tourism (2009) Ltd.
IDBDIDB Development Corporation Ltd.
IDBGIIDB Group Investment Inc.
IDBHIDB Holdings Corporation Ltd.
IFISAInversiones Financieras del Sur S.A.
IFRICInternational Financial Reporting Standards Interpretation Committee
IFRSInternational Financial Reporting Standard
MPITMinimun Presumed Income Tax
IndarsaInversora Dársena Norte S.A.
IRSAIRSA Inversiones y Representaciones Sociedad Anónima
IRSA CPIRSA Propiedades Comerciales S.A.
KoorKoor Industries Ltd.
LipstickLipstick Management LLC
LRSALa Rural S.A.
MetropolitanMetropolitan 885 Third Avenue Leasehold LLC
NASDAQNational Association of Securities Dealers Automated Quotation
NCNNon-convertible Notes
NFSANuevas Fronteras S.A.
New LipstickNew Lipstick LLC
NISNew Israeli Shekel
NPSFNuevo Puerto Santa Fe S.A.
NYSENew York Stock Exchange
OmbúOmbú Agropecuaria S.A.
PAMSAPanamerican Mall S.A.
PBCProperty & Building Corporation Ltd.
PBELPBEL Real Estate Ltd.
Puerto RetiroPuerto Retiro S.A.
QualityQuality Invest S.A.
RigbyRigby 183 LLC
ShufersalShufersal Ltd.
SRASociedad Rural Argentina
TarshopTarshop S.A.
TASETel Aviv Stock Exchange
Tender offersShare repurchase commitment
YuchanYuchán Agropecuaria S.A.
YatayYatay Agropecuaria S.A.
F- 1
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Financial Position
as of June 30, 20152016 and 20142015
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

Note06.30.16 06.30.15
ASSETS
Note  06.30.15   06.30.14     
Non-current assets             
Investment properties 10  3,474,959   3,454,616 10 and Schedule I
49,766 3,475
Property, plant and equipment 11  1,977,195   2,381,956 1126,300 1,977
Trading properties 12  129,654   132,555 124,472 130
Intangible assets 13  175,763   175,007 1311,814 176
Biological assets 14  458,879   444,853 14677 459
Investments in associates and joint ventures 8, 9  2,772,685   2,375,339 
Investments in joint ventures and associates 8,916,534 2,772
Deferred income tax assets 28  652,186   852,642 251,658 653
Income tax credit    160,457   177,547  173 160
Restricted assets 17  4,301   50,897  129 4
Trade and other receivables 18  426,777   475,349 173,773 427
Financial assets held for sale 183,346 -
Investment in financial assets 19  622,845   275,012 162,226 623
Derivative financial instruments 20  207,602   233 198 208
Employee benefits  4 -
Total non-current assets    11,063,303   10,796,006  120,880 11,064
Current Assets             
Trading properties 12  3,300   4,596 12241 3
Biological assets 14  119,998   195,830 14455 120
Inventories 15  511,350   439,771 153,900 511
Restricted assets 17  607,021   -  748 607
Income tax credit    30,749   19,694  541 31
Assets held for sale 44  -   1,357,866 
Financial assets held for sale 181,256 -
Trade and other receivables 18  1,772,373   1,438,408 1714,158 1,772
Investment in financial assets 19  504,102   495,633 169,673 504
Derivative financial instruments 20  29,554   32,897 1953 30
Cash and cash equivalents 21  633,693   1,002,987 2014,096 634
Total current assets    4,212,140   4,987,682  45,121 4,212
TOTAL ASSETS    15,275,443   15,783,688  166,001 15,276
SHAREHOLDERS’ EQUITY             
Capital and reserves attributable to equity holders of the parent             
Share capital    494,777   490,997  495 495
Treasury stock    6,866   10,566 
Inflation adjustment of share capital    64,530   64,047 
Inflation adjustment of treasury stock    895   1,378 
Treasury shares  7 7
Inflation adjustment of share capital and treasury shares  65 65
Share premium    659,464   773,079  659 659
Additional paid-in capital from treasury stock    12,678   - 
Cost of treasury stock    (32,198)  (54,876)
Share warrants    -   106,264 
Changes in non-controlling interests    53,806   (15,429)
Cumulative translation adjustment    443,096   633,607 
Equity-settled compensation    81,988   70,028 
Additional paid-in capital from treasury shares 16 13
Legal reserve    -   81,616  83 -
Reserve for new developments    -   17,065 
Special Reserve    -   633,940 
Reserve for the acquisition of securities issued by the company   32,198   200,000 
Accumulated deficits    (246,069)   (1,066,428)
Other reserves 271,086 579
Accumulated Deficit  (1,390) (245)
Equity attributable to equity holders of the parent   1,572,031   1,945,854  1,021 1,573
Non-controlling interest    2,329,927   2,488,932  14,211 2,330
TOTAL SHAREHOLDERS’ EQUITY    3,901,958   4,434,786  15,232 3,903

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

F
F- 2
F-4

 

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Financial Position(Continued)
as of June 30, 20152016 and 20142015 (Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

 Note06.30.16 06.30.15
LIABILITIES    
Non-current liabilities    
Trade and other payables                                                                                 211,528 264
Borrowings                                                                                 2393,808 5,833
Deferred income tax liabilities                                                                                 257,662 151
Derivative financial instruments                                                                                 19121 270
Payroll and social security liabilities                                                                                  21 5
Provisions                                                                                 221,341 387
Employee benefits                                                                                 24689 -
Total non-current liabilities                                                                                  105,170 6,910
Current liabilities    
Trade and other payables                                                                                 2118,443 1,307
Income tax and minimum presumed income tax liabilities  624 142
Payroll and social security liabilities                                                                                  1,856 230
Borrowings                                                                                 2323,488 2,466
Derivative financial instruments                                                                                 19147 263
Provisions                                                                                 221,041 55
Total current liabilities                                                                                  45,599 4,463
TOTAL LIABILITIES                                                                                  150,769 11,373
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 166,001 15,276
 
 Note  06.30.15   06.30.14 
LIABILITIES         
Non-current liabilities         
Trade and other payables                                                                                22  264,054   216,760 
Borrowings                                                                                25  5,832,973   5,315,335 
Deferred income tax liabilities                                                                                28  150,691   470,045 
Derivative financial instruments                                                                                20  269,949   320,847 
Payroll and social security liabilities                                                                                23  5,539   5,041 
Provisions                                                                                24  386,948   220,489 
Total non-current liabilities                                                                                   6,910,154   6,548,517 
Current liabilities         
Trade and other payables                                                                                22  1,306,835   1,004,180 
Income tax liabilities                                                                                   142,361   73,429 
Payroll and social security liabilities                                                                                23  230,400   202,546 
Borrowings                                                                                25  2,466,030   2,639,491 
Derivative financial instruments                                                                                20  262,734   53,419 
Provisions                                                                                24  54,971   20,708 
Liabilities held for sale                                                                                44  -   806,612 
Total current liabilities                                                                                   4,463,331   4,800,385 
TOTAL LIABILITIES                                                                                   11,373,485   11,348,902 
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES   15,275,443   15,783,688 

The accompanying notes are an integral part of these Consolidated Financial Statements.


FF- 3
F-5

 

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Consolidated Statements of (Operations) / Income
for the fiscal years ended June 30, 2016, 2015 and 2014
(All amounts in millions of Argentine Pesos, except otherwise indicated)
 Note06.30.16 06.30.15 06.30.14
Revenues                                                                               2835,384 5,652 4,604
Costs                                                                               29(26,090) (4,770) (3,913)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest 1,660 1,324 1,152
Changes in the net realizable value of agricultural produce after harvest 208 (34) (17)
Gross profit                                                                                11,162 2,172 1,826
Gain from disposal of investment properties                                                                                    101,101 1,150 231
(Loss) / Gain from disposal of farmlands                                                                                (2) 550 91
General and administrative expenses                                                                                   30(2,244) (618) (533)
Selling expenses                                                                                   30(6,279) (474) (354)
Other operating results, net                                                                                  32(44) 12 (75)
Profit from operations                                                                                3,694 2,792 1,186
Share of profit / (loss) of joint ventures and associates       8,9
473 (1,026) (410)
Profit from operations before financing and taxation  4,167 1,766 776
Finance income                                                                                   331,974 241 288
Finance cost                                                                                   33(7,719) (1,685) (2,852)
Other financial results                                                                                   33(510) 156 (10)
Financial results, net                                                                                   33(6,255) (1,288) (2,574)
(Loss) / Profit before income tax                                                                                (2,088) 478 (1,798)
Income tax                                                                                  25197 (303) 389
(Loss) / Profit for the year                                                                                (1,891) 175 (1,409)
       
Attributable to:      
Equity holders of the parent                                                                                (1,038) (250) (1,068)
Non-controlling interest                                                                                (853) 425 (341)
       
(Loss) / Profit per share attributable to equity holders of the parent during the year:      
Basic                                                                                (3.82) 0.36 (2.15)
Diluted                                                                                (i) (3.82) 0.32 (i) (2.15)
(i)
Due to the loss for the year, there is no diluted effect on this result.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F- 4
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Comprehensive (Operations) / Income Statements
for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

 Note  06.30.15   06.30.14   06.30.13 
Revenues31  5,651,805   4,604,011   3,528,551 
Costs                                                                            32  (4,769,715)  (3,914,592)  (3,120,495)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest   1,324,152   1,152,653   886,744 
Changes in the net realizable value of agricultural produce after harvest   (34,471)  (17,447)  11,756 
Gross profit                                                                               2,171,771   1,824,625   1,306,556 
Gain from disposal of investment properties3  1,150,230   230,918   177,999 
Gain from disposal of farmlands                                                                             3  550,462   91,356   149,584 
General and administrative expenses                                                                            33  (617,820)  (533,939)  (346,383)
Selling expenses                                                                            33  (474,158)  (352,726)  (279,463)
Other operating results, net                                                                            35  12,209   (75,008)  98,068 
Profit from operations                                                                               2,792,694   1,185,226   1,106,361 
Share of loss of associates and joint ventures8,9  (1,024,972)  (408,651)  (9,818)
Profit from operations before financing and taxes   1,767,722   776,575   1,096,543 
Finance income                                                                            36  241,109   288,188   200,857 
Finance cost                                                                            36  (1,684,328)  (2,852,000)  (1,124,746)
Other financial results                                                                            36  155,058   (10,586)  15,128 
Financial results, net                                                                                (1,288,161)  (2,574,398)  (908,761)
Profit / (Loss) before income tax                                                                                479,561   (1,797,823)  187,782 
(Loss) /Income tax expense                                                                             28  (303,350)  389,415   (33,519)
Profit / (Loss) for the year                                                                                176,211   (1,408,408)  154,263 
              
Attributable to:             
Equity holders of the parent                                                                                (249,619)   (1,067,880)  (26,907)
Non-controlling interest                                                                                425,830   (340,528)  181,170 
              
Loss per share attributable to equity holders of the parent during the year:             
Basic                                                                                    (0.51)   (2.15)  (0.05)
Diluted                                                                                    (i)(0.51)  (i) (2.15)  (i) (0.05) 

(i)  Due to the loss attributable to equity holders of the parent during the fiscal years 2015, 2014 and 2013, there is no diluted effect on this result.

The accompanying notes are an integral part of these Consolidated Financial Statements.


F
 
 06.30.16 06.30.15 06.30.14
(Loss) / Profit for the year                                                                                        (1,891) 175 (1,409)
Other comprehensive income / (loss):     
Items that may be reclassified subsequently to profit or loss:     
Currency translation adjustment                                                                                        37 (521) 1,285
Share of currency translation adjustment of joint ventures and associates accounted for using the equity method4,818 81 (17)
Share of change in fair value of hedging instruments net of associates and joint ventures accounted for using the equity method(93) - -
Items that may not be reclassified subsequently to profit or loss:     
Actuarial loss from defined benefit plans net of income taxes (42) - -
Other comprehensive income / (loss) for the year (i)                                                                                        4,720 (440) 1,268
Total comprehensive income / (loss) for the year                                                                                        2,829 (265) (141)
      
Attributable to:     
Equity holders of the parent (646) (441) (437)
   Non-controlling interest 3,475 176 296
 
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
F- 5

 

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Comprehensive Income
for the fiscal years ended June 30, 2015, 2014 and 2013
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


   06.30.15   06.30.14   06.30.13 
Profit / (Loss) for the year                                                                                             176,211   (1,408,408)  154,263 
Other comprehensive income:            
Items that may be reclassified subsequently to profit or loss:            
Currency translation adjustment                                                                                             (521,489)  1,284,550   180,908 
Currency translation adjustment from associates and joint ventures  81,606   (17,409)  1,715 
Other comprehensive (loss) / income for the year (i)  (439,883)  1,267,141   182,623 
Total comprehensive loss for the year  (263,672)   (141,267)  336,886 
             
Attributable to:            
Equity holders of the parent                                                                                             (440,130)  (436,557)  65,647 
Non-controlling interest                                                                                             176,458   295,290   271,239 

(i)  Components of other comprehensive income have no impact on income tax.

The accompanying notes are an integral part of these Consolidated Financial Statements.



F-7


Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

 
Consolidated Statements of Changes in Shareholders’ Equity
for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

  Share Capital  Treasury Stock  
Inflation adjustment
of Share Capital
  
Inflation adjustment
of Treasury Stock
  
Share
premium
  
Additional paid-in capital
from treasury stock
  
Cost of Treasury
Stock
  
Share
warrants
  Subtotal  
Changes in
non-controlling interests
  Cumulative translation adjustment  
Equity-settled
compensation
  
Legal
 reserve
  Reserve for new developments  
Special
reserve (1)
  Reserve for the acquisition of securities issued by the company  Accumulated deficit  Subtotal  Non-controlling interest  
Total
shareholders’
equity
 
Balances as of June 30, 2014  490,997   10,566   64,047   1,378   773,079   -   (54,876)  106,264   1,391,455   (15,429)  633,607   70,028   81,616   17,065   633,940   200,000   (1,066,428)  1,945,854   2,488,932   4,434,786 
(Loss) /Profit for the year                                    -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (249,619)   (249,619)   425,830   176,211 
Other comprehensive (loss) for the year  -   -   -   -   -   -   -   -   -   -   (190,511)   -   -   -   -   -   -   (190,511)   (249,372)   (439,883)
Total comprehensive (loss) / income for the year  -   -   -   -   -   -   -   -   -   -   (190,511)   -   -   -   -   -   (249,619)   (440,130)   176,458   (263,672) 
Appropriation of retained earnings resolved by Shareholders’ Meeting held on November 14, 2014:                                                                                
- Share Distribution  5,565   (5,565)  726   (726)  -   -   54,876   -   54,876   -   -   -   -   -   -   (54,876)  -   -   -   - 
- Share Premium                                  -   -   -   -   (220,881)  -   -   -   (220,881)  -   -   -   -   -   -   -   220,881   -   -   - 
- Legal Reserve                                  -   -   -   -   -   -   -   -   -   -   -   -   (81,616)  -   -   -   81,616   -   -   - 
- Reserve for new developments  -   -   -   -   -   -   -   -   -   -   -   -   -   (17,065)  -   -   17,065   -   -   - 
- Other reserves                                  -   -   -   -   -   -   -   -   -   -   -   -   -   -   (633,940)  -   633,940   -   -   - 
- Reserve for the repurchase of equity interest  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (112,926)  112,926   -   -   - 
- Exercise of warrants  80   -   -   -   1,132   -   -   (130)  1,082   -   -   -   -   -   -   -   -   1,082   -   1,082 
Cash dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (136,696)  (136,696)
Capital reduction                                    -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (228,101)  (228,101)
Equity-settled compensation (Note 27)  -   -   -   -   -   -   -   -   -   -   -   27,678   -   -   -   -   -   27,678   7,837   35,515 
Purchase of Treasury stock (Note 30)  (3,068)  3,068   (400)  400   -   -   (32,198)  -   (32,198)  -   -   -   -   -   -   -   -   (32,198)  -   (32,198)
Maturity of share warrants (Note 30)  -   -   -   -   106,134   -       (106,134)  -   -   -   -   -   -   -   -   -   -   -   - 
Equity incentive plan granted (Note 27)  1,203   (1,203)  157   (157)  -   12,678   -   -   12,678   -   -   (15,718)  -   -   -   -   3,040   -   -   - 
Changes in non- controlling interest (Note 3)  -   -   -   -   -   -   -   -   -   69,235   -   -   -   -   -   -       69,235   5,282   74,517 
Reimbursement of expired dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   510   510   301   811 
Capital contribution from non-controlling interest  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   15,914   15,914 
Balance as of June 30, 2015  494,777   6,866   64,530   895   659,464   12,678   (32,198)  -   1,207,012   53,806   443,096   81,988   -   -   -   32,198   (246,069)   1,572,031   2,329,927   3,901,958 
 Attributable to equity holders of the parent  
 Share capitalTreasury Shares
Inflation adjustment
 of share capital and treasury shares (i)
Share premiumAdditional paid-in capital from Treasury Shares
Legal
reserve
Other
reserves
(Note 27)
Accumulated DeficitSubtotalNon-controlling interestTotal Shareholders’ equity
Balances as of June 30, 2015                
49576565913-579(245)1,5732,3303,903
Loss for the year                                                  -------(1,038)(1,038)(853)(1,891)
Other comprehensive income for the year ------392-3924,3284,720
Total comprehensive income / (loss) for the year------392(1,038)(646)3,4752,829
As provided by Ordinary and Extraordinary Shareholders’ Meeting held on October 30, 2015 and on November 26, 2015:           
- Legal reserve                                                 -----83-(83)---
- Reserve for future dividends                                                 ------31(31)---
- Cash dividends                                                 ---------(75)(75)
IDBD business combination (Note 3)                                                  ---------8,6098,609
Reserve for share-based compensation ------17-173956
Equity incentive plan granted                                                  ----3-(4)1---
Transaction with non-controlling interest ------106-106387493
Cumulative translation adjustment for interest held before business combination ------(58)-(58)(33)(91)
Acquisition of subsidiaries                                                  ---------3636
Capital reduction                                                  ---------(4)(4)
Share of changes in subsidiaries’ equity ------23-235174
Dividends distribution to non-controlling interest ---------(615)(615)
Reimbursement expired dividends                                                  -------66-6
Capital contributions from non-controlling interest ---------1111
Balances as of June 30, 2016                                                  49576565916831,086(1,390)1,02114,21115,232

(1)       Related to CNV General Resolution N° 609/12. See Note 2.29.
(i)

Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury Shares as of June 30, 2016 and June 30, 2015, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.


F- 6
F-8

 

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Changes in Shareholders’ Equity
for the fiscal years ended June 30, 2014, 2013 and 2012
 (All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)

  Share Capital  Treasury Stock  
Inflation adjustment
of Share Capital
  
Inflation adjustment
of Treasury Stock
  
Share
premium
  
Cost of Treasury
Stock
  
Share
warrants
  Subtotal  
Changes in
non-controlling interests
  Cumulative translation adjustment  
Equity-settled
compensation
  
Legal
 reserve
  Reserve for new developments  
Special
reserve (1)
  Reserve for the acquisition of securities issued by the company  Accumulated deficit  Subtotal  Non-controlling interest  
Total
shareholders’
equity
 
Balance as of June 30, 2013  496,562   5,001   64,773   652   773,079   -   106,264   1,446,331   (21,996)  2,284   8,345   46,835   337,065   695,628   -   (26,522)  2,487,970   2,231,096   4,719,066 
Loss for the year                                 -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (1,067,880)  (1,067,880)  (340,528)  (1,408,408)
Other comprehensive income for the year  -   -   -   -   -   -   -   -   -   631,323   -   -   -   -   -   -   631,323   635,818   1,267,141 
Total comprehensive income / (loss) for the year  -   -   -   -   -   -   -   -   -   631,323   -   -   -   -   -   (1,067,880)  (436,557)  295,290   (141,267)
Appropriation of retained earnings resolved by Shareholders’ Meeting held on October 31, 2013:                                                                            
- Legal reserve                                 -   -   -   -   -   -   -   -   -   -   -   34,781   -   (34,781)  -   -   -   -   - 
- Other reserves                                 -   -   -   -   -   -   -   -   -   -   -   -   -   (26,907)  -   26,907   -   -   - 
- Cash dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   (120,000)  -   -   -   (120,000)  (134,432)  (254,432)
Equity-settled compensation (Note 27)  -   -   -   -   -   -   -   -   -   -   62,742   -   -   -   -   -   62,742   16,429   79,171 
Changes in non- controlling interest (Note 3)  -   -   -   -   -   -   -   -   6,567       -   -   -   -   -   -   6,567   84,089   90,656 
Purchase of Treasury stock (Note 30)  (5,565)  5,565   (726)  726   -   (54,876)  -   (54,876)  -   -   -   -   -   -   -   -   (54,876)  -   (54,876)
Cancellation of Brasilagro warrants  -   -   -   -   -   -   -   -   -   -   (1,059)  -   -   -   -   -   (1,059)  -   (1,059)
Capital reduction                                 -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (4,163)  (4,163)
Release of Reserve for new developments resolved by Shareholders’ Meeting held on April 11, 2014 (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   (200,000)  -   200,000   -   -   -   - 
Reimbursement expired dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   1,067   1,067   623   1,690 
Balance as of June 30, 2014  490,997   10,566   64,047   1,378   773,079   (54,876)  106,264   1,391,455   (15,429)  633,607   70,028   81,616   17,065   633,940   200,000   (1,066,428)  1,945,854   2,488,932   4,434,786 

(1)  Related to CNV General Resolution N° 609/12. See Note 2.29.

The accompanying notes are an integral part of these Consolidated Financial Statements.


F-9


Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

 
Consolidated Statements of Changes in Shareholders’ Equity
for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
 (All(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

  Share Capital  Treasury Stock  
Inflation adjustment
of Share Capital
  
Inflation
adjustment
of
Treasury Stock
  
Share
premium
  
Share
warrants
  Subtotal  
Changes in
non-controlling interest
  Cumulative translation adjustment  
Equity-settled
compensation
  Legal reserve  Reserve for new developments  
Special
reserve (1)
  
Retained earnings /
Accumulated deficit
  Subtotal  Non-controlling interest  Total shareholders’ equity 
Balance as of June 30, 2012  496,562   5,001   164,561   1,657   773,079   106,263   1,547,123   (6,889)  (81,939)  1,833   42,922   389,202   -   666,611   2,558,863   2,132,648   4,691,511 
(Loss) Gain for the year  -   -   -   -   -   -   -   -   -   -   -   -   -   (26,907)  (26,907)  181,170   154,263 
Other comprehensive income for the year  -   -   -   -   -   -   -   -   92,554   -   -   -   -   -   92,554   90,069   182,623 
Total comprehensive income / (loss) for the year  -   -   -   -   -   -   -   -   92,554   -   -   -   -   (26,907)  65,647   271,239   336,886 
Appropriation of retained earnings resolved by Shareholders’ Meeting held on October 31, 2012:                                                                    
- Legal reserve                                  -   -   -   -   -   -   -   -   -   -   3,913   -   -   (3,913)  -   -   - 
- Other reserves                                  -   -   -   -   -   -   -   -   -   -   -   (52,137)  -   52,137   -   -   - 
- Appropriation of retained earnings  -   -   (99,788)  (1,005)  -   -   (100,793)  -   -   -   -   -   -   100,793   -   -   - 
- Cash dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   -   (120,000)  (120,000)  (93,816)  (213,816)
Changes in non-controlling interest (Note 3)  -   -   -   -   -   -   -   (15,107)  -   -   -   -   -   -   (15,107)  (37,509)  (52,616)
Acquisition of non-controlling interest  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   102,723   102,723 
Capital contribution of non-controlling interest  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   8,092   8,092 
Conversion of notes  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   126   126 
Capital distribution                                     -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (152,101)  (152,101)
Equity-settled compensation (Note 27)  -   -   -   -   -   -   -   -   -   6,512   -   -   -   -   6,512   4,037   10,549 
Exercise of warrants  -   -   -   -   -   1   1   -   -   -   -   -   -   -   1   -   1 
Cumulative translation adjustment for interest held before business combination  -   -   -   -   -   -   -   -   (8,331)  -   -   -   -   -   (8,331)  (4,584)  (12,915)
Reimbursement of expired dividends (Note 30)  -   -   -   -   -   -   -   -   -   -   -   -   -   385   385   241   626 
Reallocation RG 609/12 CNV  -   -   -   -   -   -   -   -   -   -   -   -   695,628   (695,628)  -   -   - 
Balance as of June 30, 2013  496,562   5,001   64,773   652   773,079   106,264   1,446,331   (21,996)  2,284   8,345   46,835   337,065   695,628   (26,522)  2,487,970   2,231,096   4,719,066 
 Attributable to equity holders of the parent  
 Share capitalTreasury shares
Inflation adjustment
 of share capital and treasury shares (i)
Share
premium
Additional paid-
in capital from treasury shares
Share
warrants
Legal
 reserve
Special reserve (1)
Other
reserves
(Note 27)
Accumulated DeficitSubtotalNon-controlling interestTotal Shareholders’ equity
Balances as of June 30, 2014 4911165773-10682634851(1,066)1,9472,4894,436
Profit for the year ---------(250)(250)425175
Other comprehensive loss for the year --------(191)-(191)(249)(440)
Total comprehensive (loss) / income for the year --------(191)(250)(441)176(265)
As provided by Ordinary Shareholders’ Meeting held on November 14, 2014:             
- Share distribution 6(6)-----------
- Share premium    (221)-----221---
- Legal reserve ------(82)--82---
- Reserve for new developments --------(17)17---
- Other reserves -------(634)-634---
- Reserve for repurchase of shares --------(113)113---
- Exercise of warrants ---1------1-1
Cash dividends -----------(137)(137)
Capital reduction -----------(228)(228)
Reserve for share-based compensation --------28-28836
Acquisition of treasury shares (3)3------(32)-(32)-(32)
Maturity of share warrants ---106-(106)-------
Equity incentive plan granted 1(1)--13---(16)3---
Transaction with non-controlling interest --------69-69574
Reimbursement of expired dividends ---------11-1
Capital contribution from non-controlling interest -----------1717
Balances as of June 30, 2015 49576565913---579(245)1,5732,3303,903

(1)  Related to CNV General Resolution N° 609/12. See Note 2.29.
(i)

Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury Shares as of June 31, 2015 and June 30, 2014, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.


F- 7
F-10

 

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Consolidated Statements of Cash FlowsChanges in Shareholders’ Equity
for the fiscal years ended June 30, 2016, 2015 2014 and 20132014
 (All(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

 Note 06.30.15  06.30.14  06.30.13 
Operating activities:          
Cash generated from operations before income tax paid                                                       21  924,421   1,163,074   931,318 
Income tax paid                                                                                 (429,907)  (279,911)  (282,799)
Net cash generated from operating activities   494,514   883,163   648,519 
Investing activities:             
Acquisition of subsidiaries, net of cash acquired   -   -   (117,874)
Acquisition of interest in associates and joint ventures   (1,241,562)  (1,131,806)  (25,899)
Capital contributions to associates and joint ventures   (126,386)  (60,299)  (67,438)
Proceeds from sale of associates and joint ventures   55,842   22,754   - 
Purchases of investment properties                                                                                 (249,677)  (271,921)  (212,988)
Proceeds from sale of investment properties                                                                                 2,446,687   402,218   128,595 
Purchases of property, plant and equipment                                                                                 (220,633)  (133,423)  (137,534)
Proceeds from sale of property, plant and equipment   2,391   796   3,225 
Proceeds from sale of farmlands                                                                                 325,962   125,935   230,412 
Payments of purchase of properties                                                                                 -   (6,048)  - 
Purchases of intangible assets                                                                                 (10,134)  (14,559)  (2,691)
Advances for purchase of property, plant and equipment   (13,995)  (29,647)  (15,780)
Acquisition of Investment in financial assets                                                                                 (4,609,605)  (3,682,960)  (1,738,968)
Proceeds from disposals of Investment in financial assets   4,486,616   3,870,820   1,868,547 
Loans granted to associates and joint ventures   -   (2,090)  (59,836)
Loans repayments received from associates and joint ventures   10,443   1,913   1,774 
Dividends received                                                                                 17,961   22,372   53,443 
Net cash generated from / (used in) investing activities   873,910   (885,945)  (93,012)
Financing activities:             
Repurchase of convertible notes                                                                                 (305,026)  (163,466)  - 
Repurchase of equity interest                                                                                 (32,851)  (97,726)  - 
Proceeds from issuance of non-convertible notes   693,382   1,051,823   800,404 
Payment of non-convertible notes                                                                                 (1,071,997)  (799,559)  (423,118)
Issuance of trust debt titles                                                                                 -   14,950   - 
Payment of trust debt titles                                                                                 (9,733)  (5,424)  - 
Borrowings                                                                                 1,497,750   793,447   878,622 
Repayments of borrowings                                                                                 (1,334,494)  (590,114)  (508,490)
Payment of seller financing of shares                                                                                 (105,861)  -   - 
Payments of borrowings from associates and joint ventures   (2,250)  (1,640)  - 
Borrowings from associates and joint ventures   22,151   17,246   70,714 
Exercise of warrants                                                                                 1,082   -   1 
Cancellation of Brasilagro warrants                                                                                 -   (1,059)  - 
Payment of seller financing                                                                                 (3,142)  (2,250)  (26,347)
Acquisition of non-controlling interest in subsidiaries   (32,306)  (1,208)  (49,868)
Distribution of share capital of subsidiaries                                                                                 -   (4,263)  (152,102)
Dividends paid                                                                                 (33,509)  (243,637)  (239,352)
Sale of equity in subsidiaries to non-controlling interest   181,781   313   - 
Capital reduction of subsidiaries                                                                                 (228,101)  -   - 
Acquisition of derivative financial instruments   -   (37,961)  - 
Payment of derivative financial instruments                                                                                 (233,135)  -   - 
Proceeds from derivative financial instruments   1,506   62,158   - 
Contributions from non-controlling interest                                                                                 15,914   139,058   8,092 
Interest paid                                                                                 (799,402)  (576,937)  (375,716)
Net cash used in financing activities                                                                                 (1,778,241)  (446,249)  (17,160)
Net (decrease) increase in cash and cash equivalents   (409,817)  (449,031)  538,347 
Cash and cash equivalents at beginning of year21  1,002,987   1,047,586   471,922 
Foreign exchange gain on cash and cash equivalents   40,523   404,432   37,317 
Cash and cash equivalents at end of year                                                                                 633,693   1,002,987   1,047,586 

 Attributable to equity holders of the parent  
 Share capitalTreasury shares
Inflation adjustment
 of share capital and treasury shares (i)
Share
premium
Share
warrants
Legal
 reserve
Special reserve (1)
Other
reserves
(Note 27)
Accumulated DeficitSubtotalNon-controlling interestTotal Shareholders’ equity
Balances as of June 30, 2013                                                   49756577310647696326(27)2,4882,2314,719
Loss for the year                                                   --------(1,068)(1,068)(341)(1,409)
Other comprehensive income for the year                                                   -------631-6316371,268
Total comprehensive income / (loss) for the year -------631(1,068)(437)296(141)
As provided by Ordinary Shareholders´ Meeting held on October 31, 2013:            
- Legal reserve                                                   -----35(35)-----
- Other reserves                                                   ------(27)-27---
- Cash dividends                                                   -------(120)-(120)(134)(254)
Reserve for share-based compensation                                                   -------63-631679
Transaction with non-controlling interest                                                   -------7-78491
Acquisition of treasury shares                                                   (6)6-----(55)-(55)-(55)
Cancellation of Brasilagro warrants                                                   -------(1)-(1)-(1)
Capital reduction                                                   ----------(4)(4)
Release of Reserve for new developments resolved by Ordinary Shareholders’ Meeting held on April 11, 2014------------
Reimbursement expired dividends                                                   --------22-2
Balances as of June 30, 2014                                                   491116577310682634851(1,066)1,9472,4894,436
(i)
Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury Shares as of June 30, 2014 and June 30, 2013, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.
 


F- 8
F-11

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements of Cash Flows
for the fiscal years ended June 30, 2016, 2015 and 2014
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina


 Note06.30.16 06.30.15 06.30.14
Operating activities:      
Cash generated from operations                                                                                      204,866 924 1,163
Income tax paid                                                                                       (811) (430) (280)
Net cash generated from operating activities                                                                                       4,055 494 883
Investing activities:      
Cash incorporated by business combination                                                                                       9,193 - -
Acquisition of interest in joint ventures and associates                                                                                       - (1,242) (1,132)
Capital contributions to joint ventures and associates                                                                                       (207) (126) (60)
Sale of associates and joint ventures                                                                                       9 - -
Acquisition of investment properties                                                                                       (888) (250) (272)
Sale of joint ventures and associates                                                                                       - 56 23
Sale of investment properties                                                                                       1,394 2,447 402
Acquisition of property, plant and equipment  (1,145) (221) (133)
Sale of property, plant and equipment  3 12 1
Sale of farmlands  - 316 126
Purchase of properties  - - (6)
Acquisition of intangible assets                                                                                       (137) (10) (15)
Acquisition of investments in financial instruments                                                                                       (13,513) (4,610) (3,683)
Sale of investments in financial instruments                                                                                       14,129 4,487 3,871
Loans granted to joint ventures and associates                                                                                       (852) - (2)
Proceeds from loans granted to joint ventures and associates                                                                                       80 10 2
Dividends received                                                                                       593 18 22
Suppliers advances                                                                                       (7) (15) (30)
Net cash generated from (used in) investing activities                                                                                       8,652 872 (886)
Financing activities:      
Repurchase of non-convertible notes                                                                                       (209) (305) (163)
Repurchase of treasury stock                                                                                       - (33) (98)
Issuance of non-convertible notes  8,012 693 1,052
Issuance of trust debt titles  - - 15
Repayment of non-convertible notes                                                                                       (4,291) (1,072) (800)
Proceeds from borrowings                                                                                       7,187 1,498 793
Repayments of trust debt titles                                                                                       - (10) (5)
Repayments of seller financing of shares                                                                                       - (106) -
Repayment of borrowings                                                                                       (11,031) (1,334) (590)
Repayment of borrowings to joint ventures and associates                                                                                       (6) - (2)
Proceeds from exercise of options granted                                                                                       6 - -
Proceeds of borrowings from joint ventures and associates                                                                                       4 22 17
Cancellation of Brasilagro warrants                                                                                       - - (1)
Repayments of seller financing                                                                                       (72) (3) (1)
Acquisition of non-controlling interest in subsidiaries                                                                                       (1,192) (32) (1)
Dividends paid                                                                                       (239) (34) (244)
Capital distribution to non-controlling interest in subsidiaries                                                                                       (207) (228) (4)
Repayments of derivative financial instruments                                                                                       (620) (233) (38)
Proceeds from derivative financial instruments                                                                                       2,093 2 62
Receipts from claims                                                                                       90 - -
Contributions from non-controlling interest                                                                                       1 16 139
Sale of equity interest in subsidiaries to non-controlling interest 86 182 -
Interest paid                                                                                       (4,107) (799) (577)
Net cash used in financing activities                                                                                       (4,495) (1,776) (446)
Net increase (decrease) in cash and cash equivalents                                                                                       8,212 (410) (449)
Cash and cash equivalents at beginning of year                                                                                      20634 1,003 1,048
Foreign exchange gain on cash and cash equivalents                                                                                       5,250 41 404
Cash and cash equivalents at end of year                                                                                      2014,096 634 1,003
 

The accompanying notes are an integral part of these Consolidated Financial Statements.
F- 9
1.  The Group’s business and general information

Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria (“Cresud” or
Notes to the “Company”)Consolidated Financial Statements
(Amounts in millions of Argentine Pesos, except otherwise indicated)
1.
The Group’s business and general information
Cresud was founded in 1936 as a subsidiary of Credit Foncier, a Belgian company primarily engaged in providing rural and urban loans in Argentina and administering real estate holdings foreclosed by Credit Foncier. Credit Foncier was liquidated in 1959, and as part of such liquidation, the shares of Cresud were distributed to Credit Foncier’s shareholders. From the 1960s through the end of the 1970s, the business of Cresud shifted exclusively to agricultural activities.

In 2002, Cresud acquired a 19.85% interest in IRSA, Inversiones y Representaciones Sociedad Anónima (“IRSA”), a real estate company related to certain shareholders of Cresud. In 2009, Cresud increased its ownership percentage in IRSA to 55.64% and IRSA became Cresud’s directly principal subsidiary.

Cresud and its subsidiaries are collectively referred to hereinafter as the Group. See Note 2.3.for2.3. for a description of the Group’s companies.

The Company is domiciled in the Republic of Argentina. The address of its registered office is Moreno 877, 23rd Floor, Buenos Aires, Argentina.
IFISA is our parent company and is a corporation established and domiciled in Uruguay and IFIS Limited is the ultimate parent company of the group.
The Board of Directors has approved these Financial Statements for issue on October 31, 2016.
As of the end of year,June 30, 2016, the Group operates in two major lines of business: (i) Agriculturalagricultural business and (ii) Urban Propertiesurban properties and Investments business. See Note 6 for a descriptioninvestments business, which is divided into two operations centers: (a) Operations Center in Argentina and (b) Operations Center in Israel. They are developed through several operating companies and the main ones are listed below (Note 7):
F- 10
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of the Group’s segments.Argentine Pesos, except otherwise indicated)

1.
The Group’s business and general information (Continued)
(i)
Remains in current and non-current assets, as financial assets and other assets held for sale (see Note 18).
(ii)
Corresponds to Group’s joint ventures and associates, which are hence excluded from consolidation.
F- 11
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
1.
The Group’s business and general information (Continued)
Agricultural business operations are comprised
Within the agricultural business, the Group, through Cresud, engaged in the operation of crop production, cattle feeding, raising, fattening and slaughtering, milk production, sugarcane production, brokerage activities and brokerage activities.sale of supplies. The Group currently has agricultural operations and investments in Argentina, Brazil, Uruguay, Paraguay and Bolivia.

The Cresud's shares are listed on the Buenos Aires Stock Exchange ("BCBA", as per its Spanish acronym) and in NASDAQ (National Association of Securities Dealers Automated Quotation). Brasilagro’s shares are listed and traded on both the Novo Mercado del BOVESPA and the NYSE.
Urban Properties and Investments business
Operations Center in Argentina
The activities of the operations center in Argentina are conducted primarilymainly developed through IRSA and IRSA’s principal subsidiary, IRSA Propiedades Comerciales (“IRSA CP” formerly Alto Palermo S.A.).CP. Through IRSA and IRSA CP, the Group owns, manages and develops 16 shopping centers across Argentina, a portfolio of office and other rental properties in the Autonomous City of Buenos Aires, the capital of Argentina, and since 2009 it entered into the United StatedStates of AmericansAmerica (“USA”) real estate market, mainly through the acquisition of non-controlling interests in office buildings and hotels. Through IRSA orand IRSA CP, the Group also develops residential properties for sale. The Group, through IRSA, is also involved in the operation of branded hotels. The Group uses the term “real estate” indistinctively in these consolidated financial statementsFinancial Statements to denote investment, development and/or trading properties activities.



IRSA CP's shares are listed and traded both on the BASE (Merval: IRCP) and the NASDAQ (NASDAQ: IRCP). IRSA's shares are listed both on the BASE (NASDAQ: IRSA) and the NYSE (NYSE: IRS).
 
F-12

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



1.  
The Group’s business and general information (Continued)

During fiscal year ended June 30, 2014, the Group made an investment in the Israeli market, through Dolphin Fund Ltd. (“DFL”) and Dolphin Netherlands B.V. (“DN B.V.”, and together with DFL “Dolphin”), in IDB Development Corporation Ltd. ("IDBD") an Israeli Company, with an initial interest of 26.65%. As of June 30, 2015 the indirect equity interest in IDBD amounts to 49.0%. IDBD is one of the Israeli largest and most diversified conglomerates, which is involved, through its subsidiaries, in several markets and industries, including real estate, retail, agribusiness, insurance, telecommunications, etc.; controlling or having non controlling interests in companies as: Clal Insurance (Insurance Company), Cellcom (Mobile phone services), Adama (Agrochemicals), Super-Sol (supermarket), PBC (Real Estate), among others. IDBD went public in Tel Aviv Stock Exchange ("TASE") since May, 2014.

The activities of the Group’s segment “Financial operations and others” is carried out mainly through Banco Hipotecario S.A. (“BHSA”),BHSA, where it haswe have a 29.99%29.91% interest (without considering treasury shares). BHSA is a commercial bank offering a wide variety of banking activities and related financial services to individuals, small, medium-sized and large corporations, including the provision of mortgaged loans. BHSA’s shares are listed on the Buenos Aires Stock Exchange (“BCBA”).BCBA. Additionally, the Group has a 43.15% interest42.81% indirect equityinterest in Tarshop S.A (“Tarshop”) whose main business comprisesactivities are credit cards activitiescard and the provision of loans.loan origination transactions.

Cresud’s and IRSA Propiedades Comerciales’s shares are listed and traded on both the Buenos Aires Stock Exchange (“BCBA”) and the National Association of Securities Dealers Automated Quotation (“NASDAQ”). IRSA’s shares are listed and traded on both the BCBA and the New York Stock Exchange (“NYSE”). Brasilagro’s shares are listed and traded on both the Novo Mercado del BOVESPA and the New York Stock Exchange (“NYSE”).

These consolidated financial statements have been approved for issue by the Board of Directors on November 17, 2015.

2.  Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.


F- 12
F-13

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amountsAmounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



1.
The Group’s business and general information (Continued)
Operations Center in Israel
During the fiscal year ended June 30, 2014, the Group made an investment in the Israeli market, through DFL and DN B.V., in IDBD -an Israeli company-, with an initial interest of 26.65%. IDBD is one of the Israeli largest and most diversified conglomerates, which is involved, through its subsidiaries and other investments, in several markets and industries, including real estate, retail, agribusiness, insurance, telecommunications, etc.; controlling or equity interest in companies such as Clal (Insurance Company), Cellcom (Telecommunications), Adama (Agrochemicals), Shufersal (Supermarkets), PBC (Real Estate), among others. IDBD traded its shares in TASE between May 2014 and March 2016. To date, it is only listed as a “Debentures Company” under the Israeli law, because some of its bonds are trading.
On October 11, 2015, the Group gained effective control over IDBD (Note 3). As a result, the Group has consolidated significant figures of several industries from IDBD and its subsidiaries.
IDBD has diverse debts containing certain covenants which have been successively negotiated, resulting in several waivers actually expiring in December 2016. IDBD estimates that if the original covenants of such loans were to become effective again, it would not be able to honor them. Non-compliance could have the effect of creditors requiring immediate repayment of the debt.
As a holding company, IDBD’s main sources of funds derive from the dividends distributed by its subsidiaries, which have experienced a reduction in recent years. Yet, there are restrictions as to the payment of dividends based on the indebtedness level in some subsidiaries. IDBD has projected future cash flows and expects to have the required liquidity to meet its commitments by issuing new debt in Israel, selling financial assets including Clal and dividend payouts by Clal. IDBD could also secure additional financing through the private issuance of equity securities.
On December 2013, it was published in the Official Gazette of Israel the Promotion of Competition and Reduction of Concentration The Law, 5774-2013 (“the Concentration Law”). This law has material implications for IDBD and its investments, including the disposal of the controlling interest in Clal, a potential delisting of IDBD or DIC so as to no longer trade its shares publicly or a merger between IDBD and DIC.
F- 13
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
1.
The Group’s business and general information (Continued)
All factors mentioned above, mainly (i) IDBD’s current financial position and need of financing to honor its financial debt and other commitments, (ii) the renegotiation underway with financial creditors, and (iii) the term set by Israel’s governmental authorities to sell the equity interest in Clal and the potential effects of such sale, in particular, on its market value, raise significant uncertainties as to IDBD’s capacity to continue as a going-concern. These financial statements do not include the adjustments or reclassifications related to the valuation of IDBD’s assets and liabilities that would be required if IDBD were not able to continue as a going-concern.
The Group is and will continue working to address the uncertainties described above.
The Group
The financial position of IDBD and its subsidiaries at the operations center in Israel does not affect the financial position of Cresud and its subsidiaries at the operations center in Argentina.
Cresud and its subsidiaries are not facing financial constraints and are compliant with their financial commitments. In addition, the commitments and other covenants resulting from IDBD´s debt do not have impact on Cresud since such debt has no recourse against Cresud and it is not granted by Cresud’s assets.
There are no significant uncertainties as to the capacity of the Group, as a whole, to operate as a going-concern perspective, with such uncertainties being limited to the operation center in Israel.
2.
Summary of significant accounting policies(Continued)

2.1.
Basis of preparation

Basis of preparation of the Financial Statements
(i)  Basis of preparation

(i)
Basis of preparation
These Consolidated Financial Statements have been prepared in accordance with and compliance with International Financial Reporting Standards (“IFRS”)IFRS issued by International Accounting Standards Board (“IASB”)IASB and interpretations from International Financial Reporting Interpretation Committee (“IFRIC” and knownIFRIC (known before as the Standards Interpretation Committee “SIC”). All IFRS applicable as of the date of these consolidated financial statements have been applied. Additionally,
Under IAS 29 “Financial Reporting in Hyperinflationary Economies”, the Group has adopted certain IFRS that are not effectivefinancial statements of an entity whose functional currency belongs to a hyperinflationary economy, regardless of whether they apply historic cost or current cost methods, should be stated at the current unit of measure as of the date of this consolidated financial statements. For such purpose, in general, inflation is to be computed in non-monetary items from the acquisition or revaluation date, as applicable.  In order to determine whether an economy is to be considered hyperinflationary, the standard lists a set of factors to be taken into account, including an accumulated inflation rate near or above 100% over a three years period.
F- 14
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
As of June 30, 2015, but for which early adoption2016, it is accepted.

The Comisión Nacional de Valores (“CNV”),not possible to compute the National Securities Commission in Argentina, through General Resolutions N° 562/09 and 576/10, has providedaccumulated inflation rate for the application of Technical Resolutions N° 26 and 29three years period ending on that date based on the official statistics of the Federación Argentina de Consejos Profesionales de Ciencias Económicas (“FACPCE”)INDEC (Argentina Statistics Office), which adoptbecause in October 2015, the International Financial Reporting Standards (“IFRS”)INDEC ceased to compute the Wholesale Domestic Price Index (IPIM, as per its Spanish acronym), issued byand started to compute it again as from January 2016.
As of the IASB, for companies subjectdate of this consolidated financial statements, the Argentine peso does not meet the conditions to be treated as the currency of a hyperinflationary economy, pursuant to the public offering regime ruledguidelines set forth by Law 17,811, dueIAS 29. Therefore, these consolidated financial statements have not been restated in constant currency.
However, over the last years, certain macroeconomic variables affecting the agricultural business and the urban properties and investment business of the operations center Argentina, such as payroll costs, input prices and service rates, have experienced significant annual changes. This factor should be taken into consideration in assessing and interpreting the financial situation and results of operations of the Group in these consolidated financial statements.
On October 11, 2015, the Group took over IDBD. IDBD’s fiscal year ends on December 31 each year and the Group’s fiscal year ends on June 30. IDBD’s quarterly and annual reporting follows the guidelines of Israeli standards, which means that the information is only available after the applicable statutory terms in Argentina. Therefore, the Group is not able to include IDBD’s quarterly results in its consolidated financial statements to be filed with the CNV within the applicable statutory terms in Argentina. The Group has started to consolidate IDBD’s results of operations with a three-month lag, adjusted for the effects of material transactions that may have taken place during the reported period. Hence, IDBD’s results of operations for the period beginning on October 11, 2015 (the acquisition date) through March 31, 2016 are included in the Group’s consolidated statement of comprehensive income for the fiscal year ended June 30, 2016, adjusted by such material transactions occurred between April 1 and June 30, 2016.
Given the materiality of IDBD’s figures incorporated, the Group had to change the format of its financial statements for the ease of reading and analysis. The most significant change is in line with the new organizational structure, which is split into two large operations center, agricultural and urban properties and investments business, the last one divided into Argentina and Israel. In this regard, changes have been made to the listing of their shares or corporate notes and for entities that have applied for authorizationtables and their respective order, classification and content in the financial statements, on a geographic basis and taking into consideration the significance of the Group's global operations following IDBD's consolidation.
F- 15
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to be listed under the mentioned regime.Consolidated Financial Statements(Continued)

(Amounts in millions of Argentine Pesos, except otherwise indicated)
(ii)  Current and non-current classification

2.
Summary of significant accounting policies (Continued)
(ii)
Current and non-current classification
The Group presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position according to the operating cycle of each activity.

The operating cycle for the activities of investment property, hotels and agricultural operations of the Group is 12 months. As such, currentCurrent assets and current liabilities include assets and liabilities that are either realized or settled within 12 months from the end of the fiscal year. The operating cycle of the Group’s trading property activities depends on each specific project, and thus cannot be clearly defined. Generally, assets and liabilities classified as trading properties are realized and settled in several years, ranging between 1 and 3 years or, in exceptional cases, even longed. As such, for purposes of classification, the Group has assumed the operating cycle for the activities to be 12 months.

All other assets and liabilities are classified as non-current assets or non-current liabilities. Current and deferred tax assets and liabilities (income tax payable) are presented separately from each other and from other assets and liabilities as current and non-current, respectively.


F-14

 
Cresud Sociedad Anónima,
(iii)
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Presentation currency



2.  
Summary of significant accounting policies (Continued)

(iii)  Presentation currency

The consolidated financial statements are presented in thousandsmillions of Argentine Pesos. Unless otherwise stated or the context otherwise requires, references to ‘Peso amounts’ or ‘Ps.’, are toof Argentine Pesos, references to ‘US$’ or ‘US dollars’ are toof United States dollars, and references to ‘Rs.’ are of Brazilian Reais and references to Brazilian Reais."NIS" are of New Israeli Shekel.

(iv)
Fiscal and harvest year-end

Fiscal year-end
The fiscal year begins on July 1 and ends on June 30 of the following year. However, the Group’s agricultural production is based on the harvest year for crops. A harvest year varies by plant according to the climate in which it is grown. Due to the geographic diversity of the farms, the planting period for a given plant may start earlier on one farm than on another, causing differences in their respective harvesting periods. The financial results are presented on a fiscal year basis.

(v)
Accounting conventions

Accounting criteria
The consolidated financial statements have been prepared under the historical cost convention,criteria, as modified by financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, share-based payments at fair value, biological assets and agricultural produce at the point of harvest measured at fair value less costs to sell, and agricultural produce after harvest measured at net realizable value and financial assets and other assets held for sale and share-based compensation at fair value.

(vi)
Reporting cash flows

Reporting cash flows
The Group reports cash flows from operating activities using the indirect method. Interest paid is presented within financing cash flows. Interest received is presented within investing activities. The acquisitions and disposals of investment properties are disclosed as cash flows from investing activities becauseas this most appropriately reflects the Group’s business activities. Cash flows in respect to trading properties are disclosed as cash flows from operating activities because these items are routinely sold in the ordinary course of business.



F- 16
F-15

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amountsAmounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
2.           Summary of significant accounting policies(Continued)

(vii)
Use of estimates

Use of estimates
The preparation of consolidated financial statements at a certain date requires the Management of the Group to make estimationsmaking estimates and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period.year. Actual results might differ from the estimates and evaluations made at the date of preparation of these financial statements. The most significant judgments made by Management in applying the Group’s accounting policies and the major estimations and significant judgments are described in Note 5.

2.1.  New accounting standards
2.2.

New accounting standards
The following standards, amendments and interpretations have been published by the IASB and by the IFRIC. Below we outline the standards, amendments and interpretations that may potentially have an impact on the Group at the time of application.

IFRS 16 "Leases". Will supersede IAS 17 currently in force (and associated interpretations) and its scope includes all leases, with a few specific exceptions. Under the new standard, lessees are required to account for leases under one single model in the balance sheet that is similar to the one used to account for financial leases under IAS 17. There are two exceptions to this rule: to recognize the lease of low-cost assets (for example, personal computers) and short-term leases (for instance, leases for a 12 months or shorter term). As regards the lease commencement date, the lessee shall recognize the obligation to make rental payments (for instance, leases payable) and an asset that represents the right to use the leased asset during the term of the lease agreement (rights of use). There is almost no changes to lessor accounting. Become effective for the fiscal year beginning on January 1, 2019, that is, fiscal year ended on June 30, 2020 for the Group. It may be applied earlier provided IFRS 15 is also adopted. The Group is currently assessing the potential impact of the amendments on its financial statements.
Amendments to IAS 7 "Disclosure initiative". Amendments provide that the entity shall disclose information so that users of the financial statements may assess the changes in liabilities resulting from financing activities, including both cash-flow and non-cash-flow derivatives. Become effective for the fiscal year beginning on January 1, 2017, that is, fiscal year ended on June 30, 2018 for the Group. Comparative information for prior fiscal years is not mandatory. Earlier adoption is permitted. The Group is currently assessing the potential impact of the amendments on its financial statements.
Amendments to IAS 12 "Recognition of deferred tax assets for unrealized losses". The amendments clarify the accounting of deferred income tax assets in the case of unrealized losses on instruments measured at fair value. Become effective for the fiscal year beginning on January 1, 2017, that is, fiscal year ended on June 30, 2018 for the Group. Earlier adoption is permitted. The Group is currently assessing the potential impact of the amendments on its financial statements.
F- 17
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
Amendments to IAS 1 "Presentation of financial statements"

In December 2014, the IASB has released amendments to IAS 1 “Presentation of Financial Statements”. These amendments Amendments establish guidance on grouping significant items, provides for the disclosure of relevant information for certain items and disclosures that are to be included in relation to accounting policies adopted by each entity and other additional disclosures in financial statements.

The application of this amendments become Become effective for the fiscal year beginning on January 1, 2016, that is, fiscal year ended on June 30, 2017 for the Group. Earlier adoption is permitted. The Group is currently assessing the potential impact of the amendments on its financial statements.

Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures”

In December 2014, the IASB has released amendments to IFRS 10, IFRS 12 and IAS 28. These amendments refer to the treatment of the consolidation exception for financial entities and their subsidiaries.

 

F-16

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

NotesCycle of annual improvements 2014. IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”: A new classification category has been established for these assets and the amendment adds guidance on how to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data andtreat changes to disposal plans for those assets classified as otherwise indicated)



2.           Summary of significant accounting policies (Continued)

Amendments to IFRS 10 clarifies that the exemption from preparing consolidated financial statementsheld for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity. The exception may be applicable where the company controlling the investment entity accounts for subsidiaries at fair value. Additionally, amendments to IFRS 10 clarify that an investment entity should consolidate a subsidiary that is not an investment company and that provides services that support the investment entity’s activities, so that it acts as an extension of the investment entity. The remaining investments in subsidiaries of an investment entity should be measured at fair value through profit or loss.

Amendments to IAS 28 allow an entity which is not an investment entity, but has an interest in an associate or joint venture which is an investment entity, a policy choice when applying the equity method of accounting. The entity may choose to retain the fair value measurement applied by the investment entity associate or joint venture, or to unwind the fair value measurement and instead perform a consolidation at the level of the investment entity associate or joint venture.

Amendments becomesale. Become effective for the fiscal year beginning on January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group.  Earlier adoption is permitted. The Group is currently assessing the potential impact of the amendments on its consolidated and separate financial statements on this balance sheet date.

Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” – Treatment afforded to sales or contributions of assets between an investor and its associate or joint venture
On September 2014, the IASB has released amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”. The first amendment adds guidance on how to treat losses of control in subsidiaries that does not contain a business as established by IFRS 3 “Business combinations”, thus limiting the amount that may be reclassified from other comprehensive income to income for the year solely to the participation of other investors not related to the investor; it further provides how the residual participation in these investments should be valued, after such loss of control. In the second case, the modifications refer to the recognition of profits and losses resulting from upstream and downstream transactions, between an entity and its associates or joint ventures, when they involve assets that may constitute or not a business, as such is defined in IFRS 3.

Amendments become effective for the fiscal year beginning January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. The Group is currently assessing the potential impact of the amendments on its financial statements.


 
F-17

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.           Summary of significant accounting policies (Continued)

Cycle of annual improvements to IFRS: Amendments to IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”;2014. IFRS 7 “Financial Instruments: Disclosures”: It clarifies that amendments established in December, 2011 on offsetting financial assets and IAS 34 “Interim Financial Reporting”

Onliabilities, and amendments established in September, 2014 will be of retroactive application to annual fiscal years as from January 1, 2013, in the IASB,first case, and January 1, 2016 in its annual improvements, has released amendmentsthe second case. In addition, it sets forth the specific disclosure requirements related to the following standards:

·  
IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”: A new classification category has been established for these assets and the amendment adds guidance on how to treat changes to disposal plans for those assets classified as held for sale.

·  
IFRS 7 “Financial Instruments: Disclosures”: It clarifies that amendments established in December, 2011 on offsetting financial assets and liabilities, and amendments established in September, 2014 will be of retroactive application to annual fiscal years as from January 1, 2013, in the first case, and January 1, 2016 in the second case. In addition, it sets forth the specific disclosure requirements related to servicing contracts related to financial assets transferred.

·  
IAS 34 “Interim Financial Reporting”: It clarifies that supplementary information included in interim financial statements through cross reference with other statements or reference information should be available with such interim financial statements.

The application of this amendments becomeservicing contracts related to financial assets transferred. Become effective for the fiscal year beginning on January 1, 2016, that is, fiscal year ended on June 30, 2017 for the Group. The Group is currently assessing the potential impact of the amendments on its financial statements.

IAS 27 Revised “Separate Financial Statements”

.On August 12, 2014 the IASB has released an amendment to IAS 27 “Equity method in Separate Financial Statements”. The amendment reinstates the equity method as an option to account for investments in subsidiaries, joint ventures and associates in separate financial statements. Amendments become effective for the fiscal year beginning January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. Earlier adoptionIt may be applied earlier. The Group is permitted.currently assessing the potential impact of the amendments on its financial statements.

 

F-18

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

IFRS 9 “Financial Instruments”

On July 24, 2014, the IASB released the final version of IFRS 9 “Financial instruments”, which includes in one single standard all stages of the IASB project to replace IAS 39 “Financial instruments: Recognition and measurement”. Such stages are classification and measurement of financial instruments, impairment and accounting for hedging. This version It adds a new impairment model based on expected losses and introduces some minor amendments to the classification and measurement of financial assets. Additionally, this amendment to IFRS 9 includes the new general hedge accounting model, allow adoption of the treatment of fair value changes due to own credit on liabilities designated at fair value through profit or loss. The new standard replaces all previous versions of IFRS 9 and becomes effective for fiscal years starting on or after January 1, 2018, this is, for financial statements ended on June 30, 2019 for the Group. Earlier adoption is permitted.

The Group has adoptedis currently assessing the first stagespotential impact of IFRS 9the amendments on its financial statements.
F- 18
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the transition date.Consolidated Financial Statements(Continued)

(Amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
IFRS 15 “Revenue from contracts with customers”. Replaces IAS 11 “Construction contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer loyalty programs”, IFRIC 15 “Agreements for the construction of real estate”, IFRIC 18 “Transfer of assets from customers” and SIC-31 “Revenue – Barter transactions involving advertising services”. Provides the new revenue recognition model derived from contracts with customers. The core principle underlying the model is satisfaction of obligations assumed with customers. Applies to all contracts with customers, other than those covered by other IFRSs, such as leases insurance and financial instruments contracts. The standard does not address recognition of interest or dividend income. IFRS 15 becomes effective for all fiscal years beginning as from January 1, 2018, that is, for financial statements ended on June 30, 2019 and may be adopted earlier. Application is retroactive. As of the date of these consolidated financial statements, the Group is assessing the impact that this standard shall have on its financial position and the results of operations.
Amendments to IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets”. The amendments provide further guidance on the calculation of depreciation and amortization. Become effective for fiscal years beginning on or after January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. It may be applied earlier. The Group is currently assessing the potential impact of the amendments on its financial statements.
Modification to IFRS 11 “Joint Arrangements”. The amendments clarify accounting for acquisitions where the business involves joint operations. Amendments become effective for fiscal years beginning on or after January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. It may be applied earlier. The Group is currently assessing the potential impact of the amendments on its financial statements.
Amendments to IAS16IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture”

On June, 2014 the International Accounting Standards Board issued the amendments to IAS 16 “Property, Plant and Equipment” and to IAS 41 “Agriculture” whereby the bearer plant concept is defined and bearer plants become part of the scope of IAS 16. A bearer plant is defined as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. Before, bearer plants were not defined and those related to agricultural production were covered by IAS 41.

Bearer plants are solely used to develop produce. The only significant future economic benefits derived from bearer plants result from the sale of the agricultural produce they generate.

Bearer plants meet the definition of property, plant and equipment of IAS 16 and their operation is similar to that of manufacturing. As a result, amendments require that bearer plants be accounted for as property, plant and equipment and covered by IAS 16, rather than IAS 41. The produce growing on bearer plants will continue to be governed by IAS 41.

F- 19
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
Amendments become effective for the fiscal year beginning January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. Earlier adoption is permitted. The
Group's sugarcane fields are recognized as bearer plants under the new definition included in IAS 41. Under IAS 8, modifications are to be applied retrospectively; therefore, the sugar cane field will be reclassified under “Property, plant and equipment” and valued at depreciated cost and depreciated over its useful life under the balance declining method based on the expected yield as from June 30, 2016, with comparative balances being revised retrospectively.
However, the agricultural production growing in sugar cane field will remain under “Biological assets” and will continue to be valued at fair value minus selling costs.
These amendments will imply changes in accounting policies and will have the following impact on the financial situation and results of operations of the Group, is currently assessing the potential impactalready recognized in the preparation of consolidated financial statements on this balance sheet date.as of June 30, 2016, 2015 and 2014:

 

Income statement (summary) 
June 30,
 2016
(Published)
Increase / (Decrease)
June 30,
2016
(Adjusted)
June 30,
2015
(Published)
Increase / (Decrease)
June 30,
2015
(Adjusted)
June 30,
2014
(Published)
Increase / (Decrease)
June 30,
2014
(Adjusted)
Costs  (26,090)(240)(26,330)(4,770)(165)(4,935)(3,913)(114)(4,027)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest 1,6601081,7681,324951,4191,152481,200
Income tax expense  1976
203(303)(5)(308)389(4)
385
(Loss) / Profit for the year  (1,891)(126)(2,017)175(75)100
(1,409)(70)(1,479)
Attributable to:          
Equity holders of the parent  (1,038)(85)(1,123)(250)(57)(307)(1,068)(54)(1,122)
Non-controlling interests  (853)(41)(894)425(18)407(341)(16)(357)
(Loss) / Profit per share attributable to equity holders of the parent during the year:          
Basic  (3.82)-(3.82)(0.36)-(0.36)(2.15)-(2.15)
Diluted  (3.82)-(3.82)(0.36)-(0.36)(2.15)-(2.15)
 
F-19

F- 20
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amountsAmounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

IFRS 15 “Revenue from contracts with customers”

On May 28, 2014, the IASB has published the new IFRS 15 “Revenue from contracts with customers” (IFRS 15) that replaces IAS 11 “Construction contracts”, IAS 18 “Revenue from ordinary operating activities”, IFRIC 13 “Customer loyalty programs”, IFRIC 15 “Agreements for the construction of real estate”, IFRIC 18 “Transfer of assets from customers” and SIC-31 “Revenue – Barter transactions involving advertising services”. IFRS 15 provides the new revenue recognition model derived from contracts with customers. The core principle underlying the model is satisfaction of the obligations assumed with customers. IFRS 15 bases this principle on a single, five-step model that is developed extensively and in detail, including examples.

The new model of ordinary income applies to all contracts with customers, other than those covered by other IFRSs, such as leases insurance and financial instruments contracts. The standard does not address recognition of interest or dividend income.

IFRS 15 becomes effective for all fiscal years beginning as from January 1, 2017 and may be adopted earlier. Application is retroactive. On the balance sheet date, the Company is still assessing the impact that this standard shall have on its financial position and the results of operations.

Amendments to IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets”

On May 12, 2014, the IASB has published amendments to the IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets” denominated “Clarification of acceptable methods of depreciation and amortization” (Amendments to IAS 16 and IAS 38)”. The amendments provide further guidance on the calculation of depreciation and amortization of property, plant and equipment and intangible assets. The application of this amendments become effective for the fiscal year beginning January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. Earlier adoption is permitted. The Company has not yet assessed the impact that this standard shall have on its financial position and the results of its operations

Amendments to IFRS 11 “Joint Arrangements”

On May 6, 2014, the IASB has published amendments to IFRS 11 “Joint Arrangements”, entitled “Accounting for acquisition of interests in joint operations (Amendment to IFRS 11)”. The amendments clarify accounting for such acquisitions where the business involves joint operations. Amendments become effective for the fiscal year beginning January 1, 2016, that is, fiscal year ended June 30, 2017 for the Group. Earlier adoption is permitted. The Company has not yet assessed the impact that this standard shall have on its financial position and the results of its operations.

 

2.
Summary of significant accounting policies (Continued)
 
Statements of financial position (summary) 
June 30,
 2016
(Published)
Increase / (Decrease)
June 30,
2016
 (Adjusted)
June 30,
 2015
(Published)
Increase / (Decrease)
June 30,
2015 (Adjusted)
Biological assets  1,132(20)1,112579(18)561
Property, plant and equipment  26,30054926,8491,9773482,325
Deferred income tax assets  2,19947
2,24668419703
Total Assets  45,12157645,69715,27634915,625
Retained earnings  (1,390)21
(1,369)(245)44
(201)
Cumulative translation adjustment  8072351,04244387530
Total Shareholders’ Equity  15,23225615,4883,9031314,034
F-20

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

On the issue date of these financial statements there are no other standards, amendments and interpretations issued by the IASB and IFRIC that are yet to become effective and that are expected to have a material effect on the Group.

2.3.
Scope of consolidation

Scope of consolidation
(a)  Subsidiaries

(a)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group also analyzeanalyzes whether there is control when it does not hold more than 50% of the voting rights of an entity, but does have capacity to define its relevant activities because of de-facto control.

There may be de-facto control where the relative size of voting rights held by the Group in an entity in relation to the size and dilution of other shareholders gives the Group power to define the relevant activities of such entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition costs are charged to expenseexpensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

IFRS 3 “Business Combination” allows up to 12 months to finalize the accounting for a business combination. Where the accounting for a business combination is not complete by the end of the reporting period in which the business combination occurred, the Group reports provisional amounts.

The Group has elected to recognize acquisition of assets or group of assets carried out between entities under common control who also qualify as “Business Combination” according to IFRS 3, using acquisition method.

The Group recognizes any non-controlling interest in the acquireeacquire on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquiree’sacquire’s net assets.


The Group chooses the method to be used on a case by case base.
 
F-21

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

The excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquire and the acquisition-date fair value of any previous equity interest in the acquireeacquire over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statements of income statements as “Bargain purchases gains”.

Inter-company transactions, balances and unrealized gains and/or losses on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting
F- 21
Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(Amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group. The majority of subsidiaries have the same year-end as the Group’s, however, a small number of subsidiaries have different year-ends. In these circumstances, special-purpose financial statements prepared as of June 30 of each year are used for purposes of the Group consolidation. (Continued)

The Group conducts its business through several operating and holding subsidiaries. Unless otherwise stated,investment companies, the subsidiariesprincipal companies are listed below have share capital consisting solely of ordinary shares, which are held directly or indirectly by the Group and the proportion of ownership interests held equals to the voting rights held by the Group.below:

The country of incorporation or registration is also their place of business. Subsidiaries are shown in alphabetical order.

Ownership interest is shown considering ultimate percentage held by the Company. Subsidiaries are either controlled directly by the Company (i.e. IRSA), or indirectly by other subsidiary (i.e. IRSA Propiedades Comerciales S.A. through IRSA).

 

Agricultural business
 
   June 30, 2016June 30, 2015June 30, 2014
Name of the entityCountry
Main
activity
% of ownership interest held
by the Group (6)
% of ownership interest held
by the NCI
% of ownership interest held
by the Group (6)
% of ownership interest held
by the NCI
% of ownership interest held
by the Group (6)
% of ownership interest held
 by the NCI
Direct equity interest:        
Brasilagro-Companhia Brasileira de Propiedades Agrícolas (1)BrazilAgricultural42.18%57.82%39.76%60.23%39.63%60.37%
Cactus Argentina S.A. (2)ArgentinaAgro-industrial----97.13%-
Sociedad Anónima Carnes Pampeanas S.A.ArgentinaAgro-industrial95.00%5.00%95.00%-39.38%-
Futuros y Opciones.Com S.A.ArgentinaBrokerage59.59%40.41%59.59%40.41%59.59%40.41%
FyO Trading S.A.ArgentinaBrokerage2.20%97.80%----
Granos Olavarría S.A.ArgentinaWarehousing and brokerage2.20%97.80%----
Helmir S.A.UruguayInvestment100.00%-100.00%-100.00%-
IRSA Inversiones y Representaciones Sociedad AnónimaArgentinaReal Estate63.38%36.23%63.91%35.70%64.56%34.55%
Doneldon S.A.UruguayInvestment100.00%-100.00%-100.00%-
Interest indirectly held through BrasilAgro:        
Araucária Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Cajueiro Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Ceibo Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Cremaq Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Engenho de Maracajú Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Flamboyant Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Jaborandi Agrícola Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Jaborandi Propriedades Agrícolas S.A.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Mogno Ltda.BrazilAgricultural99.99%0.01%39.63%60.37%39.63%60.37%
Interest indirectly held through Futuros y Opciones.Com. S.A.:        
FyO Trading S.A.ArgentinaBrokerage96.37%3.63%59.63%40.37%59.63%40.37%
Granos Olavarría S.A.Argentina
Warehousing
and brokerage
96.37%3.63%59.63%40.37%59.63%40.37%
Interest indirectly held through Helmir S.A.:        
IRSA Inversiones y Representaciones Sociedad AnónimaArgentinaReal Estate0.39%99.61%0.39%35.70%--
Sociedad Anónima Carnes Pampeanas S.A.ArgentinaAgro-industrial5.00%95.00%-5%--
Cactus Argentina S.A. (2)ArgentinaAgro-industrial----2.87%-
Agropecuaria Acres del Sud S.A.BoliviaAgricultural39.76%60.24%39.76%-39.76%-
Yatay Agropecuaria S.A.BoliviaAgricultural30.70%69.30%30.70%-30.70%-
F-22

F- 22
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amountsAmounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


2.  
Summary of significant accounting policies (Continued)

    June 30, 2015  June 30, 2014  June 30, 2013 
Name of the entityPlace of business / country of incorporation
Main
Activities (*)
 % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7) 
Direct equity interest:                    
Agrotech S.A (1)ArgentinaInvestment  -   -   -   -   95.00%  - 
Brasilagro-Companhía Brasileira de Propiedades Agrícolas (2)BrazilAgricultural  (***) 39.76%  60.24%  (***) 39.63%  60.37%  39.64%  60.36%
Cactus Argentina S.A. (3)ArgentinaAgro-industrial  -   -   97.13%  -   95.00%  - 
Sociedad Anónima Carnes Pampeanas S.A.ArgentinaAgro-industrial  95.00%  -   39.38%  -   38.92%  - 
Futuros y Opciones.Com S.A.ArgentinaBrokerage  59.59%  40.41%  59.59%  40.41%  60.50%  39.50%
Helmir S.A.UruguayInvestment  100%  -   100.00%  -   100.00%  - 
IRSAArgentinaReal Estate  (***) 63.91%  35.70%  (***) 64.56%  34.55%  64.56%  34.55%
Northagro S.A. (4)ArgentinaInvestment  -   -   -   -   100.00%  - 
Pluriagro S.A. (4)ArgentinaInvestment  -   -   -   -   100.00%  - 
Doneldon S.A.UruguayInvestment  100%  -   100.00%  -   100.00%  - 
Interest indirectly held through IRSA:                          
IRSA Propiedades Comerciales S.A.ArgentinaReal Estate  62.06%  37.94%  63.18%  36.82%  62.62%  37.38%
Apsamedia S.A.ArgentinaConsumer financing (**) and advertising  -   -   -   -   62.62%  37.38%
Emprendimiento Recoleta S.A.ArgentinaReal Estate  33.31%  66.69%  33.91%  66.09%  33.62%  66.38%
Fibesa S.A.ArgentinaReal Estate  62.06%  37.94%  63.18%  36.82%  62.62%  37.38%
Hoteles Argentinos S.A.ArgentinaHotel  51.82%  48.18%  52.81%  47.19%  52.36%  47.64%
Dolphin Fund Ltd. (6)BermudasInvestment  59.32%  40.68%  56.88%  43.12%  -   - 
I Madison LLCUnited StatesInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Inversora Bolívar S.A.ArgentinaInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
IRSA Development LPUnited StatesInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
IRSA International LLCUnited StatesInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Jiwin S.A.UruguayInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Liveck S.A.UruguayInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Llao Llao Resorts S.A. (5)ArgentinaHotel  32.39%  67.61%  33.01%  66.99%  32.73%  67.28%
Nuevas Fronteras S.A.ArgentinaHotel  49.45%  50.55%  50.39%  49.61%  49.96%  50.04%
Palermo Invest S.A.ArgentinaInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Real Estate Investment Group LPBermudasInvestment  41.46%  58.54%  42.25%  57.75%  41.89%  58.11%

 

2.
Summary of significant accounting policies (Continued)
 
   June 30, 2016June 30, 2015June 30, 2014
Name of the entityCountry
Main
activity
% of ownership interest held
by the Group (6)
% of ownership interest held
by the NCI
% of ownership interest held
by the Group (6)
% of ownership interest held
by the NCI
% of ownership interest held
by the Group (6)
% of ownership interest held
by the NCI
Interest indirectly held through Doneldon: S.A.:        
Agropecuaria Acres del Sud S.A.BoliviaAgricultural60.24%39.76%59.24%-59.24%-
Ombú Agropecuaria S.A.BoliviaAgricultural100.00%-100.00%-100.00%-
Yatay Agropecuaria S.A.BoliviaAgricultural69.30%30.70%69.31%-69.31%-
Yuchán Agropecuaria S.A.BoliviaAgricultural100.00%-100.00%-100.00%-
Sedelor S.A.UruguayInvestment100.00%-100.00%-100.00%-
Codalis S.A.UruguayInvestment100.00%-100.00%-100.00%-
Alafox S.A.UruguayInvestment100.00%-100.00%-100.00%-
Urban properties and investments business
Interest indirectly held through IRSA:        
IRSA CP (5)ArgentinaReal Estate60.33%39.67%62.00%37.94%63.18%36.82%
E-Commerce Latina S.A. (5)ArgentinaInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Efanur S.A.UruguayInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Hoteles Argentinos S.A.ArgentinaHotel51.02%48.98%52.00%48.18%52.81%47.19%
Inversora Bolívar S.A.ArgentinaInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Llao Llao Resorts S.A. (3)ArgentinaHotel31.89%68.11%32.00%67.61%33.01%66.99%
Nuevas Fronteras S.A.ArgentinaHotel48.68%51.32%49.00%50.55%50.39%49.61%
Palermo Invest S.A.ArgentinaInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Ritelco S.A.UruguayInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Tyrus S.A.UruguayInvestment63.77%36.23%65.00%35.22%66.01%33.99%
Interest indirectly held through IRSA CP:        
Arcos del Gourmet S.A.ArgentinaReal Estate57.40%42.60%56.00%44.15%56.86%43.14%
Emprendimiento Recoleta S.A.ArgentinaReal Estate34.24%65.76%33.00%66.69%33.91%66.09%
Fibesa S.A.ArgentinaReal Estate63.77%36.23%62.00%37.94%63.18%36.82%
Panamerican Mall S.A.ArgentinaReal Estate51.02%48.98%50.00%50.35%50.54%49.46%
Shopping Neuquén S.A.ArgentinaReal Estate63.47%36.53%99.14%0.86%99.07%0.93%
Torodur S.A.UruguayInvestment63.77%36.23%62.00%37.94%63.18%36.82%
Interest indirectly held through
Tyrus S.A.:
        
Dolphin Fund Ltd. (4)BermudasInvestment58.00%41.60%55.00%40.68%56.88%43.12%
I Madison LLCUnited StatesInvestment64.00%36.23%65.00%35.22%66.01%33.99%
IRSA Development LPUnited StatesInvestment64.00%36.23%65.00%35.22%66.01%33.99%
IRSA International LLCUnited StatesInvestment64.00%36.23%65.00%35.22%66.01%33.99%
Jiwin S.A.UruguayInvestment64.00%36.23%65.00%35.22%66.01%33.99%
Liveck S.A.UruguayInvestment64.00%36.23%65.00%35.22%66.01%33.99%
Real Estate Investment Group IV LPBermudasInvestment100.00%-100.00%-100.00%-
Real Estate Investment Group V LPBermudasInvestment100.00%-100.00%-100.00%-
Real Estate Strategies LLCUnited StatesInvestment64.00%36.23%65.00%35.22%66.01%33.99%
Interest indirectly held through
Efanur S.A.:
        
Real Estate Strategies LPUnited StatesInvestment43.00%57.38%43.00%56.71%44.12%55.88%
Interest indirectly held through Dolphin Fund Ltd.        
IDB Development Corporation Ltd. (7)IsraelInvestment44.00%56.46%----
F-23

F- 23
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amountsAmounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


2.  
Summary of significant accounting policies (Continued)

    June 30, 2015  June 30, 2014  June 30, 2013 
Name of the entityPlace of business / Country of incorporation
Main
Activities (*)
 % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7) 
Real Estate Investment Group II LPBermudasInvestment  52.17%  47.83%  53.17%  46.83%  52.71%  47.29%
Real Estate Investment Group III LPBermudasInvestment  52.59%  47.41%  53.59%  46.41%  53.14%  46.86%
Real Estate Investment Group IV LPBermudasInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Real Estate Investment Group V LPBermudasInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Real Estate Strategies LPBermudasInvestment  43.29%  56.71%  44.12%  55.88%  43.74%  56.26%
Real Estate Strategies LLCUnited StatesInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Arcos del Gourmet S.A.ArgentinaReal Estate  55.85%  44.15%  56.86%  43.14%  56.37%  43.63%
Conil S.A.ArgentinaReal Estate  -   -   63.18%  36.82%  62.62%  37.38%
Panamerican Mall S.A.ArgentinaReal Estate  49.65%  50.35%  50.54%  49.46%  50.10%  49.90%
E-Commerce Latina S.A.ArgentinaInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Efanur S.A.UruguayInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Ritelco S.A.UruguayInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Shopping Neuquén S.A.ArgentinaReal Estate  61.78%  35.22%  62.68%  37.32%  62.05%  37.95%
Solares de Santa María S.A.ArgentinaReal Estate  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Torodur S.A.UruguayInvestment  62.06%  37.94%  63.18%  36.82%  62.62%  37.38%
Tyrus S.A.UruguayInvestment  64.78%  35.22%  66.01%  33.99%  65.45%  34.55%
Unicity S.A.ArgentinaInvestment  64.78%  35.22%  65.45%  33.99%  65.45%  34.55%
Doneldon S.A.UruguayInvestment  100%  -   100%  -   100%  - 
Interest indirectly held through BrasilAgro:                          
Araucária Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Cajueiro Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Ceibo Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Cremaq Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Engenho de Maracajú Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Flamboyant Ltda. BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Jaborandi Agrícola Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Jaborandi Propriedades Agrícolas S.A.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%
Mogno Ltda.BrazilAgricultural  39.63%  60.37%  39.63%  60.37%  39.64%  60.36%

 

F-24

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

2.
Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


2.  
Summary of significant accounting policies (Continued)

    June 30, 2015  June 30, 2014  June 30, 2013 
Name of the entityPlace of business / country of incorporation
Main
Activities (*)
 % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7)  % of ownership interest by the Group  % of ownership interest by the NCI (7) 
Interest indirectly held through Cactus S.A. (3):                    
Sociedad Anónima Carnes Pampeanas S.A.ArgentinaAgro-industrial  -   -   60.62%  -   61.08%  - 
Agrotech S.A. (1)ArgentinaInvestment  -   -   -   -   5.00%  - 
IRSAArgentinaReal Estate  -   -   (***) 0.89%  -   0.89%  - 
Interest indirectly held through Futuros y Opciones.Com. S.A.:                          
FyO Trading S.A.ArgentinaBrokerage  59.63%  40.37%  59.63%  40.37%  60.50%  39.50%
Granos Olavarría S.A.ArgentinaWarehousing and brokerage  59.63%  40.37%  59.63%  40.37%  -   - 
Interest indirectly held through Helmir. S.A.:                          
IRSAArgentinaReal Estate  (***) 0.39%  35.70%  -   -   -   - 
Sociedad Anónima Carnes Pampeanas S.A.ArgentinaAgro-industrial  -   5%  -   -   -   - 
Cactus Argentina S.A. (3)ArgentinaAgro-industrial  -   -   2.87%  -   5.00%  - 
Agropecuaria Acres del Sud S.A.BoliviaAgricultural  39.76%  -   39.76%  -   -   - 
Yatay Agropecuaria S.A.BoliviaAgricultural  30.70%  -   30.70%  -   -   - 
Interest indirectly held through Doneldon. S.A.:                          
Agropecuaria Acres del Sud S.A.BoliviaAgricultural  59.24%  -   59.24%  -   100.00%  - 
Ombú Agropecuaria S.A.BoliviaAgricultural  100.00%  -   100.00%  -   100.00%  - 
Yatay Agropecuaria S.A.BoliviaAgricultural  69.31%  -   69.31%  -   100.00%  - 
Yuchán Agropecuaria S.A.BoliviaAgricultural  100.00%  -   100.00%  -   100.00%  - 
Sedelor S.A.UruguayInvestment  100.00%  -   100.00%  -   100.00%  - 
Codalis S.A.UruguayInvestment  100.00%  -   100.00%  -   100.00%  - 
Alafox S.A.UruguayInvestment  100.00%  -   100.00%  -   100.00%  - 

(1)  As from January 1, 2014, all transactions carried out by Agrotech S.A, are understood as if they had been made by and for Cactus S.A. due to the pre-merger commitment signed on February 25, 2014.
(2)  The Group has consolidated the investment in Brasilagro-Companhía Brasileira de Propiedades Agrícolas (“Brasilagro”) considering that the Company exercises “de facto control” over it. See Note 7 for further information regarding to Brasilagro.
(3)  As from July 1st, 2014, all transactions carried out by Cactus Argentina S.A., are understood as if they had been made by and for Cresud S.A.C.I.F. y A. due to the pre-merger commitment signed in September 2014.
(4)  On August 22, 2013 the Board of Directors of Cresud approved the withdrawal of the process of incorporation against the Superintendence of Corporations.
(5)  The Group has consolidated the investment in Llao Llao Resorts S.A. considering their ownership interest together with the Company's participation in the making decisions.
(6)  The Group has consolidated its indirect interest in Dolphin Fund Ltd. (DFL) considering its exposure to variable returns coming from its investment in DFL and the nature of the relationship between the Group and the shareholders with right to vote of DFL.
(7)  Non-controlling interest (NCI)
(*)Companies whose principal activity is “investment” are substantially holding companies that do not have significant assets and liabilities other than their respective interest holdings in operating entities.
(**)Residual activity.
(***)The effect of treasury shares as of June 30, 2015 and 2014 was not considered.


F-25

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.           Summary of significant accounting policies(Continued)

Name of the entityCountryMain activity% of ownership interest held by the Group (5)% of ownership interest held by the NCI
Interest indirectly held through IDBD:    
Discount Investment Corporation Ltd.IsraelInvestment76.43%23.57%
IDB Tourism (2009) Ltd.IsraelHolding company in tourist services sector100.00%-
IDB Group Investment Inc.IsraelInvestment100.00%-
Interest indirectly held through Discount Investment Corporation Ltd.:    
Property & Building Corporation Ltd.IsraelReal Estate76.45%23.55%
Gav Yam Land Ltd.IsraelReal Estate52.80%47.20%
Israel Property Rental Corporation Ltd. (ISPRO)IsraelReal Estate76.45%23.55%
MATAM - Haifa Science Industries CenterIsraelReal Estate38.30%61.70%
Neveh-Gad Building & Development Ltd.IsraelReal Estate76.45%23.55%
Hadarim Properties Ltd.IsraelReal Estate76.45%23.55%
PBC USA Investment Inc.United StatesReal Estate76.45%23.55%
Shufersal Ltd.IsraelSupermarket52.95%47.05%
Shufersal Real Estate Ltd.IsraelSupermarket52.95%47.05%
Koor Industries Ltd.(8)IsraelHolding company in the agrochemical sector100.00%-
Cellcom Israel Ltd. (9)IsraelCommunication services41.77%58.23%
Netvision Ltd.IsraelCommunication services41.77%58.23%
Elron Electronic Industries Ltd.IsraelTechnology development – Holding50.32%49.68%
Bartan Holdings and Investment Ltd.IsraelHolding55.68%44.32%
Epsilon Investment House Ltd.IsraelHolding68.75%31.25%
(1)
The Group has consolidated the investment in Brasilagro considering that the Company exercises “de facto control” over it. See Note 7 for further information regarding to Brasilagro.
(2)
As from July 1st, 2014, all transactions carried out by Cactus Argentina S.A., are understood as if they had been made by and for Cresud S.A.C.I.F. y A. due to the pre-merger commitment signed in September 2014.
(3)
The Group has consolidated the investment in Llao Llao Resorts S.A. considering their ownership interest held together with the Company's participation in the making decisions.
(4)
Includes interest indirectly held through Ritelco S.A.
(5)
Includes interest indirectly held through Tyrus S.A.
(6)
Correspond to interest directly held in each company.
(7)
Owns a 40% equity interest of Adama.
(8)
The Group has consolidated the interest in Cellcom taking into consideration its equity interest and decision-making power given the fact that the remaining interests are too disperse.
(9)
Until takeover was secured, IDBD was valued at fair value in accordance with IAS 28 exception.
The Group takes into account both quantitative and qualitative aspects in order to determine which non-controlling interests in subsidiaries are considered significant. In quantitative terms, the investments that individually represent at least 20% of the total equity attributable to non-controlling interest
(b)
Changes in ownership interests in subsidiaries at the each year end. Therefore, in qualitative terms, are considered, among other factors, the specific risks to which each company is exposed to, their returns and the importance that eachwithout change of them has for the Group.control

Summarized financial information on subsidiaries with material non-controlling interests and other information are included in Note 7.

(b)  Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The recorded amount is the difference between the fair value of the consideration paid and/or receive and the relevant share acquired and/or given of the carrying value of net assets of the subsidiary.

(c)  Disposal of subsidiaries with loss of control
F- 24

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
(c)
Disposal of subsidiaries with loss of control
When the Group ceases to have control any retained interest in the entity is re-measured at its fair value at the date when control is lost, with changes in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(d)
Associates

Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and less than 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting.accounting, except as otherwise indicated as explained below. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.

Investments in associates are accounted for using the equity method of accounting, except as otherwise indicated as explained below.


F-26

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognized in the income statements, and its share of post- acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group recognizes such losses until the carrying amount of the associate reduces to zero, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to ‘share of profit / (loss) of associates and joint ventures’ in the income statements.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

For purposes of including the earnings of associates by applying the equity method, the Group uses financial statements of the associates as of the same date or a later date, provided the difference between the reporting date of the associate and that of the Group cannot be longer than three months. In these cases, the Group assesses and adjusts the results of such associates for material transactions or other material events occurred during the interim period.

The Group takes into account both quantitative and qualitative aspects in order to determine which non-controlling interests in associates are considered significant. In quantitative terms, the investments that individually represent at least 20% of the result of joint ventures in the Consolidated Income statements, and at least 20% of the total equity attributable to non-controlling interest in joint ventures at the each year-end are considered significant. Therefore, in qualitative terms, are considered, among other factors, the specific risks to which each company is exposed to, their returns and the importance that each of them has for the Group.


F-27

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

As indicated above, the Group generally accounts for its investments in associates under the equity method. However, IAS 28 “Investments in Associates” provides an exemption from applying the equity method where investments in associates are held through “Venture Capital Organizations” (VCO) or venture capital entities, as defined in Spanish, even when the Group is not a VCO. This type of investment may be accounted for at fair value through profit or loss for the years because such measure proves to be more useful to users of financial statements than the equity method.

Summarized financial informationAs of each year end or upon the existence of evidence of impairment, a determination is made as to whether there is any objective indication of impairment in the value of the investments in associates. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and other information for associates are includedits carrying value and recognizes the amount adjacent to "Share of profit / (loss) of joint ventures and associates" in Note 9.the statements of income.

(e)
Joint arrangements

Joint arrangements
Joint arrangements are arrangements of which the Group and other party or parties have joint control bound by a contractual arrangement. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

F- 25
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
Investments in joint ventures are accounted for under the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognized in the consolidated statementstatements of financial position at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition of profits or losses and movements in other comprehensive income in the income statements and in other comprehensive income respectively.

When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.


F-28

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

The Group determines at each reporting date whether there is any objective evidence that the investment amount in the joint ventures is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value and recognizes the difference to ‘share"Share of profit / (loss) of associatesjoint ventures and joint ventures’associates" in the income statements.statements of income.

Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
2.4.

Segment information
The Group takes into account both quantitative and qualitative aspects in order to determine which non-controlling interests in joint ventures are considered significant In quantitative terms, the investments that individually represent at least 20% of result of joint ventures in the Consolidated Income statements, and at least 20% of the total equity attributable to non-controlling interest in joint ventures at the each year-end are considered significant. Therefore, in qualitative terms, are considered, among other factors, the specific risks to which each company is exposed to, their returns and the importance that each of them has for the Group.

Therefore, in qualitative terms, are considered, among other factors, the specific risks to which each company is exposed to, their returns and the importance that each of them has for the Group.

Summarized financial information and other information for significant joint ventures are included in Note 8.

2.4.  Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”), the Group’s Executive Committee. This CODM, who isCommitter, responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee of the Group that makes strategic decisions.them. The operating segments are included in Note 6.


F-29

 
Cresud Sociedad Anónima,
2.5.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Foreign currency translation



(a)
2.
Summary of significant accounting policies (Continued)Functional and presentation currency

2.5.  Foreign currency translation

(a)  Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Argentine Pesos, which is the Group’s presentation currency.

(b)
Transactions and balances

Transactions and balances in foreign currency
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the profit or loss for the year.

Foreign exchange gains and losses are presented in the statements of income statements within finance costs and finance income, as appropriate, unless they are capitalized as explainedcapitalized.
F- 26
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in Note 2.22.millions of Argentine Pesos, except otherwise indicated)

(c)  Group companies

2. 
Summary of significant accounting policies (Continued)
(c)
Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i)
Assets, liabilities and liabilitiesgoodwill for each statement of financial position presented are translated at the closing rate at the date of that financial position;
(ii)Income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
(iii)
All resulting exchange differences are recognized in the statement of comprehensive income.

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation) all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the Company are reclassified to profit or loss.


 
2.6.
F-30Investment properties

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income.

2.6.  Investment properties

Investment properties are those properties owned by the Group that are held either to earn long-term rental income or for capital appreciation, or both, and that is not occupied by the companies in the consolidated Group. Properties owned by the Group occupied by associates or joint ventures are accounted for as investment properties in the Consolidated Financial Statements. Investment property also includes property that is being constructed or developed for future use as investment property. The Group also classifies land whose future use has not been determined yet as investment properties.

Where a property is partially occupied by the Group, with the rest being held for rental income or capital appreciation, the Group accounts for the portions separately. The portion that is occupied by the Group is accounted for as property, plant and equipment under IAS 16 “Property, Plant and Equipment” and the portion that is held for rental income or capital appreciation, or both, is treated as investment properties under IAS 40 “Investment Property”.

The Group’s investment properties primarily comprise the Group’s portfolio of shopping centers and offices, farmland leased out to third parties, certain property under development and undeveloped land.

Investment properties are measured initially at cost. Cost comprises the purchase price and including directly attributable expenditures, such as legal fees, certain direct taxes, letting fees and in the case ofexpenditures.
For properties under construction, thedevelopment, capitalization of costs includes not only financial costs.costs, but also all costs directly attributable to works in process, from commencement of construction until it is completed and property is in conditions to start operating.

Direct expenses related to lease contract negotiation (as well as payment to third parties for services rendered and certain specific taxes related to execution of such contracts) are capitalized as part of the book value of the relevant investment properties and amortized over the term of the lease.

 

 
F-31

F- 27
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)
2. 

Summary of significant accounting policies (Continued)
For properties under development, capitalization of costs includes not only financial costs. Also includes all costs directly attributable to works in process, from commencement of construction until it is completed and property is in conditions to start operating. Capitalized costs include mainly the part attributable to third-party service costs, as well as the materials necessary for construction. Capitalization of such costs ceases when the property reaches the operating conditions indicated above. 

Borrowing costs associated with direct expenditure on properties under development or undergoing major refurbishment are capitalized. The finance cost capitalized is calculated using the Group’s weighted average cost of borrowings after adjusting for borrowings associated with specific developments. Where borrowings are associated with specific developments, the amount capitalized is the gross interest incurred on those borrowings less any investment income arising on their temporary investment. Finance cost is capitalized as from the commencement of the development work until the date of practical completion. The capitalization of finance costs is suspended if there are prolonged periods when development activity is interrupted. Finance cost is also capitalized on the purchase cost of land or property acquired specifically for redevelopment in the short term but only where activities necessary to prepare the asset for redevelopment are in progress.

The Group has adopted the cost model for all of its investment properties. Therefore, at the date of each statement of financial position, investment properties are carried at amortized cost, less impairment losses, if any. Under the cost model, an investment property is impaired if its carrying amount exceeds its recoverable amount. Where individual components of an item of investment property have different useful lives, they are accounted for as separate items, which are depreciated separately. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. These costs may include the cost of improving or replacing parts that are eligible for capitalization when the costs of replacing the parts are incurred. The carrying amount of the replaced part is derecognized. Repairs and maintenance are charged to the income statements during the period in which they are incurred.

If an investment property becomes occupied by the Group, it is reclassified as property, plant and equipment at the commencement of such occupation. An item of property occupied by the Group is reclassified to investment property when its use has changed and occupation by the Group ceases. Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to trading properties.

Transfers in and out of the respective categories as described above do not change the carrying amount of the properties transferred, and they do not change the cost of the properties for measurement or disclosure purposes.


 
F-32

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

Land and property under constructions are not depreciated. Depreciation of the remaining investment properties is calculated, based on a component approach, using the straight-line method over the estimated useful life of each component. The remaining useful life as of June 30, 20152016 is as follows:

Shopping center portfolioBetween 311 and 2530 years
Offices and other rental properties portfolioBetween 98 and 29100 years

AtAs of each period-end, assets are reviewed for any sign ofyear-end an impairment to itstest is performed on the recoverable value and/or residual useful life of the assets. If there arebe any indicators of impairment, the recoverable amount and/or theresidual useful life of the impaired assetsasset(s) is estimated,computed, and then they are adjusted,an impairment adjustment is made, if applicable. The asset’s residual values and useful lives are reviewed, if appropriate, at least at each financial year-end.

An asset’s carrying amount is written down immediately to the asset’sits recoverable amount if its carrying amount is greater than its estimated recoverable amount (See Note 2.10).amount.

Asset transfers, whether assets classified under investments properties are reclassified under other items or vice-versa, may only be carried out where there is a change of use evidenced by: a) commencement of occupation by the owner, where investment property is transferred to property, plant and equipment; b) commencement of development activities for sale purposes, where investment property is transferred to trading properties; c) the end of owner occupation, where it is transferred from property, plant and equipment to investment property; or d) commencement of an operating lease transactions with a third party, where trading properties is transferred to investment property.

The Group may sell its investment property when it considers that such property no longer forms part of the lease business. Investment properties are derecognized when they are disposed of or when they are permanently withdrawn from use and no future economic benefits are expected to arise from their disposals. Gains or losses on disposals or retirements of investment properties are determined by comparing the net disposal proceeds and their carrying amounts at the date of disposal. The gains or losses are recognized in the statements of income statements and disclosed separately under the line item “Gain from disposal of investment property”. Proceeds from the sale of such property are accounted for when the material risks and benefits have been transferred to the purchaser. As for unconditional agreements, proceeds are accounted for generally when title to property passes to the buyer and the buyer intends to make the respective payment therefor. In the case of conditional agreements, the sale is accounted for where such conditions have been met. Where consideration receivable for the sale of the properties is deferred, it is discounted to present value. The difference between the discounted amount and the amount receivable is treated as interest income and recognized over the period using the effective interest method.


F-33

 
Cresud Sociedad Anónima,
2.7.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except sharesProperty, plant and per share data and as otherwise indicated)equipment



2.
Summary of significant accounting policies (Continued)

2.7.  Property, plant and equipment

This category primarily comprises land used for agricultural purposes, buildings or portions of a building used for administrative and corporate purposes, machines, computers and other equipment, motor vehicles, furniture, fixtures and fittings and improvements to the Group’s corporate offices.

The Group has also several hotel properties. Based on the respective contractual arrangements with hotel managers and / or given their direct operators nature, the Group considers it retains significant exposure to the variations in the cash flows of the hotel operations, and accordingly, hotels are treated as owner-occupied properties and classified under the line item “Property, plant and equipment”.

F- 28
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
All property, plant and equipment (“PPE”) are stated at historicalacquisition cost less depreciation and accumulated impairment, if any. HistoricalThe acquisition cost includes expenditure that is directly attributable to the acquisition of the items.

For properties under development, capitalization of costs includes not only financial costs, but also all costs directly attributable to works in process, from commencement of construction until it is completed and property is in conditions to start operating. Capitalized costs include mainly the part attributable to third-party service costs, as well as the materials necessary for construction. Capitalization of such costs ceases when the property reaches the operating conditions indicated above. 
 
Borrowing costs incurred for the purpose of acquiring, constructing or producing a qualifying PPE are capitalized as part of its cost. A qualifying PPE is an asset that necessarily takes a substantial period of time to get ready for its intended use. Borrowing costs are capitalized while acquisition, construction or production is actively underway and cease once the asset is substantially complete or suspended if the development of the asset is suspended.


F-34

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. TheseSuch costs may include the cost of improving or replacingimprovements and replacement of parts that are eligible for capitalization.as they meet the conditions to be capitalized. The carrying amount of those parts that are replaced is derecognized.derecognized Repairs and maintenance expenses are charged toas incurred in the income statements during the period in which they are incurred.statement of income. Depreciation, based on a component approach, is calculated using the straight-line method to allocate the cost over the assets’ estimated useful lives,lives. The remaining useful life as of June 30, 2016 is as follows:

Hotel buildingsBuildings and facilitiesBetween 14 and 24 years
Other buildings and facilitiesBetween 155 and 50 years
FurnitureMachinery and fixturesequipment                                                                      Between 3 and 1017 years
Machinery and equipmentCommunication networks                                                                      Between 3 and 1020 years
VehiclesOthers                                                                      5 years
OthersBetween 3 and 25 years

The assets’ net book amount and useful lives are reviewed, and adjusted if appropriate, at least at each financial year-end.

An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount (See Note 2.10).amount.

Gains from the sale of these assets are recognized when the significant risks and rewards have transferred to the buyer. This will normally take place on unconditional exchange, generally when legal title passes to the buyer and it is probable that the buyer will pay. For conditional exchanges, sales are recognized when these conditions are satisfied.

Gains and losses on disposals are determined by comparing the proceeds, with the carrying amount. Gains and losses from the disposal of farmlands are disclosed within “Gains from disposal of farmlands” in the income statements. All other gains and losses from the disposal of property, plant and equipment items are recognized within “Other operating results, net” in the income statements.statement of comprehensive income.

2.8.  Leases

F- 29
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
2.8.
Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement.

 

F-35

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

A Group company is the lessor:

Properties leased out to tenants under operating leases are included in “Investment properties” in the statement of financial position. See Note 2.282.23 for the recognition of rental income (Finance lease – theincome. The Group does not have any assets leased out under finance leases).leases.

A Group company is the lessee:

Operating lease – leases in which substantially all risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases.

The Group has entered into some operating lease agreements, mainly related to farming activities. By virtue of these contracts, the Group leases land open for agricultural exploitation during the harvest year. The lease price is generally set at a fixed amount in dollars or at a certain number of quintals of soybeans (or equivalent measurement unit) during the entire lease term. Lease payments can be made in installments or in advance at the beginning of the lease. The lease costs are recognized in the income statements in relation toaccording the degree of ripenessharvest of the harvest since thecrops The Group considers that this systematic base is more representative of the time pattern of the leases’ benefits.

Additionally, the Group acts as a lessee in other operating leases, mainly related to agricultural business. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Finance lease – leases ofThe Group acquires certain specific assets where the Group has substantially all the risks(especially machinery and rewards of ownership are classified ascomputer equipment) under finance leases. Finance leases are capitalized at the commencement of the lease at the lower of the fair value of the property and the present value of the minimum lease payments. Capitalized lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. The finance charges arewill be charged to the statements of income statements over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. TheLiabilities corresponding rental obligations, net ofto finance charges,leases, measured at discounted value, are included in current and non-current borrowings Leases
Operating leases where the Group acts as lessee under finance leasesmainly include machinery and computer equipment.offices.

 

 
F-36

F- 30
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2. 
Summary of significant accounting policies (Continued)

Summary of significant accounting policies (Continued)
2.9.  Intangible assets

2.9.
(a)  Goodwill
Intangible assets

(a)
Goodwill
Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognized by the Group on an acquisition. Goodwill is initially measured as the difference between the fair value of the consideration transferred, plus the amount of non-controlling interest in the acquireeacquisition and, in business combinations achieved in stages, the acquisition-date fair value of the previously held equity interest in the acquiree;acquisition; and the net fair value of the identifiable assets and liabilities assumed on the acquisition date.

At acquisition goodwill is allocated to those cash generating units expected to benefit from the acquisition for the purpose of impairment testing (See Note 2.10). Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill arising on the acquisition of subsidiaries is included within “Intangible assets” in the statement of financial position.

Goodwill may also arise upon investments in associates and joint ventures, being the surplus of the cost of investment over the Group’s share of the fair value of the net identifiable assets. Such goodwill is recorded within investments in associates or joint ventures and tested for impairment as part of the overall balances.

Goodwill arising on the acquisition of foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently if there is indicator of impairment.

(b)  Computer software
For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units (“CGU”). In order to determine whether any impairment loss should be recognized, the book value of CGU or CGU groups is compared against its recoverable value. Net book value of CGU and CGU groups include goodwill and assets with limited useful life (such as, investment properties, property, plant and equipment, intangible assets and working capital net).

If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognized for goodwill are recorded in the statement of income as a deduction from operating income and not reversed in a subsequent periods.
Recoverable amount of a CGU is the higher of fair value less costs-to-sell and value-in-use. The fair value is the amount at which a cash-generating unit may be sold in a current transaction between unrelated, willing and duly informed parties. Value-in-use is the present value of all estimated future cash flows expected to be derived from CGU or CGU groups.
(b)
Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives of 3 years.


F-37

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met: (i) it is technically feasible to complete the software product so that it will be available for use; (ii) management intends to complete the software product and use or sell it; (iii) there is an ability to use or sell the software product; (iv) it can be demonstrated how the software product will generate probable future economic benefits; (v) adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and (vi) the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.

Computer software development costs recognized as assets are amortized over their estimated useful lives, which does not exceed 3 years.

(c)  Rights to use

The Group acquired certain rights to develop land and facilities. These rights primarily comprise the right to develop the land and attached buildings and facilities known as Arcos del Gourmet (“Arcos”) and the “Anta Right Agreement”.

The Arcos land and attached facilities is owned by Administration of Railway Infrastructure ("ADIF"), a governmental agency created for the management of certain State´s properties, particularly assets pertaining to the railway system. The Arcos (or "Arches") are the old warehouse and adjacent spaces below the tracks of the San Martin railway lines which were abandoned. The right was acquired as part of the Arcos acquisition and is carried at acquisition cost less accumulated amortization. Amortization is calculated using the straight-line method over the period in which the economic benefits from the use of the asset. The Group must pay ADIF a fee on a monthly basis.

 

 
F-38

F- 31
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)
2. 

Summary of significant accounting policies (Continued)
The Anta Right Agreement comprises
(c)
Branding and client relationships
This relates to the right to exploit 132,000 hectaresfair value of land for agriculture purposes inbrands and client relationships arising at the Provincetime of Salta, in Northern Argentina, under an agreementthe business combination with the Provincial Government expiring on November 2038 with an option to extend it for an additional 29-year period.

The right was acquired by the Group in December 2005 and is carriedIDBD. They are subsequently valued at acquisition cost, less the accumulated amortization. Amortization is calculated using the straight-line method over 35 years. Under the Anta amortization or impairment. Client relationships have a 12-year useful life, while brands have an indefinite useful life.
(d)
Right Agreement, the Group must pay to the Province of Salta a fee equivalent to a 10% of the annual turnover obtained by the development of the premises.receive future units under barter agreements

(d)  Right to receive future units under barter agreements

The Group also enters into barter transactions where the Group normally exchanges undeveloped parcels of land with third-party developers for future property to be constructed on the bartered land. The Group generally receives monetary assets as part of the transactions and/or a right to receive future units to be constructed by developers. Such rights are initially recognized at cost (which is the fair value of the land assigned) and such rights are not adjusted later, unless there is any sign of impairment.

2.10.  Impairment of assets

(a) Goodwill

For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units (“CGU”). In order to determine whether any impairment loss should be recognized, the carrying amount of the CGU or groups of CGUs is compared to their recoverable amount. Net book value of CGU and group of CGUs include goodwill and assets with limited useful life, including investment properties, property, plant and equipment, intangible assets and working capital net.

If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognized for goodwill are recorded in the income statement as a deduction from operating income and not reversed in a subsequent period.

The recoverable amount of a CGU is the higher of its fair value less costs-to-sell and its value-in-use. Fair value less costs to sell is the best estimate of the amount obtainable from the sale of a CGU in an arm’s length transaction between knowledgeable, willing parties less the costs of disposal. Value in use is the present value of the future cash flows expected to be derived from the CGUs or groups of CGUs.


F-39

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

(b) Property, plant and equipment, investment property and finite-life intangible assets

At the date of each statementstatements of financial position, the Group reviews the carrying amounts of its property, plant and equipment, investment property and finite-life intangible assets to determine whether there is any indicator that those assets have suffered an impairment loss. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs.

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the income statements.
2.10.

Trading properties
Assets or CGU that have suffered an impairment loss are revised as of each balance sheet date to assess a potential reversal of such impairment. The impairment loss recognized in prior fiscal years may only be reversed if there has been a change in the estimates used to assess the recoverable value of assets or the CGU since the recognition of the impairment loss.

Where an impairment loss subsequently reverses the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized immediately in the income statements.

2.11.  Trading properties

Trading properties comprises those properties either intended for sale in the process of construction for sale. Trading properties are carried at the lower of cost and net realizable value. Where there is a change in use of investment properties evidenced by the commencement of development with a view to sale, the properties are reclassified as trading properties at their cost, which is the carrying value at the date of change in use. They are subsequently carried at the lower of cost and net realizable value.

Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the trading properties to their present location and condition.


F-40

 
Cresud Sociedad Anónima,
2.11.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Inventories



2.
Summary of significant accounting policies (Continued)

For properties under development, capitalization of costs includes not only financial costs, but also all costs directly attributable to works in process, from commencement of construction until it is completed and property is in conditions to start operating. Capitalized costs include mainly the part attributable to third-party service costs, as well as the materials necessary for construction. Capitalization of such costs ceases when the property reaches the operating conditions indicated above. 

Borrowing costs incurred for the purpose of acquiring, constructing or producing a qualifying trading properties are capitalized as part of its cost. A qualifying trading property is an asset that necessarily takes a substantial period of time to get ready for its intended use. Borrowing costs are capitalized while acquisition, construction or production is actively underway and cease once the asset is substantially complete or suspended if the development of the asset is suspended.

Net realizable value is the estimated selling price in the ordinary course of business less costs to complete redevelopment and selling expenses. If the net realizable value is lower than the carrying amount, a write down is recognized for the amount by which the carrying amount exceeds its net realizable value. Write-downs are reversed when circumstances that caused the write-down cease to exist, or when net realizable value increases.

2.12.  Inventories

Inventories include assets held for sale in the ordinary course of the Group’s business activities, assets in production or construction process for sale purposes, and materials, supplies or other assets held for consumption in the process of producing sales and/or services. Inventories primarily comprise harvested agricultural produce and consumable supplies, inventories from hotel properties, and other supplies and materials required to offer different services.

Consumable suppliesSupplies used in the Group's farming activities comprise fertilizers, agrochemicals, vaccines, seeds, feed for livestock and other items used in the Group’s farming activities.items. Harvested agricultural produce comprise harvested crops, and raw meat.

 

 
F-41

F- 32
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)
2. 

Summary of significant accounting policies (Continued)
For the Group’s operations in Argentina and Brazil, harvested crops are perpetually measured at net realizable value until the point of sale because there is an active market in the produce, there is a negligible risk that the produce will not be sold and there is a well-established practice in the industry carrying the inventories at net realizable value. Changes in net realizable value are recognized in the income statements in the periodyear in which they arise under the line item “Changes in net realizable value of agricultural produce after harvest”.

On the other hand, harvested crops for the Group’s operations in BoliviaInventories are measured at the lower of cost or net realizable value.
Net realizable value because there is no an active marketthe estimated selling price in that country. Costthe ordinary course of business less selling expenses. It is determined usingon an ongoing basis, taking into account the weighted average cost method.product type and aging, based on the accumulated prior experience with the useful life of the product. The Group periodically reviews the inventory and its aging and books an allowance for impairment, as necessary.

Consumable supplies and inventories from hotel operations and the rest of materials and assets classified in this category are measured at the lower of cost or net realizable value. The cost of consumable supplies, materials and hotel inventoriesother assets is determined using the weighted average cost method, whereasthe cost of inventories of mobile phones, related accessories and spare parts is priced under the moving average method, and the cost of the hotelremaining inventories is determined usingpriced under the first-in-firstfirst in, first out (FIFO) method.

Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Inventories are recorded at the cash cost and the difference between that and the actual amount paid is treated as finance cost.

2.13.  Biological assets and agriculture produce at the point of harvest
2.12.

Biological assets and agriculture produce at the point of harvest
Biological assets comprise unharvested crops (mainly corn, wheat, soybeans and sunflower), sugarcane, livestock (breeding and dairy cattle and cattle held for sale or meat production) and other less significant biological assets such as sheep and tree plantations.

The Group distinguishes between consumable and bearer biological assets. Consumable biological assets are those assets that may be harvested as agricultural produce or sold as biological assets, for example livestock intended for the production of meat and/or livestock held for sale. Bearer biological assets are those assets capable of producing more than one harvest, for example sugarcane, dairy cattle and breeding cattle. Consumable biological assets are generally classified as current while bearer biological assets are generally classified as non-current.

 

F-42

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

Expenses relating to the agricultural activity include items as planting, harvesting, irrigation, agrochemicals, fertilizers, veterinary services and others. The Group elected to expense all such costs when incurred and includes them as “Cost of agriculture production” within Costs in the income statements (See Note 32)30). Therefore, “Cost of agriculture production” represents the costs expensed whilst the biological assets are growing.

F- 33
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
The line item “Cost of sales of biological assets and agricultural produce” within “Costs” in the income statements represents the recognition as an expense of agricultural produce held in inventory, valued at either cost or net realizable value, as applicable (See Note 2.12)2.11), or biological assets valued at fair value less costs to sell.

The fair value of a biological asset in its present location and condition is determined based on either the present value of expected net cash flows from the biological asset discounted at a current market-determined pre-tax rate or the current quoted market price in the most relevant market.

Biological assets are measured at fair value less costs to sell on initial recognition and at each statement of financial position date, except where fair value cannot be reliably measured. Cost approximates fair value when little or no biological transformation has taken place since the costs were originally incurred or the impact of biological transformation on price is not expected to be material. Costs to sell include all incremental costs directly attributable to the sale of the biological assets, excluding finance costs and income taxes.

In determining the fair value of a biological asset based on the expected net discounted cash flows, the following factors have been taken into account:

(i)  The productive life of the asset;

(ii)  The period over which the asset will mature;

(iii)  The expected future sales price;

(iv)  The cost expected to arise throughout the life of the asset; and

(v)  A pre-tax nominal discount rate.

Expected future sale prices for all biological assets are determined by reference to observable data in the relevant market. Costs expected to arise throughout the life of the biological assets are estimated based on historical and statistical data.


F-43

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

The gain or loss arising from initial recognition of aa) agricultural produce and b) biological assetassets at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset is recognized in profit or loss in the period in which they are incurred within the line item “Initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest”.

Agricultural produce harvested from the Group’s biological assets is initially measured at its fair value less costs to sell at the point of harvest. The fair value of agricultural produce is determined based on market price in the most relevant markets of each product. The gain or loss arising from initial recognition of agricultural produce as a result of harvesting is also recognized in profit or loss in the period in which it arises in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest”. Harvested produce is transferred to inventory at their fair value less costs to sell at the point of harvest. See Note 2.12 for measurement of inventories.
2.13.

Financial instruments
2.14.  Financial instruments

(a)  Classification

The Group has adopted IFRS 9 in advance as well as the related consequential amendments to other IFRSs, because this new accounting policy provides reliable and more relevant information for users to assess the amounts, timing and uncertainty of future cash flows.

Accordingly, the Group classifies its financial assets in the following categories: those to be measured subsequently at fair value, and those to be measured at amortized cost. This classification depends on whether the financial asset is a debt or an equity investment.

Debt investments

(i) Financial assets at amortized cost

A debt investment is classified as “amortized cost” only if both of the following criteria are met: (i) the objective of the Group’s business model is to hold the asset to collect the contractual cash flows; and (ii) the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The nature of any derivatives embedded in the debt investment are considered in determining whether the cash flows of the investment are solely payment of principal and interest on the principal outstanding and are not accounted for separately.

 

F-44

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

As of the end of the current financial statements, the Group’s financial assets at amortized cost comprise certain items of cash and cash equivalents, trade and other receivables and investment in financial assets.

(ii) Financial assets at fair value through profit or loss

If either of the two criteria abovementioned in the previous paragraph is not met, the debt instrument is classified as “fair value through profit or loss”. The Group has not designated any debt investment as measured at fair value through profit or loss to eliminate or significantly reduce an accounting mismatch.

Changes in fair values and gains from disposal of financial assets at fair value through profit or loss (except for derivative financial instruments mentioned in Note 2.15) are recorded within “Financial results, net” in the income statements.statements of income.

As
F- 34
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of the endArgentine Pesos, except otherwise indicated)
2. 
Summary of the current financial statements, the Group’s financial assets at fair value through profit or loss comprise derivative financial instruments, mutual funds, mortgage bonds, government bonds and preferred shares, among others.significant accounting policies (Continued)

Equity investments

All equity investments, which are not subsidiaries, associate companies and joint venture of the Group, are measured at fair value. Equity investments that are held for trading are measured at fair value through profit or loss. For all other equity investments, the Group can make an irrevocable election at initial recognition to recognize changes in fair value through other comprehensive income rather than profit or loss.

The Group decided to recognize changes in the fair value of equity investments through profit or loss.

Changes in fair values and gains or losses from disposal of equity investments at fair value through profit or loss and dividends income are recorded within “Financial results, net” in the income statements.

(b)  Recognition and measurement

Regular purchases and sales of financial assets are recognized on the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.


F-45

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value though profit or losses are expensed in the income statements.statements of income.

In general, the Group uses the transaction price method to determine fair value of a financial instrument upon initial recognition. In the other cases, the Group merely records a gain or a loss upon initial recognition only if the fair value of the instrument is supported by other comparable and observable current market transactions in the same instrument or from other available observable market data. Any gain or loss not recognized upon initial recognition of a financial asset are recognized later, only to the extent that there are changes in the factors (including time) that market participants would consider at the time of agreeing upon a price.

A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the financial asset is derecognized or impaired and through the amortization process using the effective interest rate method.

All equity investments, which are not subsidiaries, associate companies and joint venture of the Group, are measured at fair value.

The Group is required to reclassify all affected debt investments when and only when its business model for managing those assets changes.

(c)  Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets measured at amortized cost is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that impairment can be reliably estimated.

Evidence of impairment may include indicators that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows.


F-46

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statements. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the reversal of the previously recognized impairment loss is recognized in the consolidated income statements.

(d)  Offsetting financial instruments

Financial assets and liabilities are offset when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

2.15.  Derivative financial instruments and hedging activities

F- 35
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
2.14.
Derivative financial instruments and hedging activities and options
Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Group manages exposures to various risks using hedging instruments that provide the appropriate economic outcome. The Group does not use derivative financial instruments for speculative purposes. To date, the Group has used future contracts, commodities put and call options, foreign exchange contracts and interest rate swaps as deemed appropriate.

The Group’s policy is to apply hedge accounting to hedging relationships where it is both permissible under IFRS 9, practical to do so and its application reduces volatility, but transactions that may be effective hedges in economic terms may not always qualify for hedge accounting under IFRS 9. To date the Group has not applied hedge accounting to any of its derivative financial instruments. Trading derivatives are classified as a current asset or liability on the statement of financial position. Gains and losses on derivatives are classified according to their nature. Gains and losses on commodity derivatives are classified within the line item “Other operating income, net”. Gain and losses on all other derivatives are classified in the income statements where the results of the items covered are recognized.

 

F-47

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

The fair values of financial instruments that are traded in active markets are computed by reference to market prices. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end as each reporting period.

2.16.  Groups of assets and liabilities available for sale
The stock purchase options involving shares of subsidiaries agreed at a fixed price are accounted for under shareholders’ equity.

2.15.
Groups of assets and liabilities held for sale
Groups of assets and liabilities are classified as availableheld for sale when the Group is expected to recover their value by means of a sale transaction (rather than through use) and where such sale is highly probable. Groups of assets and liabilities availableheld for sale are valued at the lower of their net book value and fair value less selling costs.

2.17.  Restricted assets
2.16.

Trade and other receivables
This item is comprised by:  (i) cash in guarantee directly associated with the sale of the office building for rental located at Madison Ave. 183, New York, U.S. (Note 44) and sale of farmlands, (ii) deposits in investment mutual funds held as guarantee of certain short and long term loans, obtained for financing harvest expenses, development of lands and acquisitions of farmlands. According to the IFRS 9, these escrow accounts are to be accounted for as financial assets, and are initially recognized at fair value and then, at amortized cost.

2.18.  Trade receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

An impairment provision of doubtful accounts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

In the case of larger homogeneous receivables, the impairment provision is calculated on an individual basis. When individually assessed, the Group records a provision for impairment which amounts to the difference between the value of the discounted expected future cash flows of the receivable  and its carrying amount, taking into account the existing collateral, if any. This provision takes into consideration the financial situation of the debtor, the resources, payment record and, if applicable, the realizable value of any collateral.

 

 
F-48

F- 36
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2. 
2.           Summary of significant accounting policies(Continued)

An allowance for bad debts is recorded where there is objective evidence that the Group may not be able to collect all receivables within their original payment term. Indicators of bad debts include significant financial distress of the debtor, the debtor potentially filing a petition for reorganization or bankruptcy, or any event of default or past due account.
In the case of larger non-homogeneous receivables, the impairment provision is calculated on an individual basis.
The Group collectively evaluates for impairment smaller-balance homogeneous receivables whichfor impairment. For that purpose they are grouped on the basis of similar risk characteristics taking intoand account asset type, collateral type, past-due status and other relevant factors. The Group applies allowance factors which in the judgment of management represent the expected losses over the life of the receivables. In determining those factors, the Group considers the following: (i) delinquencies, (ii) loss history and the general behavior of clients, (iii) trends in volume and terms of receivables, (iv) the experience and depth of the debtors’ management, (v) national and local economic trends, (vi) concentrations of credit by individual credit size and by class of receivable, and (vii) the effect of external factors.are taken into account.

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowancea provision account, and the amount of the loss is recognized in the statements of income statements within “Selling expenses”. Subsequent recoveries of amounts previously written off are credited against “Selling expenses” in the income statements.statements of income.

2.19.  Trade payables

2.17.
Trade and other payables
Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.

2.20.  Tenant deposits
2.18.

Borrowings
The Group generally obtains deposits from tenants as a guarantee for returning the property at the end of the lease term in a specified good condition or for the lease payments for the leases period (which is generally 3 years). The deposits generally amount to one month of lease rentals. In accordance with IFRS 9, such deposits are treated as both a financial assets and a financial liability, and they are initially recognized at fair value. The difference between fair value and cash received is considered to be part of the minimum lease payments received for the operating lease (refer to Note 2.28 for the recognition of rental income). The deposits are subsequently measured at amortized cost.

2.21.  Borrowings

Borrowings are recognized initially at fair value, net of costs incurred in the transaction. Borrowings are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized as finance cost over the period of the borrowings using the effective interest method.


F-49

 
Cresud Sociedad Anónima,
2.19.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Provisions



2.
Summary of significant accounting policies (Continued)

2.22.  Borrowing cost

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

In accordance with what we mentioned above, the Group capitalizes borrowing costs on qualifying investment properties, property, plant and equipment and trading properties.

2.23.  Provisions

Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are not recognized for future operating losses.

F- 37
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as finance cost.

 

(a)
Warranties
 
A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historic data of the warranties granted and all potential results are weighted against associated probabilities.
F-50

(b) Onerous contracts
A provision for onerous contracts is recognized when the expected benefits are lower than the costs of complying with contract obligations. The provision is measured at the present value of the lower of expected cost of terminating the contract and the net expected cost of continuing the contract. Before recognizing a provision, the Group recognizes the impairment of the assets related to the mentioned contract.
 
Cresud Sociedad Anónima,
2.20.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Employee benefits



(a)
2.
Summary of significant accounting policies (Continued)Defined contribution plans

2.24.  Employee benefits

(a)  Pension plan

The Group operates a defined contribution plan. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expenses in the statements of income statementsin the fiscal year when they are incurred.

(b)  Termination benefits

F- 38
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
(b)
Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

(c)
Bonus plans

Bonus plans
The Group recognizes a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognizes a provision where it is contractually obliged or where there is a past practice that has created a constructive obligation.

2.25.  Share-based payments
(d)

Defined benefit plans
The Group operates
Group’s net obligation concerning defined benefit plans is calculated on an equity incentiveindividual basis for each plan, under which certain selectedestimating the future benefits employees directors and top management of the Company, IRSA and IRSA CP have a right to receive shares of their respective employer companies, although they must remain with the employer entity for a certain period of time.

The Group’s subsidiary undertaking, Brasilagro, also operates a stock option plan, under which Brasilagro receives services from certain directors and top management. Additionally, Brasilagro issued warrants as consideration for the services received from its founding shareholders. On the other hand, the Group’s subsidiary Jaborandí S.A. issued warrantsgained in exchange for their services received fromin the current and prior years. The benefit is disclosed at its shareholders.present value, net of the fair value of the plan assets. Calculations are made on an annual basis by a qualified actuary.

 

(e)
Other long-term employee benefits
 
The net obligation of IDBD and its subsidiaries concerning employee long-term benefits, other than retirement plans, is the amount of the future benefits employees have gained in exchange for their services in the current and prior periods. These benefits are discounted at their present values.
F-51

 
Cresud Sociedad Anónima,
(f)
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Share-based compensation plan



2.
Summary of significant accounting policies (Continued)

The fair value of the equity settled awards is measured at the date of grant. ManagementThe Group measures the fair value using the valuation technique that it considers to be the most appropriate to value each class of award. Methods used may include Black-Scholes calculations or other models as appropriate. The valuations take into account factors such as non-transferability, exercise restrictions and behavioral considerations.

The fair value of the equity settled awards is recognized as an expense in the income statements over the vesting period on a straight-line basis, taking into consideration the best estimation of the awards that will eventually vest. Such estimate shall be revised provided subsequent information available indicates that the number of equity instruments expected to vest differs from original estimates.

If an equity instrument is cancelled during
F- 39
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the vesting period, it is accounted for as an accelerationConsolidated Financial Statements(Continued)
(All amounts in millions of vesting,Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
2.21.
Income tax, deferred income tax and the amount that otherwise could have been recognized for services received over the remaining of vesting period is recognized immediately in theminimum presumed income statements. Any payment made by a counterparty due to cancellation of share-based payment shall be accounted for as a repurchase of equity instruments (that is, it is deducted from shareholders’ equity) unless the payment exceeds the fair value of the repurchased equity instruments measure at the repurchase date. The excess, if any, is recognized as an expense.tax

2.26.  Current and deferred income tax

The Group’s tax expense for the year comprises the charge for tax currently payable and deferred income. Tax is recognized in the statements of income, statements, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statementstatements of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. ManagementThe Group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

F-52

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the closing date of the consolidated financial statements and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associatesjoint ventures and joint ventures,associates, except when opportunity of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

The Group is able to control the timing of dividends from its subsidiaries and hence does not expect taxable profit. Hence deferred tax is recognized in respect of the retained earnings of overseas subsidiaries only if at the closing date of the Consolidated Statement of Financial Position, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary.

F- 40
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
Entities in Argentina are subject to the Minimum Presumed Income Tax (“MPIT”). Pursuant to this tax regime, an entity is required to pay the greater of the income tax or the MPIT. The MPIT provision is calculated on an individual entity basis at the statutory asset tax rate of 1% and is based upon the taxable assets of each company as of the end of the year, as defined by Argentine law. Any excess of the MPIT over the income tax may be carried forward and recognized as a tax credit against future income taxes payable over a 10-year period. When the Group assesses that it is probable that it will use the MPIT payment against future taxable income tax charges within the Groupapplicable 10-year period recognizes the MPIT as a current or non-current receivable, as applicable, within “Trade and other receivables” in the Consolidated StatementStatements of Financial Position.

 

2.22.
Cash and cash equivalents
 
F-53

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

2.27.  Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. DoBank overdrafts are not include bank overdrafts.included.

2.28.  Revenue recognition
2.23.

Revenue recognition
The Group is engaged in diverse operations primarily including agricultural and agro-industrial activities; investment and development properties and hotel operations. Revenue
Group's revenue is measured at the fair value of the consideration received or receivable.

Revenue derived from the sale of goods is recognized when: (a) material risks and benefits derived from title to property have been transferred; (b) the company does not retain any management function on the assets sold nor does it have any control whatsoever on such assets; (c) the amount of revenues and costs associated to the transaction may be measured on a reliable basis; and (d) the company is expected to accrue the economic benefits associated to the transaction.

Revenue derived from the provision of services is recognized when (a) the amount of revenue and costs associated to the services may be measured on a reliable basis; (b) the company is expected to accrue the economic benefits associated to the transaction, and (c) the level of completion of services may be measured on a reliable basis.

Agricultural and agricultural-related activities of the Group:

Revenue from Group’s agricultural activities comes primarily from sales of agricultural produce and biological assets, from provision of services related to the activity and from leases from farmlands.

F- 41
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2. 
Summary of significant accounting policies (Continued)
The Group recognizes revenue on product sales when the agricultural produce or biological assets are delivered and the customers take ownership and assume risk of loss, which is when the products are received by the customer at its or a designated location or collected directly by the customer from the cultivation bases, collection of the relevant receivable is probable and the selling price is fixed or determinable. Net sales of products represent the invoiced value of goods, net of trade discounts and allowances, if any.
 
The Group also provides agricultural-related (including but not limited to watering and feedlot services) and brokerage services to third parties. Revenue from services is recognized as services are rendered.

 

F-54

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

The Group also leases land to third parties under operating lease agreements. Lease income is recognized on a straight-line basis over the period of the lease.

Investment property activities:

· Rental and services - Shopping centers portfolio

Revenues derived from business activities developed in the Group’s shopping centers mainly include rental income under operating leases, admission rights, commissions and revenue from several services provided to the Group’s lessees.

All lease agreements in Argentina are cancelable pursuant to Argentine Law 23,091 “Lease law” as amended by Law 24,808 “Lease Law”. Under the law, a lease is not cancelable within the first six months of the agreement, but provides that after that initial non-cancelable period, tenants may rescind agreements at any time upon giving prior written notice to lessors. Cancellations are subject to one-and-a-half month’s rent if rescinded during the first year of the lease and one month’s rent if rescinded after the first year of the lease.

The Group analyzed the definition of the lease term in IAS 17, for its cancelable option, and which provides that a non-cancelable lease is a lease that is cancelable only (a) upon the occurrence of some remote contingency, (b) with the permission of the lessor, (c) if the lessee enters into a new lease with the same lessor or (d) upon payment by the lessee of such an additional amount that, at inception of the lease, continuation of the lease is reasonably certain.

The Group considered that all of its operating leases should be considered non-cancellable for accounting. The Group concluded that, even though a lease is cancelable under the law, tenants would incur significant “economic penalties” if the leases are terminated prior to expiry. The Group considered that these economic penalties are of such amount that continuation of the lease contracts by tenants appears to be reasonably certain at the inception of the respective agreements. Group reached this conclusion based on factors such as (i) the strategic geographical location and accessibility to customers of the Group’s investment properties; (ii) the nature and tenure of tenants (mostly well-known local and international retail chains), (iii) limited availability of identical revenue-producing space in the areas where the Group’s investment properties are located; (iv) the tenants’ brand image and other competitive considerations; (v) tenants’ significant expenses incurred in renovation, maintenance and improvements on the leased space to fit their own image; (vi) the majority of the Group’s tenants only have stores in shopping centers with some or none street stores.


F-55

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

Lessees of shopping centers are generally required to pay the higher of: (i) a base monthly rent (the “Base Rent”) and (ii) a specific percentage of gross monthly sales recorded by the Lessee (the “Supplementary Rent”), which generally ranges between 4% and 10% of gross sales. Moreover, in accordance with agreements entered into for most locations, the Base Rent is subject to scheduled increases, typically between 7% and 24% per year over the term of the lease.

In addition, some lease contracts include provisions that set forth variable rent based on specific volumes of sales and other types of ratios.

Rental income from shopping center properties leased out under operating leases, isadmission rights and fees related to their real estate agent business are recognized in the statements of income statements on a straight-line basis over the term of the leases. When lease incentives are granted, they are recognized as an integral part of the net consideration for the use of the property and are therefore recognized on the same straight-line basis.

Contingent rents, being lease payments that are not fixed at the inception of a lease, are recorded as income in the periodsyears in which they are earned. Rent reviews are recognized when such reviews have been agreed with tenants.

Tenants in the Group’s shopping centers are also generally charged a non-refundable admission right upon entering a lease contract or renewing an existing one. Admission rights are treated as additional rental income and recognized in the income statements under a straight-line basis over the term of the respective lease agreement.

The Group acts as its own leasing agent for arranging and closing lease agreements in its shopping center properties and consequently earns letting fees. Letting fees are paid by tenants upon the successful closing of an agreement. A transaction is considered successfully concluded when both parties have signed the related lease contract. Letting fees received by the Group are treated as additional rental income and are recognized in the income statements on a straight-line basis over the term of the lease agreements.

Lease contracts also provide that common area maintenance charges and collective promotion funds of the Group’s shopping centers are borne by the corresponding lessees, generally on a proportionally basis. These common area maintenance charges include all such expenses convenient and necessary for various purposes including, but not limited to, the operation, maintenance, management, safety, preservation, repair, supervision, insurance and enhancement of the shopping centers. The lessor is responsible for determining the need and suitability of incurring a common area expense. The Group makes the original payment for such expenses, which are then reimbursed by the lessees. The Group has assessed the substance of the transactions and concludedconsiders that the group is actingit acts as a principal since it has exposure to the significant risks and rewards associated with the rendering of services.


F-56

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

these cases. Service charge income is presented within rental income and services, separately from property operating expenses. Property operating expenses are expensed as incurred.

Under
F- 42
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the lease contracts entered into, lessees also agree to participateConsolidated Financial Statements(Continued)
(All amounts in collective promotion funds (“FPC”) to be used in advertising and promoting the Group’s shopping centers. Each lessee’s participation is generally calculated as a percentagemillions of the monthly rent accrued. Revenue so derived is also included under rental incomeArgentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
Rental and services segregated from advertising and promotion expenses. Such expenses are charged to income when incurred.

Revenue includes income from managed operations such as car parking lots. In addition, revenue includes income from property management fees. Revenue from services and management fees is recognized on an accrual basis as services are provided.

·Office- Offices and other rental properties portfolio

Rental income from officeoffices and other rental properties include rental income from office leased out under operating leases, income for services and expenses recovery paid from tenants.

Rental income from officeoffices and other rental properties leased out under operating leases is recognized in the income statements on a straight-line basis over the term of the leases. When lease incentives are granted, they are recognized as an integral part of the net consideration for the use of the property and are therefore recognized on the same straight-line basis.

Contingent rents, being lease payments that are not fixed at the inception of a lease, are recorded as income in the periods in which they are earned. Rent reviews are recognized when such reviews have been agreed with tenants.

Lease contracts also provide that common area maintenance expenses of the Group’s offices and other rental properties are borne by the corresponding lessees, generally on a proportionally basis. These common area maintenance expenses include all such expenses convenient and necessary for various purposes including, but not limited to, the operation, maintenance, management, safety, preservation, repair, supervision, insurance and enhancement of the offices and other rental properties. The Group makes the original payment for such expenses, which are then reimbursed by the lessees. The Group considered that it acts as a principal in these cases. The Group accrues reimbursements from tenants for recoverable portions of all these expenses as service charge revenue in the period the applicable expenditures are incurred and is presented separately from property operating expenses. Property operating expenses are recognized as incurred.

Revenue from supermarkets
Revenue from the sale of goods in the ordinary course of business are recognized at the fair value of the consideration collected or receivable, net of returns and discounts. When the credit term is short and financing is that typical in the industry, consideration is not discounted. When the credit term is longer than the industry’s average, in accounting for the consideration, the Group discounts it to its net present value by using the client’s risk premium or the market rate. The difference between the fair value and the nominal amount is accounted for under financial income. If discounts are granted and their amount can be measured reliably, the discount is recognized as a reduction of revenue.
Generally, the Group recognizes revenue upon delivery of goods to the client. In international sales, revenue is recognized upon loading goods with the forwarder. Where two or more products are sold under one single contract, the Group separates each component and gives them a separate accounting treatment. The attribution of value to each component is based on the relative fair value of each unit. Should the fair value not be measurable on a reliable basis, then revenue is attributed based on the difference arising between the total amount of the executed contract and the fair value of the goods delivered.
 

 
F-57

F- 43
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

·Summary of significant accounting policies Development and sale property activities(Continued)
As regards client loyalty programs, the fair value of the Group:consideration received or receivable in relation to the initial sale is allocated across the rewards credits and the other components of the sale. The amount allocated to rewards credits is estimated based on the market value of the goods to be delivered. The fair value of the right to purchase products at a discount is calculated considering the expected exchange ratio and the expected terms. Such amount is deferred and revenue is recognized only where rewards credits are exchanged and the Group has complied with its obligation to provide the products at a discount, or else when such reward credits have expired. The amount of revenue recognized under such circumstances is based on the number of reward credits that have been exchanged for products with discounts, in relation to the total number of reward credits expected to be exchanged. Deferred revenue is then reversed when reward credits are no longer likely to be exchanged.

In addition, when the Group acts as agent and not as main supplier in a transaction, revenue is recognized at the net amount of commissions. Revenue primarily comprisesfrom commissions is recognized based on transactions conducted by credit card companies at the proceedsrate and on the date they are credited. Revenue from developmentcredit margins of credit cards is recognized on the date the client is bound to pay and revenue for subscription fees is recognized on a monthly basis.
Revenue from communication services and sale of trading properties. communication equipment
Revenue derived from the use of communication networks by the Group, including mobile phones, Internet services, international calls, fixed line calls, interconnection rates and roaming service rates, are recognized when the service is provided, proportionally to the extent the transaction has been realized, and provided all other criteria have been met for revenue recognition.
Revenue from the sale of properties ismobile phone cards are initially recognized only when the significant risksas deferred revenue and rewards have transferred to the buyer. This will normally takethen recognized as revenue as they are used or upon expiration, whichever takes place on unconditional exchange of contracts (except where payment or completion is expected to occur significantly after exchange). For conditional exchanges, sales are recognized when these conditions are satisfied.earlier.

The Group applies IFRIC 15 “Agreements for the Construction of Real Estate”. IFRIC 15 gives guidance as to which standard applies when accounting for the construction of real estate; that is IAS 11 “Construction Contracts” or IAS 18 “Revenue”. IFRIC 15 interprets that an agreement meets the definition of a construction contract under IAS 11 when the buyer is able to specify the major structural elements of the design of the property either before or during construction. Furthermore, IFRIC 15 interprets that an agreement is forA transaction involving the sale of goods under IAS 18 when construction takes place independentlyequipment to a final user normally also involves a service sale transaction. In general, this type of sale is performed without a contractual obligation by the agreement and the buyer has onlyclient to consume telephone services for a limited ability to influence the design. The Group has assessed the nature of its agreements and determined that they are within the scope of IAS 18.minimum amount over a predetermined period. As a result, the Group records the sale of equipment separately and recognizes revenue pursuant to the transaction value upon delivery of the equipment to the client. Revenue from telephone services are recognized and accounted for as they are provided. When the client is bound to make a minimum consumption of services during a predefined period, the contract formalizes a transaction of several elements and, therefore, revenue from the sale of open market private homesequipment is recorded at an amount that should not exceed its fair value, and commercial units entirely atis recognized upon delivery of the point of legal completion in accordance with IAS 18.

equipment to the client and provided the criteria for recognition are met. The Group also enters into barter transactions where the Group normally exchanges undeveloped parcels of land with third-party developers for future property to be developed on the bartered land. In certain circumstances, the Group also receives cash as part of these transactions. The legal title together with all risks and rewards of ownership to the land are transferred to the developer upon sale. The Group generally requires the developer of the subject parcel to issue surety insurance or to mortgage the land in favor of the Group as performance guarantee. If the developer does not fulfill its obligations, the Group forecloses on the land through the execution of the mortgage or the surety insurance policy, in addition to imposing a cash penalty for breach.

The Group determines that its barter transactions have commercial substance and that the conditions for revenue recognition on the transfer of land are met at the time the transaction is consummated. Revenue is then recognized atascertains the fair value of the goods delivered, adjusted by the amount of cash received, if any. In exchange for delivery of the land, the Group receives cash, if any, and an in-kind receivable. Such receivable is initially recognized at fair value but is not subsequently re-measured. In exchange for delivering the parcel, the Group receives cash and/or a right to receive future units to be developedindividual elements, based on the subject parcels. The in-kind receivableprice at which it is initially recognized at cost (beingnormally sold, after taking into account the fair value of the transferred land) as an intangible asset in the statement of financial position in the line item “Right to receive future units (Barter transactions)”. The mentioned intangible asset is not adjusted in subsequent years unless there are indicia of impairment.relevant discounts.

 

 
F-58

F- 44
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.
Summary of significant accounting policies (Continued)

Summary of significant accounting policies (Continued)
The Group may sell
Revenue derived from long-term contracts is recognized at the residential apartments to third-party homebuyers once they are finalizedpresent value of future cash flows, discounted at market rates prevailing on the transaction date. Any difference between the original credit and transferredits net present value is accounted for as interest income over the credit term.
Revenue from tourism services
Revenue from the developer. In these circumstances, revenueprovision of tourist services is recognized when the significant risks and rewardsfollowing conditions are transferredmet:
the revenue amount may be reliably measured;
    the economic benefits associated to the buyer. This will normally take place whentransaction are expected to have an impact on the title deeds are transferredGroup;
the degree of completion of the transaction may be measured on a reliable basis; and
   expenses incurred in relation to the homebuyer.transaction as well as all necessary costs to finalize the transaction may be reliably measured.

However,
2.24.
Cost of sales
The cost of sales of supermarkets, includes the acquisition costs for the products less discounts granted by suppliers, as well as all expenses associated with storing and handling inventories. It also includes operational and management costs for shopping centers held by the Group may market the residential apartments during construction or even before construction commences. In these situations, homebuyers generally surrenders a downpaymentas part of its real estate investments.
The Group’s cost of sales in relation to the Group withsupply of communication services mainly includes the remaining amount being paid when the developer completes the propertycosts to purchase equipment, salaries and transfers itrelated expenses, service costs, royalties, ongoing license dues, interconnection and roaming expenses, cell tower lease costs, depreciation and amortization expenses and maintenance expenses directly related to the Group, and the Group in turn transfers it to the buyer. Revenue is not recognized until the apartments are completed and the transaction is legally completed, that is when the apartments are transferred to the homebuyers and deeds of title are executed. This is because in the event the residential apartments are not completed by the developer and consequently not delivered to the homebuyer, the Group is contractually obligated to return to the homebuyer any down payment received plus a penalty amount. The Group may then seek legal remedy against the developer for non-performance of its obligations under the agreement. The Group exercised judgment and considers that the most significant risk associated with the asset the Group holds (i.e. the right to receive the apartments) consisting of the unfulfillment of the developer's obligations (i.e. to complete the construction of the apartments) has not been transferred to the homebuyers upon reception of the down payment.services provided.

·Hotel operations of the Group:

Revenue from hotel operations primarily comprises room accommodation, catering and other services. Revenue from product sales in hotels are recognized when the product is delivered and the significant risks and rewards of ownership are transferred to the buyer. Revenues from sales of services are recognized when the service is rendered. All revenues are recognized on an accruals basis.

2.29.  Equity

2.25.
Share Capital, Treasury Stock, Inflation Adjustment of Share Capital, Share Premium, Additional paid-in Capital from Treasury Stock, Cost of Treasury Stockcapital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds from this issuance.

 

F-59

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.           Summary of significant accounting policies (Continued)

Share repurchases made this fiscal year, as established by the amended CNV Rules issued in relation to the new Capital Markets Act 26,831 and its implementing Executive Order 1023/13 (published by CNV in 2013) are to be recorded as follows: 1) the acquisition cost of the repurchased shares is charged to “Cost of Treasury Stock”, 2) the nominal value of the repurchased shares is charged to “Share Capital”, the proportional part of the adjustment for inflation corresponding to such repurchased shares is charged to “Inflation Adjustment of Share Capital”, and is matched by a credit to “Treasury Stock” and “Inflation Adjustment of Share Capital and Treasury Stock”. This entry is reverted upon the sale of shares. Upon sale of the treasury shares, the difference between the net realizable value of the treasury shares sold and their acquisition cost shall be recorded, whether it is a gain or a loss, as part of owners’ contributions not yet capitalized to be called “Additional Paid-in Capital from Treasury Stock”.

Before CNV rules 2013 become effective, whereWhen any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) wasis deducted from equity attributable to the Company’s equity holders until the shares wereare cancelled or reissued. WhereWhen such ordinary shares wereare subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and wasis included in equity attributable to the Company’s equity holders.

F- 45
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
2.
Summary of significant accounting policies (Continued)
Instruments issued by the Group that will be settled by the Company delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or another financial asset are classified as equity.

Inflation adjustment of share capital

Under Argentine GAAP, the Group’s financial statements were previously prepared on the basis of general price-level accounting which reflected changes in the purchase price of the Argentine Peso in the historical financial statements through February 28, 2003. The inflation adjustment related to share capital was appropriated to an inflation adjustment reserve that formed part of shareholders' equity. The balance of this reserve could be applied only towards the issuance of common stock to shareholders of the Company. Resolution 592/11 of the CNV requires that at the transition date to IFRS certain equity accounts, such as the inflation adjustment reserve, are not adjusted and are considered an integral part of share capital.

2.26.

Comparability of information
 
F-60

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

Legal Reserve

According to Argentine law, 5% of the profit of the year is separated to constitute a legal reserve until they reach legal capped amounts (20% of total capital). This legal reserve is not available for dividend distribution and can only be released to absorb losses. The Group has not reached the legal limit of this reserve.

Special Reserve

Pursuant to CNV General Ruling N° 609/12, the Company set up a special reserve, to reflect the positive difference between the balance at the beginning of retained earnings disclosed in the first financial statements prepared according to IFRS and the balance at closing of retained earnings disclosed in the last financial statements prepared in accordance with previously effective accounting standards. This reserve may not be used to make distributions in kind or in cash, and may only be reversed to be capitalized, or otherwise to absorb potential negative balances in Retained Earnings.

Reserve for New Developments

The Company and subsidiaries may separate portions of their profits of the year to constitute voluntary reserves according to company law and practice. These special reserves may be for general purposes or for specific uses such as new developments. The voluntary reserves may be released for dividend distribution.

Reserve for the repurchase of securities issued by the Company

On April 11, 2014, Cresud reported on a potential repurchase of shares intended to curb the drop in prices and reduce fluctuations on the Company’s shares and ADR and strengthen its position in the market, thus minimizing potential temporary imbalances that may arise between supply and demand. On that same date, the Shareholders’ Meeting approved a partial release of the account “Reserve for new developments” in an amount of up to Ps. 200 million, in order to appropriate such amount of money to set up a reserve entitled “Reserve for the repurchase of securities” issued by the Company.


F-61

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


2.  
Summary of significant accounting policies (Continued)

2.30.  Earnings per share

Basic profit / (loss) per share is calculated by dividing the net profit / (loss) for the year attributable to equity holders of the parent by the weighted average number of common shares outstanding during the year. Diluted net profit / (loss) per share is computed by dividing the net profit / (loss) for the year by the weighted average number of common shares outstanding, and when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as-if converted basis.

In computing diluted profit / (loss) per share, income available to common shareholders used in the basic profit / (loss) per share calculation is adjusted to any other income or lossBalance items that would result from the assumed conversion of potential common shares. The weighted-average number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Diluted profit / (loss) per share is based on the most advantageous conversion rate or exercise price over the entire term of the instrument from the standpoint of the security holder. The calculation of diluted profit / (loss) per share excludes potential common shares if their effect is anti-dilutive. The Company has considered the dilutive effect of outstanding warrants in calculating diluted profit / (loss) per share. See Note 37 for details.

2.31.  Dividend distribution

Cash dividend distribution to the Group’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved.

As indicated in Note 30, the Group has been refunded dividends deposited with the Caja de Valores. Such amounts have been recorded either under Retained Earnings, if already forfeited or under Trade and other payables, if not forfeited.

2.32.  Dividends income

Dividends earned are recorded when declared.


F-62

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



2.  
Summary of significant accounting policies (Continued)

2.33.  Comparative information

Amounts as of June 30, 2015 and 2014 which are disclosedshown in these financial statements for comparative purposes have been takenarise from the Consolidated Financial Statements as of such date. The financial statements originally issuedthen ended. Certain reclassifications have been subject to certain reclassifications requiredmade in order to present these figures comparatively with those of this year. See Note 2.1 (a)

As required by IFRS 3, the information of IDBD is included in the consolidated financial statements of the Group as from the acquisition date, and the prior periods are not modified by this situation. Therefore, the consolidated financial information for years after the acquisition is not comparative with prior years.
During the fiscal year ended June 30, 2016, the Argentine Peso devalued against the US$ and other currencies by around 65%. This has an impact in comparative information presented in these Financial Statements, due mainly to the currency exposure of our income and costs of Agricultural Business and of income from Urban properties and investments business line, especially from the “office and other rental properties” segment, and our net assets and liabilities (mainly assets and liabilities of the Operations Center in Israel), in foreign currency.
Moreover, during the year ended June 30, 2015,2016, the Real Brasileño (RS)Brazilian Reais (Rs.) has depreciated against the Argentine Peso and other currencies by around 20.0%17%, respectively, which affects the comparability of the figures reported in the current financial statements given its negative impact on the financial position and results of operations of the Group, due mainly to the foreign exchange rate exposure to net assets and liabilities denominated in foreign currency and investments in joint ventures with a functional currency different from the Real.Brazilian Reais.

3.  Acquisitions and disposals
2.27.

Irrevocable right of use of the capacity of underground communication lines
Year ended June 30, 2015

SaleTransactions carried out to acquire an irrevocable right of Cresca farmland

On April 3, 2014, Cresca S.A. signeduse of the capacity of underground communication lines are accounted for as service contracts. The amount paid for the rights of use of the communication lines is recognized as “Prepaid expenses” under trade and other receivables, and is amortized over a bill of sale whereby it sells an area of 24,624 hectares locatedstraight-line basis during the period set forth in Chaco Paraguayo. The total price is US$ 14.7 million (Ps. 56.3 million)the contract (including the option term), which amount shall be collectable as follows US$ 1.8 million were collected upon executionis the estimated useful life of the bill of sale, US$ 4.3 million upon execution of the conveyance deed; US$ 3.7 million interest-free in July, 2015; US$ 4.9 million interest-free in July, 2016. Possession was delivered upon execution of the conveyance deed of title and constitution of a mortgage to secure payment of the balance, on July 14, 2014.such capacity.

The Group has recognized gains of Ps. 19.1 million as result of this transaction.

Sale of Cremaq farmland

On June 10, 2015, Brasilagro sold the remaining area of 27,745 hectares of Cremaq field, an establishment, located in the municipality of Baixa Grande do Ribeiro (Piaui). The sale was priced at Rs. 270 million (Ps. 694.0 million), of which Rs. 67.5 million (Ps. 196.8 million) were collected, and the remaining balance will be collected within an estimated term of de 90 days.

The Group has recognized gains of Ps. 525.9 million as result of this transaction.


 

 
F-63

F- 46
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)

Sale of La Fon Fon II farmlands

On October 17, 2013, Yuchán Agropecuaria signed a purchase-sale agreement involving a sale subject to retention of title involving 1,643 hectares of "La Fon Fon II" for an overall amount of US$ 7.21 million (equivalents to Ps. 59.0 million). As of the consolidated financial statements date, the amount of US$ 1.5 million has been collected, and the remaining balance amounts to US$ 5.71 million that will be cancelled in 6 semi-annual installments, starting in December this year, and concluding in June, 2018. Under the contract, the conveyance shall be recorded with the Registry once the price has been fully paid off. On June 24, 2015, possession was granted by Yuchán Agropecuaria. During this year the Group recognized a profit before tax of US$ 2.7 million (equivalents to Ps. 24.6 million) as result of this transaction.

Sale of investment properties

On July 7, 2014, IRSA signed the transfer deed for the sale of the 19th and 20th floors of the Maipú 1300 Building. The total price of the transaction was Ps. 24.7. Such transaction generated a profit before tax of approximately Ps. 20.3 million.

On September 29, 2014, the Group through its subsidiary Rigby 183 LLC (“Rigby 183”) finalized the sale of the Madison 183 Building, located in the city of New York, United States, in the sum of US$ 185 million, thus paying off the mortgage levied on the asset in the amount of US$ 75 million. Such transaction generated a gain before tax of approximately Ps. 296.5 million.

On October 8, 2014, the Group through IRSA signed the transfer deed for the sale of the 22th and 23th floors of the Bouchard 551 Building. The total price of the transaction was Ps. 168.7 million. Such transaction generated a gain before tax of approximately Ps. 150.1 million.

On October 22, 2014, the Group through IRSA signed the transfer deed for the sale of the 10th floor and two parking units of the Maipú 1300 Building and one parking unit of the building Libertador 498. The total price of the transaction was Ps. 12.0 million. Such transaction generated a gain before tax of approximately Ps. 10.1 million.

On October 28, 2014, the Group through IRSA signed the transfer deed for the sale of 9th, 10th and 11th floors of the Bouchard 551 Building. The total price of the transaction was Ps. 279.4 million. Such transaction generated a gain before tax of approximately Ps. 238.6 million.

 

3.
Acquisitions and disposals
 
A.
F-64

IDBD
 
Cresud Sociedad Anónima,
(a)
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Control obtainment



3.  
Acquisitions and disposals (Continued)

On November 7, 2014, the Group through IRSA signed the transfer deed for the sale of the 21th floor of the Bouchard 551 Building. The total price of the transaction was Ps. 75.6 million. Such transaction generated a gain before tax of approximately Ps. 66.1 million.

On December 10, 2014, the Group through IRSA signed the transfer deed for the sale of the 9th floor of the Maipú 1300 Building. The total price of the transaction was Ps. 12.5 million. Such transaction generated a gain before tax of approximately Ps. 10.7 million.

On May 5, 2015, the Group through IRSA CP has signed a bill of sale to transfer 8,470 square meters corresponding to nine offices floors and 72 parking units of Intercontinental Plaza Building. The  transaction price was Ps. 376.4 million, which has already been fully paid. On June 30, 2015, the title deed was executed and the possession of the units previously mentioned was granted. Gross profit before tax of this operation amounted to Ps. 338.4 million. 

On May 19, 2015, the Group through IRSA signed the transfer deed for the sale of the 15th floor of the Maipú 1300 Building and one parking unit in Libertador 498 Building. The total price of the transaction was US$ 13.5 million. Such transaction generated a profit before tax of approximately Ps. 11.6 million.

On June 5, 2015, the Group through IRSA signed the transfer deed for the sale of the 14th floor of the Maipú 1300 Building. The total price of the transaction was US$ 13.3 million. Such transaction generated a profit before tax of approximately Ps. 11.5 million.

All sales of the period led to a combined profit for the Group of Ps. 1,150.2 million approximately, disclosed within the line “Gain from disposal of investment properties” in the income statement.

Decreased shareholding in Avenida Inc.

On July 18, 2014, the Group, through Torodur S.A., exercised the warrant that remained associated to this investment and consequently its interest in Avenida Inc. increased to 6,172,840 shares or 35.46%. However, simultaneously, a new investor acquired 35.12% of interest in the Company, diluting the Group’s holding to 23.01% at such date.

On September 2, 2014, Torodur S.A. sold 1,430,000 shares representing 5% of the Avenida Inc.’s capital stock in the amount of Ps. 19.1 million (US$ 2.3 million), thus reducing equity interest to 17.68% of its share capital. Such transaction generated a gain of Ps. 8.8 million which are shown in the line "Other operating results, net" in the income statement.


F-65

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)

As a result of the sale of the interest, the Group has ceased to recognize the equity interest in Avenida Inc. as investment in associates and began to consider it as a financial asset at fair value in the financial statements as of June 30, 2015.

Acquisition of additional interest in BHSA

During the year ended June 30, 2015, the Group acquired 3,289,029 additional shares of BHSA in a total amount of Ps. 14.2 million, thus increasing its interest in such company from 29.77% to 29.99%, without consideration of Treasury shares.

Investment in IDBD
 
On May 7, 2014, a transaction was closedagreed whereby the Group, acting indirectly through Dolphin, acquired jointly with C.A.A. Extra Holdings Limited, aETH (a non-related company incorporatedestablished under the laws of the State of Israel to the Company best knowledge controlled by Mordechay Ben Moshé (hereinafter, “ETH”), an aggregate number of 106.6 million common shares in IDBD, representing 53.30% of its stock capital, under the scope of the debt restructuring arrangement of IDBD’s holdingIDBH, IDBD's parent company, IDB Holdings Corporation Ltd. (“IDBH”), with its creditors (the “Arrangement”"Arrangement").
Under the terms of the agreement entered into between Dolphin and E.T.H.M.B.M. Extra Holdings Ltd., a company controlled by Mordechay Ben Moshé, to which Dolphin and ETH acceded to (the “Shareholders' Agreement”"Shareholders' Agreement"), Dolphin acquired a 50% interest in this investment, whileand ETH acquired the remaining 50%. The total initial investment amount was NIS 950 million, equivalent to approximately US$ 272 million at the exchange rate prevailing on that date. As of June 30, 2014, IRSA’s indirect interest in IDBD was approximately 23%.
Under the Arrangement, Dolphin and ETH agreed to participate on a joint and several basis in the capital increases resolved by IDBD’s Board of Directors in order to carry out its business plan for 2014 and 2015, in amounts of at least NIS 300 million in 2014 and NIS 500 million in 2015. As of June 30, 2014, Dolphin and ETH had contributed NIS 231.09 million of the commitment of NIS 300 million corresponding to the year 2014.
Moreover, as part of the Arrangement, Dolphin and ETH committed jointly and severally to make one or more tender offers (the “Tender Offers”) for the purchase of IDBD’s shares for a total amount of NIS 512.09 million (equivalent to approximately US$ 135.7 million at the exchange rate prevailing as of June 30, 2015), as follows: (i) by December 31, 2015 at least NIS 249.8 million for a price per share of NIS 7.798 (value as of June 30, 2015, subject to adjustment) and (ii) by December 31, 2016, for at least NIS 512.09 million, less the offer made in 2015, for a price per share of NIS 8.188 (value as of June 30, 2015, subject to adjustment). As security for the performance of the tender offers, a total of 28,020,191 shares of IDBD were pledged at the closing of the transaction.


F-66

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)
On the other hand, the Arrangement provided that Dolphin and ETH had to pay on a joint and several basis to the creditors who are parties to the Arrangement an additional amount of NIS 100 million in the event that IDBD executed the sale of its interest in Clal Insurance Enterprises Holdings Ltd. (“Clal”) before December 31, 2014, provided that: (i) the sale price was not lower than NIS 4,200 million and (ii) the closing of the transaction took place before June 30, 2015, with IDBD having received as of such date a payment of not less than NIS 1,344 million (gross). As of December 31, 2014, IDBD had not executed the sale of its interest in Clal and accordingly this commitment undertaken by Dolphin and ETH became ineffective.
On May 12, 2014, IDBD’s shares became listed on the “TASE”. Consequently, all the shares (including the pledged shares) were deposited in escrow with Bank Leumi Le-Israel as security in compliance with the lock-up provisions set forth in Chapter D of the TASE Regulations, which provide that initially listed shares may not be disposed of for a term of 18 months as from initial listing allowing the release of a 2.5% of the locked ups shares per month beginning on the fourth month since the initial listing date.
Pursuant to the provisions of IDBD’s rights offering memorandum dated June 9, 2014, on June 26, 2014, a total of 1,332,500 rights to subscribe shares and warrants were granted by IDBD to Dolphin at a ratio of 1 for every 40 shares held, which were exercised on July 1, 2014. Later on, during IDBD’s rights issuance process, Dolphin and ETH acquired 0.89 million additional rights for NIS 2.83 million, equivalent to approximately US$ 0.83 million, out of which 50% corresponded to Dolphin and 50% to ETH, all in accordance with the terms of the Shareholders´ Agreement.
The rights offered by IDBD allowed to subscribe in July 2014 for 13 common shares of IDBD for a price of NIS 65 (NIS 5 per share) and 27 warrants, 9 of each series (series 1, 2 and 3) to be issued by IDBD, at no cost. Each warrant issued by IDBD would allow acquiring one common share in IDBD. Series 1 expired on November 1, 2014 and were exercisable at NIS 5.50 per warrant. Series 2 matured on May 1, 2015 and were exercisable at NIS 6 per warrant. Series 3 matures on December 1, 2015 and is exercisable at NIS 6.50 per warrant.


F-67

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)
On July 1, 2014 Dolphin exercised all granted and acquired rights it held as of June 30, 2014 to acquire the additional shares in IDBD. As a result, Dolphin received 23.1 million shares and 16 million Series 1, 2 and 3 warrants. ETH held the same number of rights and acquired the same number of shares and warrants as Dolphin.
During the period from July 9 to July 14, 2014, Dolphin acquired through transactions in the open market 0.42 million shares and 0.34 million additional Series 2 warrants for NIS 1.77 million (equivalent to approximately US$ 0.52 million as of such date). 50% of such shares and Series 2 warrants were sold to ETH pursuant to the provisions of the Shareholders’ Agreement.
On November 2, 2014, Dolphin exercised 15,998,787 Series 1 warrants and ETH exercised its respective share of Series 1 warrants.
On January 19, 2015, Dolphin acquired in the open market 94,000 shares in IDBD for a total amount of NIS 0.13 million (equivalent to US$ 0.03 million as of the purchase date) and subsequently sold 50% to ETH in accordance with the terms of the Shareholders´ Agreement. In addition, Dolphin acquired 42,564 shares in Discount Investment Corporation Ltd (“DIC”), IDBD's subsidiary, for NIS 0.24 million (equivalent to US$ 0.06 million as of the purchase date), 50% of which was offered to ETH under the terms of the Shareholders´ Agreement. This time ETH decided not to acquire 50% of such shares.
Furthermore, on January 19, 2015, IDBD issued a shelf offering report for subscription rights (the “Rights Offering”) for approximately NIS 800 million (the “Maximum Immediate Consideration”) pursuant to an irrevocable offer from Dolphin, (as described in Note 9 to these financial statements), to grant on January 26, 2015, 1 right (the “New Right”) for every 25 shares held in IDBD. Each New Right would allow to subscribe on February 10, 2015 a number of 45 common shares in IDBD for NIS 68.04 (NIS 1.512 per share) and 20 Series 4 warrants, 19 Series 5 warrants and 17 Series 6 warrants issued by IDBD, at no cost. Each warrant issued by IDBD would allow acquiring a common share in IDBD. The Series 4 warrants expire on February 10, 2016 and are exercisable at NIS 1.663 per warrant. Series 5 warrants expire on February 12, 2017 and are exercisable at NIS 1.814 per warrant. Series 6 warrants expire on February 12, 2018 and are exercisable at NIS 1.966 per warrant


F-68

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)
    As a result of the Rights Offering, on January 26, 2015, Dolphin received 3.7 million New Rights. ETH received the same number of New Rights. The Rights Offering shelf offering report also stipulated that on February 5, 2015 the rights received could be traded on the public market during such single day only.
In addition, on February 5, 2015, Dolphin acquired 2.05 million New Rights for a total amount of NIS 0.94 million (equivalent to US$ 0.24 million as of the purchase date), 50% of which was offered to ETH under the terms of the Shareholders´ Agreement. At this time ETH decided not to acquire 50% of such New Rights.
On February 10, 2015 Dolphin exercised all New Rights received and acquired on the market. As a result, Dolphin received 258,970,184 shares, 115,097,859 Series 4 warrants, 109,342,966 Series 5 warrants and 97,833,180 Series 6 warrants. ETH did not exercise any of the New Rights it held. On such same date, Dolphin sold 71.39 million shares in IDBD to Inversiones Financieras del Sur S.A. (“IFISA”), an entity that is indirectly controlled by Eduardo Sergio Elsztain, at the closing price of NIS 1.39 per share, totaling NIS 99.23 million, equivalent to US$ 25.65 million at the exchange rate prevailing on the date of the transaction.
In addition, between February 9 and February 16, 2015, Dolphin acquired on the market 0.36 million shares of DIC for NIS 2.88 million, equivalent to US$ 0.74 million at the exchange rate prevailing on the date of each transaction, part of which was offered to ETH under the terms of the Shareholders´ Agreement. At this time ETH also decided not to acquire its pro rata interest of such shares according ti the Shareholders´ Agreement.
On May 1, 2015 the IDBD Series 2 warrants expired unexercised.
On May 31, 2015 Dolphin sold to IFISA 46 million Series 4 warrants for a total amount of NIS 0.46 million (equivalent to US$ 0.12 million as of the date of the transaction), on condition that IFISA agreed to exercise all of them when so required by IDBD to Dolphin, in accordance with the proposal made on May 6, 2015 as described in Note 9 to these financial statements.


F-69

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)
On June 3, 2015 in accordance with the, Dolphin May 6 proposal (as described in Note 9 to these financial statements), Dolphin exercised 44.2 million Series 4 warrants for a total amount of NIS 73.5 million (equivalent to US$ 19.2 million at the exchange rate prevailing on such date) and IFISA exercised 46 million  Series 4 warrants for a total amount of NIS 76.5 million.
As a result of the transactions described above, as of June 30, 2015, Dolphin held an aggregate number of 324,445,664 shares, 15,988,787 Series 3 warrants, 24,897,859 Series 4 warrants, 109,342,966 Series 5 warrants and 97,833,180 Series 6 warrants, accounting for a 49.0% share interest in IDBD. In addition, as of June 30, 2015 Dolphin held 406,978 shares of DIC, accounting for a direct interest of 0.48%.
As of June 30, 2015, IDBD’s Board of Directors consisted of nine members, three of which were appointed by Dolphin as regular directors: Eduardo Sergio Elsztain, Alejandro Gustavo Elsztain (on July 7 Roni Bar- On replaced him) and Saúl Zang.
During February and March 2015 Dolphin and ETH exchanged letters mainly in relation to claims from ETH in connection with the Rights Offering and ETH’s claim demanding a pro rata acquisition of the IDBD shares owned by Dolphin and subscribed for under the Rights Offering and all the shares acquired thereafter by IFISA asserting in the latter case the rights under the Shareholders´ Agreement (first refusal).
Based on the foregoing and in accordance with the provisions of the Shareholders’ Agreement with respect to dispute resolution, on April 30, 2015 (the “Preliminary Hearing”) arbitration proceedings were initiated in Tel Aviv, under Israeli law. The arbitration proceedings were intended to settle the dispute and the application and the interpretation of certain clauses of the Shareholders´ Agreement.  
The arbitration proceedings are intended to settle the issues referred to above, and application and interpretation of certain clauses of the Shareholders' Agreement.
                In addition, during the Preliminary Hearing, the parties agreed on the rules and procedures that would govern the conduct of the arbitration proceedings and a schedule for such purposes.
 
On May 28, 2015, beforeETH launched the filing of the arbitration claim, ETH triggered the Buy Me Buy You (“BMBY”) clause,BMBY mechanism provided in the Shareholders´Shareholders’ Agreement (clause which establishes that each party toof the Shareholders’ Agreement may offer to the counterparty to acquire (or sell, as the case may be), the shares it holds in IDBD at a fixed price; and within 14 days from delivery of the BMBY notice (the “Notice”) recipient should let it know whether it desires to sell or acquire the other party’s shares pursuant to the terms of the Notice, in accordance with the provisions of the Shareholders’ Agreement.price). In such petition,addition, ETH further added that the purchaser thereunder would be required to assume all obligations of the seller under the Arrangement.


F-70

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)
seller.
 
 In addition, onOn June 10 and 11, 2015, Dolphin gave notice to ETH of its intention to buy all the shares inof IDBD held by ETH, asserted its defenses and its interpretation about application and constructionETH.
After certain aspects of the BMBY, establishing that ETH’s interpretation of such mechanism was inaccurate,tender offer were resolved through an arbitration process brought by Dolphin and that pursuantETH, on September 24, 2015, the competent arbitrator resolved that:
(i)
Dolphin and IFISA (related Company to the Group) were entitled to act as buyers in the BMBY Dolphin was not requiredprocess, and ETH had to assumesell all IDBD shares held by it (92,665,925 shares) at price of NIS 1.64 per share;
(ii)
The buyer had to fulfill all of the obligations undercommitments included in the Arrangement, butincluding the commitment to carry out Tender Offers whose responsibility belonged to Dolphin;
(iii)
The buyer had to pledge the shares that if the arbitrator shall decide that Dolphin is requiredseller had pledged to assume such obligations, then Dolphin would still be the purchasing partythem in the BMBY.
As a result, the parties pursued arbitration to settle their disputes and in respectfavor of the correct interpretation ofArrangement trustees.
On October 11, 2015, the BMBY clause, in orderprocess concluded, and IFISA acquired all IDBD's shares of stock held by ETH. Consequently, the Shareholders' Agreement ceased and members of IDBD's Board of Directors representing ETH submitted their irrevocable resignation to firstly determine, who would be the purchaser underBoard Dolphin was hence empowered to appoint the BMBY clause,new members to the Board. Additionally, on the same date, Dolphin pledged additional shares as collateral to secure compliance with the IDBD stock purchase agreement, thereby increasing the number of pledged shares to 64,067,710. Consequently, the Group gained control of IDBD and secondly whether such party  would havestarted to assume all of the obligations of the seller under the Arrangement.consolidate financial statements as from that date.
 
 For such purposes, the arbitrator decided to divide the arbitration proceedings into two phases: the first one to deal with the disputes related to application and interpretation of the mechanism under the BMBY clause and the second one in relation to the parties’ additional claims.
 The parties then filed their respective arguments related to the application and interpretation of the BMBY clause mechanism, and two hearings were held on July 19 and July 22, 2015 in order to reach a decision on this matter.
 Moreover, on June 28 and 30, 2015 ETH filed a motion with the arbitratir requesting an injunction preventing changes in IDBD’s current Board of Director’s composition at IDBD’s annual shareholders’ meeting held on July 7, 2015.
On July 6, 2015, the arbitrator granted such injunction as requested by ETH, for which reason Dolphin appointed only 3 directors for the July 7 meeting and may appoint such number of directors until the arbitrator issues a final decision about who is the purchaser under the BMBY process. For more information, please see Note 44 about subsequent events to these financial statements.
F- 47
As Dolphin is a subsidiary that qualifies as a VCO in accordance with the IAS 28 exemption referred to in Note 2.3 (d), the Company has recorded its interest in IDBD at fair value with changes in the income statement.
Disposal of financial assets

During August 2014, IRSA has sold, through its subsidiary REIG IV, the balance of 1 million shares of Hersha Hospitality Trust, at an average price of US$ 6.74 per share.


F-71

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)
In addition to the competent arbitrator’s decision issued on September 24, 2015, ETH and Dolphin still have counterclaims of different kinds which are subject to such arbitration proceeding. As of the filing date of these financial statements, the proceeding is still being heard.
The following chart shows the consideration, the fair value of the acquired assets, the assumed liabilities and the non-controlling interest as of the acquisition date.
3. 
Acquisitions10.11.15
Fair value of the interest in IDBD’s equity held before the business combination and disposals (Continued)warrants1,416
Total consideration 1,416

Transactions
10.11.15
Fair value of identifiable assets and assumed liabilities:
Investment properties 29,586
Property, plant and equipment 15,104
Intangible assets 6,603
Investment in joint ventures and associates 9,268
Financial assets and other assets held for sale 5,129
Trading properties 2,656
Inventories 1,919
Income tax credits for the year 91
Trade and other receivables 9,713
Investments in financial assets 5,824
Cash and cash equivalents 9,193
Deferred income tax (4,681)
Provisions (969)
Borrowings (60,306)
Derivative financial instruments, net (54)
Income tax liabilities (267)
Employee benefits  (405)
Trade and other payables (19,749)
Total net identifiable assets 8,655
Non-controlling interest (8,630)
Goodwill 1,391
Total 1,416
The Group assessed the fair value of the investment property with the assistance of qualified independent appraisers. As of the acquisition date, the Group estimates that recognized assets are recoverable. The value of the non-controlling interestsinterest in IDBD has been determined on a proportional basis to the fair value of net acquired assets and the fair value of warrants.

Following the control of IDBD, the cumulative currency translation accumulated in shareholders’ equity from the interest held in IDBD before the business combination in the amount of Ps. 91 was recognized in the statement of income. Such result was disclosed under "Other operating results, net" line in the statement of income.
F- 48
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
3.
Acquisitions and disposals (Continued)
The revenues IDBD has generated since October 11, 2015 and that have been disclosed in the consolidated statement of income amount to Ps. 28,229. IDBD has also run a net result of Ps. (1,984) during said period. If IDBD had been included in the consolidation since July 1st, 2015, the Group´s consolidated income statement would have shown pro-forma revenues in the amount of Ps. 49,637 and pro-forma net result of Ps. (1,992).
Later on, following the exercise of BMBY, Dolphin has entered into an option agreement with IFISA that grants Dolphin the right, but not the obligation, to acquire 92,665,925 shares in IDBD which IFISA acquired in the BMBY process at a price per share of NIS 1.64 plus an annual interest rate of 8.5%. The exercise date for the option extends for two years. Additionally, Dolphin is entitled to a first refusal right in case that IFISA agrees to sell these shares to a third party. The value of the option agreement as of June 30, 2016 is zero.
(b)
Acquisition of non-controlling interest
Dolphin was required to carry out the first tranche of tender offers in December 2015. Before expiration of such first tranche, Dolphin and the agreement trustees (the " trustees") entered into an extension agreement (the "Extension Agreement"), which was replaced by the final agreement approved by approximately 95% of the non-controlling shareholders of IDBD (excluding IFISA) and by warrants holders of IDBD on March 2, 2016 and by the competent court on March 10, 2016. The major amendments to the Agreement were:
(i)
Replacement of the obligation to conduct tender offers as previously established under an agreement whereby Dolphin would purchase all the shares outstanding on March 29, 2016 from non-controlling shareholders of IDBD (except for those held by IFISA) on March 31, 2016. On March 29, 2016, all IDBD shares would cease to be traded in the TASE. On that date, all IDBD warrants held by non-controlling shareholders would expire and Dolphin would make capital contributions to IDBD or grant subordinate loans, as described hereafter.
(ii)
The price to be paid for each IDBD share held by non-controlling shareholders on March 29, 2016 would be NIS 1.25 in cash, plus NIS 1.20 adjusted nominal value in bonds of the IDBD Series 9 (the “IDBD Bonds”), which IDBD will issue directly to non-controlling shareholders and holders of warrants, and Dolphin will inject funds into IDBD equal to the adjusted nominal value of IDBD Bonds. Additionally, Dolphin would undertake to pay NIS 1.05 (subject to adjustments) in cash if Dolphin, either directly or indirectly, gain control of Clal, or else if IDBD sells a controlling shareholding in Clal under certain parameters (the “Clal payment”), which refers mainly to Clal’s sale price (at a price which exceeds 75% of its book value upon execution of the sale agreement, subject to adjustments) and, under certain circumstances, the proportion of Clal shares sold by IDBD.
F- 49
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
3.
Acquisitions and disposals (Continued)
(iii)
The warrants held by non-controlling shareholders that have not been exercised until March 28, 2016 expired on March 31, 2016. Each warrant holder was entitled to elect whether: (a) to receive IDBD bonds (based on the adjusted nominal value) in an amount equal to the difference between NIS 2.45 and the exercise price of the warrants and be entitled to the Clal payment; or (b) to receive a payment determined by an independent appraiser.
(iv)
Dolphin compromised that would provide IDBD a total amount of NIS 515 million (the “Contribution to IDBD”), out of which it has already contributed NIS 15 million in February 2016 and NIS 85 million in March 2016. The amount injected to IDBD would be reduced by any capital contribution resulting from the exercise of warrants held by non-controlling shareholders (maximum amount of approximately NIS 37.5 million). The contribution to IDBD would further cover the IDBD Bonds necessary to comply with the transactions described above (between NIS 166.5 million and NIS 178 million), and the balance would be contributed until completing the amount committed by Dolphin either as a capital contribution or as a subordinated loan (between NIS 284.5 million and NIS 333.5 million).
(v)
Dolphin had to pledge 28% of its IDBD shares, as well as all rights held by Dolphin in relation to the subordinated loan granted in the amount of NIS 210 million in December 2015, until the payment obligation for Clal has been completed or has expired, after which the pledge will be discharged. Should new shares be issued by IDBD, Dolphin will have to pledge additional shares until completing the 28% of all IDBD share capital. This pledge supersedes the existing pledge on approximately 64 million shares of IDBD and all Dolphin’s rights in relation to the Subordinated Loan.
(vi)
Additionally, Dolphin agreed not to exercise its right to convert the subordinated loans into shares of IDBD until the pledge described above has been released. Should the pledge on subordinated loans be exercised by the Arrangement Trustees, then those trustees may convert the subordinated loans into shares; however, in such case, the maximum percentage of the IDBD capital that may be pledged is 35%, and any shares in excess of such amount will be released from the pledge.
As a result of the description above, on March 31, 2016: (i) Dolphin acquired all shares from IDBD’ non-controlling shareholders (except for IFISAS), (ii) all warrants held by IDBD non-controlling shareholders expired, and (iii) Dolphin made additional contributions to IDBD via subordinated loans pursuant to the agreement. All commitments to invest in IDBD by Dolphin have been fully complied so that the only obligation still pending is the Clal payment, provided the conditions herein described are met. Additionally, Dolphin is bound to exercise its warrants in the event the following conditions occur jointly:
(i) 
An agreement is reached to renegotiate the debt covenants of IDBD and its subsidiaries;
(ii) 
Control over Clal is secured.
F- 50
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
5.
Acquisitions and disposals (Continued)
Should both situations take place, the obligation would amount to NIS 391 million. The warrants mature on February 10, 2018.
As of June 30, 2016, IRSA’s indirect interest in IDBD was 68.28% without considering dilution.
The transaction described above represented the acquisition of an additional interest of 19.28% in IDBD for a total amount of Ps. 1,249. As a result of this transaction, the non-controlling interest was increased by Ps. 346 and the interest attributable to the shareholders’ of the controlling parents was increased by Ps. 234.
B.
Acquisition and disposal of investment properties
During the fiscal year ended June 30, 2016, the Group has sold certain floors corresponding to Maipú 1300 Building, Intercontinental Plaza, all the floors corresponding to Dique IV and Isla Sirgadero, among others for a total amount of Ps. 1,393. All sales mentioned above led to a combined profit for the Group of Ps. 1,101, disclosed within the line “Gain from disposal of investment properties” in the statement of income.
During the fiscal year ended June 30, 2015, the Group acquired five plots of farmlands in Luján for Ps. 210 and, through IRSA CP, a plot of land in Córdoba for Ps. 3.1. Additionally the Group has sold floors corresponding to Maipú 1300 building, Intercontinental Plaza, Bouchard 551, the entire Madison 183 building and parking spaces in Bouchard 551, Libertador 498 and Maipú 1300 for a total amount of Ps. 2,447. All sales mentioned above led to a combined profit for the Group of Ps. 1,150, disclosed within the line “Gain from disposal of investment properties” in the statement of income.
During the fiscal year ended June 30, 2014, the Group acquired, through IRSA CP, a building next to Alto Palermo Shopping for US$ 3.8 million. Additionally the Group sold floors corresponding to Maipú 1300 building, Bouchard 551 and the entire buildings Mayo 589, Rivadavia 565, Costeros Dique IV Constitución 1159 and parking spaces in Maipú 1300, Bouchard 551 and Libertador 498 buildings for a total amount of Ps. 402. All sales mentioned above led to a combined profit for the Group of Ps. 231, disclosed within the line “Gain from disposal of investment properties” in the statement of income.
C.
Changes in non-controlling interest
IRSA

During the fiscal year ended June 30, 2016, the Group sold a 0.93% interest in IRSA for a total amount of Ps. 86.4. This resulted in an increase in non-controlling interests of Ps. 20.6 and a increase in equity attributable to holders of the parent of Ps. 40.3, net of tax effect.
F- 51
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
3.
Acquisitions and disposals (Continued)
During the fiscal year ended June 30, 2015, the Group sold a 1.81% interest in IRSA for a total amount of Ps. 181.8 million.181.8. This resulted in an increase in non-controlling interests of Ps. 33.7 million and a decreaseincrease in equity attributable to holdersowners of the parent of Ps. 97.7, million, net of tax effect.
The effecteffects of disposals of the ownership interest of IRSA on shareholders’ equity of this change in the equity interest in IRSAattributable to owners of the Group is summarized as follows:

Ps. (million)
Carrying amount of the non-controlling interests sold by the Group(33.7)
Consideration collected181.8
Tax effect(50.4)
Reserve recorded in shareholders’ equity97.7
 
June 30,
2016
Ps.
 
June 30,
2015
Ps.
Carrying amount of the non-controlling interests sold by the Group(20.6) (33.7)
Consideration collected 86.4 181.8
Tax effect (25.5) (50.4)
Reserve recorded in equity 40.3 97.7

During the fiscal year ended June 30, 2015, the Group acquired a 0.65% interest in IRSA for a total amount of Ps. 50.7 million.50.7. This resulted in a decrease in non-controlling interests of Ps. 12.7 million and an increasedecrease in equity attributable to holders of the parent of Ps. 38.0 million,38, net of tax effect.
The effect on shareholders’ equity of this change inacquisition of the ownership interest of IRSA on the equity interest in IRSAattributable to owners of the Group is summarized as follows:

 Ps. (million)
Carrying amount of group´s interest acquired of12.7
Consideration paid for non-controlling interests(50.7)
Reserve recorded in shareholders’ equity(38.0)

As a result of the transactions mentioned above, as of June 30, 2015, the equity interest in IRSA amounts to 64.30%, not considering effects of treasury stock.


F-72

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)

IRSA CP

During the fiscal year ended June 30, 2015 the Group, through IRSA, acquired an additional 0.10% interest in IRSA CP for a total amount of Ps. 5.7 million. This resulted in a decrease in non-controlling interests of Ps. 0.9 million and an increase in equity attributable to the holders of the parent of Ps. 4.7 million. As of June 30, 2015, IRSA's equity interest in IRSA CP amounts to 95.80%. The effect on shareholders’ equity of this change in the equity interest in IRSA CP is summarized as follows:

Ps. (million)
Carrying amount of group’s interest acquired of 0.912.7
Consideration paid for non-controlling interests (5.6)(50.7)
Reserve recorded in shareholders’ equity (i) (4.7)(38.0)

(i)  The reserve includes Ps. 1.6 million for non-controlling interest
On June 10, 2014, the Board of Directors of IRSA resolved to finish the stock repurchase plan that was approved by resolution of the Board on July 25, 2013, and modified by resolutions adopted on September 18, 2013, October 15, 2013 and October 22, 2013. During the term of the Stock Repurchase Plan, IRSA has repurchased 4,904,697 shares for an aggregate amount of Ps. 37,905,631.

Dolphin

During Februaryyear 2015, the Group through its subsidiaries, contributed an amount of US$ 146 million in Dolphin. Such amount was also allocated to increase Dolphin’s investment in IDBD. This resulted in a decrease in non-controlling interests of Ps. 21.0 million21 and an increase in equity attributable to the holders of the parent.

Ps. (million)
Carrying amount of non-controlling interest                                                                                                        21.0
Consideration paid for non-controlling interests                                                                                                        -
Reserve recorded in shareholders’ equity                                                                                                        (i) 21.0
(i)  The reserve includes Ps. 6.9 million for non-controlling interest

F- 52
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
3.
Acquisitions and disposals (Continued)
D.
Sale of Farmlands
Cresca
On April 3, 2014, Cresca S.A. signed a bill of sale whereby it sells an area of 24,624 hectares located in Chaco Paraguayo. The total price was US$ 14.7 million (equivalents to Ps. 116.9), which amount shall be collectable as follows: US$ 1.8 million (equivalents to Ps. 14.3) were collected upon the execution of the bill of sale, US$ 4.3 million (equivalents to Ps. 34.2) upon execution of the conveyance deed; US$ 3.7 million (equivalents to Ps. 33.1) interest-free between April and July, 2015; and US$ 4.9 million (equivalents to Ps. 73.1) interest-free were collected in July, 2016, thus being canceled all the mortgage had been granted in guarantee price balance. Possession was delivered upon execution of the conveyance deed. The Group has recognized gains of Ps. 19.1 as result of this transaction.
Cremaq
On June 10, 2015, Brasilagro sold the remaining area of 27,745 hectares of Cremaq field, an establishment, located in the municipality of Baixa Grande do Ribeiro (Piaui). The transaction price was fixed at Rs. 270 million (equal to Ps. 694), which have already been fully collected, and Rs. 49.7 million (equal to Ps. 127.7) of which remain under “Restricted Assets” on condition that the public deed for 6,020 be registered and that an agreement for the termination of possessory actions related to a disputed fraction be notarized. The Group has recognized gains of Ps. 525.9 as result of this transaction.
La Fon Fon II
On October 17, 2013, Yuchán signed a purchase-sale agreement involving a sale subject to retention of title involving 1,643 hectares of "La Fon Fon II" for an overall amount of US$ 7.21 million (equivalents to Ps. 59). As of the balance sheet date, the amount of US$ 7.1 million (equivalents to Ps. 58.1) has been collected, and the remaining balance amounts to US$ 0.12 million (equivalents to Ps. 0.9) that will be cancelled in 2 installments, starting in December this year, and concluding in December 2017. Under the contract, the conveyance will be recorded with the Registry once the price has been fully paid off. On June 24, 2015, possession was granted by Yuchán. During the year 2015 the Group recognized a profit before tax of US$ 2.7 million (equivalents to Ps. 24.6) as result of this transaction.
Araucária
On June 27, 2014, Brasilagro sold a total area of 1,164 hectares of Araucaria field.
The sale was priced at Rs. 32.5 million (Ps. 117.5). The Group recorded a profit before tax on the sale of the Araucaria farmland for an amount of Rs. 21.0 million (or Ps. 75.8).
F- 53
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
3.
Acquisitions and disposals (Continued)
San Cayetano
On May 27, 2014, Ombú signed a purchase-sale agreement involving a sale subject to retention of title involving 883 hectares of "San Cayetano I" establishment for an overall amount of US$ 4.2 million (equivalents to Ps. 31).
On June 20, 2016, an Agreement was signed to modify a Purchase-Sale Private Deed with Reserve of Property Rights where the precise area of the property has been determined to cover 855,3213; the parties have agreed to adjust the sale price of the property by deduction US$ 0.1 million (Ps. 1.4) from the total price.
The amount of US$ 3.2 million (Ps. 23.6) of the price has already been paid, and the balance will be paid in three installments, with the last installment being due upon execution of the title conveyance deed.
Under the contract, the conveyance shall be recorded once the price has been fully collected off. Possession was granted upon execution of the contract. The Group recorded a gain of US$ 1.8 million (Ps.15.6) on the sale.
E.
Acquisition of additional interest in BHSA
During the year ended June 30, 2015, the Group acquired 3,289,029 additional shares of BHSA in a total amount of Ps. 14.2, thus increasing its interest in such company from 29.77% to 29.99%, without consideration of treasury shares. During the year ended June 30, 2016, the Group sold 1,115,165 shares of BHSA in a total amount of Ps. 7.7, thus increasing its interest to 29.91%, without considering treasury shares.
F.
Disposal of financial assets
During August 2014, IRSA has sold through its subsidiary, Real Estate Investment Group IV, the balance of 1 million shares in Hersha Hospitality Trust, at an average price of US$ 6.74 per share.
G.
Sale of Associates

On February 5, 2014, the Group, through Ritelco, sold its interest in Bitania, 26 S.A., representing 49% of its capital stock, for an amount of US$ 4.2 million. Such transaction generated a net gain of approximately Ps. 13.3 million which are shown in the line "Other operating results, net" in the income statement.statement of income.

 

 
F-73

F- 54
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)

Acquisitions and disposals (Continued)
H.
BACS Banco de Crédito y Securitización S.A.

The Group through Tyrus, subscribed a purchase-sale agreement of shares of BACS, Banco de Crédito y Securitización S.A., representing an interest of 6.125%. The transaction amounts to US$ 1.35 million. This operation is yet to be approved by the Banco Central de la República Argentina,BCRA as of June 30, 2016, according to regulations in force. The advance payment related to this transaction is disclosed in “Trade and other receivables”. On August 24, 2016 the operation was approved by the BCRA.

The Group through IRSA, on June 17, 2015, subscribed Convertible Notes, issued by BACS Banco  de Crédito y Securitización S.A. for a nominal value of 100,000,000, which are convertible into common stock.shares.

On June 21, 2016 we notified BACS on their right to convert all of the Convertible notes into common shares.
As a consequence, BACS initiated the relevant diligence before the Argentine Central Bank in order to secure the authorization to issue the shares in our favor.
I.
Rigby capital reduction
Capital reduction of Rigby 183 LLC

On October 17, 2014, Rigby 183 LLC reduced its capital stock by distributing among existing shareholders, proportionally to their shareholdings, the gain made on the sale of the Madison building. The total amount distributed is US$ 103.8 million, of which the Group received US$ 77.4 million (US$ 26.5 million through IRSA International and US$ 50.9 million through IMadison LLC) and US$ 26.4 million were distributed to other shareholders. As a result of such reduction, the Group has decided to reverse the corresponding accumulated currency translationconversion difference on a pro rata basis, which amounted to Ps. 188.3 million.188.3. This reversal has been recognized in the line “Other operating results, net" in the statement of income.  

4.
Financial risk management and fair value
Year ended June 30, 2014

Sale of farmlands

On June 27, 2014, Brasilagro sold a total area of 1,164 hectares of Araucaria field.

The sale was valued at Rs. 32.5 million (or Ps.117.5 million). In July 2014Group's activities expose it to a variety of financial risk: market risk (including foreign currency risk, interest rate risk, indexing risk due to specific clauses and other price risk), credit risk, liquidity risk and capital risk. Within the buyer made an initial paymentGroup, risk management functions are conducted in relation to financial risks associated to financial instruments to which the Group is exposed during a certain period or as of Rs. 4.5 milliona specific date.
The general risk management policies of the Group and remaining balance will be collected in five annual installments. The first installmentseek both to minimize adverse potential effects on the financial performance of Rs. 4.5 million was collected in November 2014the Group and to manage and control the second installment, of Rs. 6.9 million, in June 2015.financial risks effectively. The Group recorded a profit before taxuses financial instruments to hedge certain risk exposures when deemed appropriate based on the sale of the Araucaria farmland for an amount of Rs. 21.0 million (or Ps. 75.8 million).its internal management risk policies, as explained below.

 

 
F-74

F- 55
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.

Financial risk management and fair value (Continued)
3.  
Acquisitions and disposals (Continued)

Given the diversity of characteristics in the activities conducted under its business and operations center, the Group has decentralized the risk management policies based on two significant line of business: (i) agricultural business and (ii) urban properties and investments business, which is divided into two: (a) Argentina and (b) Israel, in order to identify and properly analyze the various types of risks to which each of the subsidiaries is exposed.
On May 27, 2014 Ombú Agropecuaria S.A. executed
4.1            Risk management in the Agricultural Business:
The risks management function within the Group is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting year. Financial risk comprises market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, liquidity risk and capital risk.
The Group’s diverse activities are exposed to a purchase-sale agreement involving a condition salevariety of real property covering 883 hectaresfinancial risks in the normal course of “San Cayetano I” for a total amountbusiness. The Group’s overall risk management program focuses on the unpredictability of US$ 4.2 million (equivalentsfinancial markets and seeks to Ps. 31.0 million). US$ 2.3 million have already been collected whereasminimize the balance shall be collectedGroup’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures when deemed appropriate based on its internal management risk policies.
The Group’s principal financial instruments comprise cash and cash equivalents, receivables, payables, interest bearing assets and liabilities, other financial liabilities, other investments and derivative financial instruments. The Group manages its exposure to key financial risks in five consecutive semi-annual installments,accordance with the last falling due in November 2016. Under the contract, the conveyance shall be recorded once the priceGroup’s risk management policies.
The Group’s management framework includes policies, procedures, limits and allowed types of derivative financial instruments. The Group has been fully collected off. Possession was granted upon executionestablished a Risk Committee, comprising Senior Management and a member of the contract. The Group recordedAudit Committee, which reviews and oversees management’s compliance with these policies, procedures and limits and has overall accountability for the identification and management of risk across the Group.
This section provides a profit before taxdescription of US$ 1.8 million (Ps.15.6 million)the principal risks and uncertainties that could have a material adverse effect on the sale.Group’s strategy, performance, results of operations and financial condition. The risks and uncertainties, set out below, do not appear in any particular order of potential materiality or probability of occurrence.

Subscription of shares of Avenida Inc.

On August 29, 2013, the Group, through Torodur S.A., subscribed 3,703,704 shares of Avenida Inc., a Company incorporated in Delaware, United States, representing 24.79% of its outstanding capital. At that moment, this company had neither activity nor significant assets. Additionally, the Group acquired a warrant to increase such equity interest up to 37.04% of the company. The transaction price was Ps. 13 million, which were already paid in full. After acquisition, Avenida Inc. established a Company named "Avenida Compras S.A.", a Company incorporated in Argentina and engaged in e-commerce activity. Avenida Inc. owns 100% of Avenida Compras S.A..

Stock call option Agreement for the shares of Arcos del Gourmet S.A.

On September 16, 2013 IRSA CP entered into an agreement with Messrs. Eduardo Giana, Pablo Bossi and Patricio Tobal (non-controlling shareholders of Arcos del Gourmet S.A.), whereby the latter grant to IRSA CP an exclusive and irrevocable option to purchase 10% of the equity interest of Arcos del Gourmet S.A., which can be executed up to December 31, 2018. In the event the option is exercised, IRSA CP should pay the amount of US$ 8.0 million.

Furthermore, in the mentioned agreement a fixed amount of US$ 2.0 million was arranged, which was cancelled, and another variable amount to be paid on a monthly basis, that results from applying a 4.5% on the amounts accrued on each prior calendar month as rental and admission fees, net of certain expenses, during 5 years from the opening of the shopping mall, in relation to the assignment of rights to collect dividends of Arcos during such period.

 

 
F-75

F- 56
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.

Financial risk management and fair value (Continued)
3.  
Acquisitions and disposals (Continued)

4.1            Risk management in the Agricultural Business (Continued)
Acquisition
(a)
Market risk management
Market risk is the risk that the fair value or future cash flows of common sharesa financial instrument will fluctuate because of Condor Hospitality Trust Inc. (formerly Supertel Hospitality, Inc. duechanges in market prices. The Group’s market risks arise from open positions in foreign currencies, interest-bearing assets and liabilities, commodity price risk and equity securities price risks, to change of corporate name) (“Condor”)

On January 9, 2014, the Group, through its subsidiary, Real Estate Strategies L.P. (“RES”), granted a loanextent that these are exposed to Condor for an amount of US$ 2.0 million. This loan included a conversion option whereby RES was allowedgeneral and specific market movements. Management sets limits on the exposure to apply the aggregate amount of the loan to purchase common shares of Condor under a “Subscription Rights Offering” or convert the loan directly into common shares of Condor. Additionally, from February 2012, the Group holds two financial instruments in Condor, preferred shares and warrants,these risks that may be accepted, which are still heldmonitored on the balance sheet date. On June 6, 2014, under the "Subscription Rights Offering", RES exerciseda regular basis.
Foreign exchange risk and associated derivative financial instruments:
The Group publishes its conversion right to acquire 1,250,000 common shares at US$ 1.60 per share.consolidated financial statements in Argentine pesos but conducts operations and holds positions in other currencies. As a result, of this acquisition, the Group is exposed to foreign currency exchange risk through RES – acquired a 26.9% equity interest in Condor.

The fairexchange rate movements, which affect the value of the Group’s investmentforeign currency positions. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in Condor was baseda currency that is not the entity’s functional currency.
The commercial and/or agro-industrial activities of the Group's subsidiaries are primarily developed in Argentina and have as functional currency the Argentine Peso. The agricultural activities of the Group’s subsidiaries are primarily developed in Argentina, Brazil and Bolivia, where the functional currencies are the respective local currencies. An important part of the business activities of these subsidiaries is conducted in such local currencies, thus not exposing the Group to foreign exchange risk. Net financial position exposure to the functional currencies is managed on a case-by-case basis, partly by entering into foreign currency derivative instruments and/or by borrowing in foreign currencies, or other methods, considered adequate by the fair valueManagement, according to circumstances.
Financial instruments are considered sensitive to foreign exchange rates only when they are not in the functional currency of the entity that holds them. The following table shows the net carrying amounts of its net assets. Condor´s main assets consist of 65 hotelsfinancial instruments denominated in United States operatedUS$, broken down by various hotel chains. The Group has allocatedfunctional currency in which the price paid at the fair value of net assets acquired based on the information available on the balance sheet date. Such fair value amounted to Ps. 31.5 million, resulting in a gain on the acquisition of Ps. 15.4 million, which has been recognized under “Share of loss of associates and joint ventures” in the income statementsCompany operates, for the fiscal yearyears ended June 30, 2014.

Significant sale of investment properties

On November 15, 2013 IRSA signed2016 and 2015. The amounts are presented in Argentine Pesos, the transfer deed for the salepresentation currency of the 12th floor and two parking units of the Maipú 1300 Building and two parking units of the Libertador 498 Building. The price of the transaction was Ps. 9.0 million (US$ 1.5 million). Such transaction generated a profit before tax of approximately Ps. 7.2 million.Group:

On January 14, 2014, IRSA signed the transfer deed for the sale of the 11th floor and seven parking units of the Maipú 1300 Building. The total price of the transaction was Ps. 9.6 million (US$ 1.4 million). Such transaction generated a profit before tax of approximately Ps. 7.6 million.
  Net monetary position (Liability)/Asset (in million) Net monetary position (Liability)/Asset (in million)
  June 30, 2016 June 30, 2015
Functional currency US$ US$
Argentine Peso  (3,303) (1,618)
Brazilian Reais  268 153
Bolivian Peso  (127) (107)
Total  (3,162) (1,572)

On January 24, 2014, IRSA signed the transfer deed for the sale of the 7th floor and 28 parking units of the Bouchard 551 Building. The total price of the transaction was Ps. 124.6 million equivalents to US$ 16.0 million. Such transaction generated a profit before tax of approximately Ps. 98.8 million.

 

 
F-76

F- 57
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.

Financial risk management and fair value (Continued)
3.  
Acquisitions and disposals (Continued)

4.1            Risk management in the Agricultural Business (Continued)
On April 1, 2014, IRSA signed
The Group estimates that, other factors being constant, a 10% appreciation of the transfer deedUS dollar against the respective functional currencies at year-end would result in an additional loss before income tax for the saleyear ended June 30, 2016 and 2015 for an amount of Ps. 316 and Ps. 157, respectively. A 10% depreciation of the 5thUS dollar against the functional currencies would have an equal and 6th floor and complementary units inopposite effect on the Costeros Dique IV Building. The total price of the transaction was Ps. 12.4 million (US$ 1.5 million). Such transaction generated a profit before tax of approximately Ps. 10.3 million.

On April 7, 2014, IRSA signed the transfer deed for the sale of the 21th and 22th floors and two parking units of the Maipú 1300 Building and four parking units of the Libertador 498 Building. The price of the transaction was Ps. 24.1 million (US$ 3.0 million). Such transaction generated a profit before tax of approximately Ps. 19.6 million.

On April 10, 2014, IRSA signed the transfer deed for the sale of the 2nd floor of the Avenida de Mayo 589 Building and ten parking units of the Rivadavia 565 Building. The total price of the transaction was Ps. 24.2 million (US$ 3.0 million). Such transaction generated a profit before tax of approximately Ps. 19.9 million.

On May 6, 2014, IRSA signed the transfer deed for the sale of the Constitución 1159 Building. The price of the transaction was Ps. 23.3 million (US$ 2.9 million). Such transaction generated a profit before tax of approximately Ps. 13.4 million.

On May 14, 2014, IRSA signed the transfer deed for the sale to Transportadora de Caudales Juncadella of the unit 449 of the 8th floor of the Bouchard 551 Building. The price of the transaction was Ps. 61.8 million (US$ 7.7 million). Such transaction generated a profit before tax of approximately Ps. 49.2 million.

On May 19, 2014, IRSA signed the transfer deed for the sale to Inco Sociedad Anónima de Inversión, Industria y Comercio of the unit 1 of the ground floor of the Maipú 1300 Building. The price of the transaction was Ps. 6.5 million (US$ 0.8 million). Such transaction generated a profit before tax of approximately Ps. 5.2 million.

The properties mentioned above were classified as investment properties until the above mentioned transactions were executed, which represents a gross lease area of approximately 10,816 m2.

All sales of the year led to a combined profit for the Group of Ps. 230.9 million, disclosed within the line “Gain from disposal of investment properties” in the statementstatements of income.

On May 22, 2014 IRSA CP acquired commercial premises with an areathe other hand, the Group also uses derivative instruments, such as forward foreign exchange contracts to manage its exposure to foreign exchange risk. As of 40 m2, next to our shopping Alto Palermo, located onJune 30, 2016 the ground floor of the building located in Av. Santa Fe 3255/57/59 inGroup has future exchanges contract pending for an amount of US$ 3.8 million.Ps. 25 (asset) and Ps. 31 (liability). As of June 30, 2015 there were future exchanges contract pending for an amount of Ps. 10 (liability).

Interest rate risk:
The Group is exposed to interest rate risk on its investments in debt instruments, short-term and long-term borrowings and derivative financial instruments.
The primary objective of the Group’s investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, the Group diversifies its portfolio in accordance with the limits set by the Group. The Group maintains a portfolio of cash equivalents and short-term investments in a variety of securities, including both government and corporate obligations and money market funds.
The Group’s interest rate risk principally arises from long-term borrowings (Note 23). Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group manages this risk by maintaining an appropriate mix between fixed and floating rate interest bearing liabilities. These activities are evaluated regularly to determine that the Group is not exposed to interest rate movements that could adversely impact its ability to meet its financial obligations and to comply with its borrowings covenants.
The Group manages its cash flow interest rate risk exposure by different hedging instruments, including but not being limited to interest rate swap, depending on each particular case. For example, interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates or viceversa.
 

 
F-77

F- 58
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
3.           AcquisitionsFinancial risk management and disposals fair value(Continued)

Transactions4.1            Risk management in the Agricultural Business (Continued)
The interest rate risk policy is approved by the Board of Directors. Management analyses the Group’s interest rate exposure on a dynamic basis. Various scenarios are simulated, taking into consideration refinancing, renewal of existing positions and alternative financing sources. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. Trade payables are normally interest-free and have settlement dates within one year. The simulation is done on a regular basis to verify that the maximum potential loss is within the limits set by management.
Note 23 shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans for the years ended June 30, 2016 and 2015.
The Group estimates that, other factors being constant, a 1% increase in floating rates at year-end would decrease profit before income tax for the years ended June 30, 2016 and 2015, in Ps. 70 and Ps. 14. A 1% decrease in floating rates would have an equal and opposite effect on the income statements.
This sensitivity analysis provides only a limited, point-in-time view of this market risk sensitivity of certain of the Group’s financial instruments. The actual impact of the interest rate changes on the Group’s financial instruments may differ significantly from the impact shown in the sensitivity analysis.
Commodity price risk and associated derivative financial instruments:
The Group’s agricultural activities expose it to specific financial risks related to commodity prices. Prices for commodities have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agricultural industry.
Generally, the Group uses derivative instruments to hedge risks arising out of its agricultural business operations. The Group uses a variety of commodity-based derivative instruments to manage exposure to price volatility stemming from its integrated crop production activities. These instruments consist mainly of crop forwards, future contracts and put and call option contracts. Contract positions are designed to ensure that the Group will receive a defined minimum price for certain quantities of its production. The Group combines option contracts with future contracts only as a means of reducing the exposure towards the decrease in commodity prices, as being a producer means that the price is uncertain until the time the products are harvested and sold. The Group manages maximum and minimum prices for each commodity and the idea is to choose the best spot price at which to sell.
F- 59
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
The Group generally covers up to 50% of its crop production in order to finance its operating costs. The hedge consists of taking positions on purchased puts or sold futures and calls that assure a fixed exit price. In the past, the Group has never kept a short position greater than its crop inventories and does not intend to. On the other hand, it is not the Group’s current intention to be exposed in a long derivative position in excess of its actual production.
The following tables show the outstanding positions for each type of derivative contract for the years ended June 30, 2016 and 2015. The amounts are presented in thousands of Argentine Pesos.
  June 30, 2016
Type of derivative
contract
 Tons Margin Premium paid or (collected) Derivatives at fair value Gain / (Loss) for valuation at fair value at year-end
Futures:          
Sell          
Corn                                  30,500 - - 3 (4)
Soybeans                                  94,271 10 - (29) (15)
Purchase          
Corn                                  11,100 - - (1) -
Soybeans                                  2,300 - - - -
Wheat                                  5,400 - - 1 -
Options:          
Sell put          
Soybeans                                  12,247 - (1) - -
Purchase put          
Soybeans                                  12,747 - 5 3 (2)
Sale call          
Soybeans                                  13,347 - (4) (7) (3)
Wheat                                  2,900 - - - (1)
Total                                  184,812 10 - (30) (25)
F- 60
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
  June 30, 2015
Type of derivative
contract
 Tons Margin Premium paid or (collected) Derivatives at fair value Gain / (Loss) for valuation at fair value at year-end
Futures:          
Sell          
Corn                                  8,600 1 - (1) (1)
Soybeans                                  107,727 5 - (10) (4)
Wheat                                  7,000 - - - -
Purchase          
Corn                                  1,400 - - - -
Soybeans                                  2,200 - - - -
Wheat                                  1,000 1 - - (1)
Options:          
Sell put          
Soybeans                                  9,952 (1) - (1) (1)
Purchase put          
Soybeans                                  20,412 - 3 1 (2)
Sale call          
Soybeans                                  44,124 - (3) (7) (4)
Total                                  202,415 6 - (18) (13)
  June 30, 2014
Type of derivative
contract
 Tons Margin Premium paid or (collected) Derivatives at fair value Gain / (Loss) for valuation at fair value at year-end
Futures:          
Sell          
Corn                                  20,225 1 - 1 1
Soybeans                                  197,428 1 - 3 1
Wheat                                  1,100 - - - -
Purchase          
Corn                                  2,400 - - - -
Soybeans                                  4,300 - - - -
Wheat                                  1,700 - - - -
Options:          
Sell put          
Soybeans                                  16,204 - - 1 4
Total                                  243,357 2 - 5 6
Gains and losses on commodity-based derivative instruments were Ps. 77 (loss), Ps. 8 (gain) and Ps. 15 (loss) for the years ended June 30, 2016, 2015 and 2014, respectively. These gains and losses are included in “Other operating results, net” in the income statements.
F- 61
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
Crops future contract fair values are computed with reference to quoted market prices on future exchanges.
Other price risk
(b)
Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit limits have been established to ensure that the Group deals only with approved counterparties and that counterparty concentration risk is addressed and the risk of loss is mitigated. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Group.
The Group is subject to credit risk arising from deposits with banks and financial institutions, investments of surplus cash balances, the use of derivative financial instruments and from outstanding receivables. Credit risk is managed on a country-by-country basis. Each local entity is responsible for managing and analyzing the credit risk.
The Group’s policy is to manage credit exposure to deposits, short-term investments and other financial instruments by maintaining diversified funding sources in various financial institutions. All the institutions that operate with the Group are well known because of their experience in the market and high quality credit. The Group places its cash and cash equivalents, investments, and other financial instruments with various high credit quality financial institutions, thus mitigating the amount of credit exposure to any one institution. The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents and short-term investments in the statement of financial position.
The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk and commodities prices. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to each counter party. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty’s obligations exceed the obligations that the Group has with that counterparty. The credit risk associated with derivative financial instruments is representing by the carrying value of the assets positions of these instruments.
The Group’s policy is to manage credit risks associated with trade and other receivables within defined trading limits. All Group’s significant counterparties have internal trading limits. The Group’s customers are distinguished between those customers arising out of the investment and development properties activities of the Group from those arising out of its agricultural and agro-industrial operations. These two groups of customers are monitored separately due to their distinct characteristics.
F- 62
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
Trade receivables from agriculture and agro-industrial activities are primarily derived from the sale of commodities, raw milk, cattle, and sugarcane; receivables from feed lot operations and raw meat products; receivables from the lease of farmland properties; receivables from the sale of farmland properties; and, other receivables from ancillary activities. Trade receivables from agriculture and agro-industrial activities represent 39% and 24% of the Group’s total trade receivables as of June 30, 2016 and 2015, respectively. In contrast with the investment and development properties activities of the Group, the Group’s agribusiness is conducted through several international subsidiaries. The Group has subsidiaries in Argentina, Brazil and Bolivia. However, Argentina and Brazil together concentrate more than 87% and 88% of the Group’s grain production for the years ended June 30, 2016 and 2015, respectively. For the years ended June 30, 2016 and 2015, the grain production in Bolivia has not been significant representing only 10% and 9% of the total Group’s crop sales, respectively. Each country has its own established market for the respective grain production. Generally, the entire country’s grain production is sold in the domestic market to well-known multinational exporters such as Molinos, Cargill or Bunge, and/or local exporters. Prices for grains are also generally based on the market prices quoted in the domestic markets which normally take as reference the prices in international grain exchanges such as the Chicago Board of Trade.
For the years ended June 30, 2016 and 2015, 34% and 27% of sales of crops in Argentina and Brazil were sold to well-known exporters. The Group performs credit evaluations of its customers and generally does not require collateral. Although sales are highly concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of these customers.
The Group concentrates its cattle production in Argentina, where it is entirely sold in the domestic market. The main buyers are slaughterhouses and supermarkets and are well dispersed. Prices in the cattle market in Argentina are basically fixed by local supply and demand. The principal market is the Liniers Market in Buenos Aires, which provides a standard in price formation for the rest of the domestic markets. Live animals are sold by auction on a daily basis in the market, whereas prices are negotiated by kilogram of live weight and are mainly determined by local supply and demand. Some supermarkets and meat packers establish their prices by kilogram of processed meat. In these cases, processing yields influences the final price.
Our cattle sales are diversified, we are and will continue to be significantly dependent on a number of third party relationships, mainly with our customers for crop and milk sales. During the fiscal year 2016, we sold our products to approximately 850 customers. Sales of agricultural products to our ten largest customers represented approximately 72% of our net sales for the fiscal year ended June 30, 2016. During fiscal year 2016, our biggest three customers were Bunge Argentina S. A., Cargill S.A.C.I. and Vicentin S.A.I.C. which represented, in the aggregate, approximately 31% of our net sales in agricultural products, while the remaining seven customers in the aggregate represented approximately 41% of our net sales in the fiscal year 2016.
F- 63
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
The Group’s milk production is also based in Argentina. The Group has historically sold its entire milk production to Mastellone Hnos. S.A., which is the largest dairy company in Argentina. Sales to Mastellone amounted to Ps. 65.0 and Ps. 71.9 for the years ended June 30, 2016 and 2015, respectively, representing 2% and 3% of the Group’s agricultural consolidated revenue for those years, respectively, and 0.2% and 1% of the Group’s total revenues in the respective years. Although sales are concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of Mastellone. As milk is a perishable product there is no ability for the Group to mitigate pricing risk through inventory management. The Group negotiates the prices of raw milk on a monthly basis in accordance with domestic supply and demand. Prices for milk are based on a large number of factors including fat and protein content, bacteria levels and temperature. However, dairy prices have historically tended to have reasonable correlation with prices of agricultural inputs such as feed and fertilizer, and the Group monitors these relationships in order to adapt its tactics to suit.
The Group’s sugarcane production is based in Brazil and to a lesser extent in Bolivia. Brazil concentrates more than 92% and 96% of the Group's total sugarcane production as of June 30, 2016 and 2015, respectively. Currently, the Group has a farm in Brazil dedicated to sugar production and the entire output is sold to a third-party, ETHB, under an exclusive agreement dated March 2008. ETHB is the largest ethanol producer in Brazil. Under the agreement, ETHB is contractually obligated to purchase the entire production of two crop cycles of sugarcane comprising six agricultural years with five cuts, with the possibility of extending them for another full agricultural cycle upon prior agreement of the parties. The duration of each cycle may be extended if the parties wish to do so. Currently, the Group is selling to ETHB at market price. Sales to ETHB amounted to Ps. 256 and Ps. 178 for the years ended June 30, 2016 and 2015, respectively, representing 9% and 8% of the Group’s agricultural consolidated revenue for those years, respectively. Although sales are concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of ETHB.
The management does not expect any significant losses resulting from the non-performance by these counterparties.
The maximum exposure to Group’s credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group’s overall exposure of credit risk arising from trade receivables is set out in Note 17.
F- 64
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
(c)
Liquidity risk management
The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements, and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage liquidity risks could have a material impact on the Group’s cash flow and statements of financial position. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding its existing and prospective debt requirements by maintaining diversified funding sources.
The Group monitors its current and projected financial position using several key internally generated reports: cash flow; debt maturity; and interest rate exposure. The Group also undertakes sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key profitability, liquidity and balance sheet ratios.
The Group’s debt and derivative positions are continually reviewed to meet current and expected debt requirements. The Group maintains a balance between longer-term and shorter-term financings. Short-term financing is principally raised through bank facilities and overdraft positions. Medium- to longer-term financing comprises public and private bond issues, including private placements. Financing risk is spread by using a variety of types of debt. The maturity profile is managed in accordance with Group’s needs, by spreading the repayment dates and extending facilities, as appropriate.
The tables below show financial liabilities, including Group’s derivative financial liabilities groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows and as a result, they do not reconcile to the amounts disclosed on the statement of financial position. However, undiscounted cash flows in respect of balances due within 12 months generally equal their carrying amounts in the statement of financial position, as the impact of discounting is not significant. The tables include both interest and principal flows.
F- 65
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
When the interest payable is not fixed, the amount disclosed has been determined by reference to the existing conditions at the reporting date.
As of June 30, 2016 Less than 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years More than 4 yearsTotal
Trade and other payables                                                  614----614
Borrowings (Excluding finance lease liabilities)1,0281,2711,604250454,198
Finance lease obligations                                                  966--21
Derivative financial instruments                                                  3616---52
Total                                                  1,6871,2931,610250454,885
As of June 30, 2015 Less than 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years More than 4 yearsTotal
Trade and other payables                                                  391-22-395
Borrowings (Excluding finance lease liabilities)1,3424746995756083,698
Finance lease obligations                                                  11733-24
Derivative financial instruments                                                  335---38
Total                                                  1,7774867045806084,155
(d)
Capital risk management
The capital structure of the Group consists of equity and net borrowings. The type and maturity of the Group’s borrowings are analyzed further in Note 23. The Group’s equity is analyzed into its various components in the statements of changes in equity.
Capital is managed so as to promote the long-term success of the business and to maintain sustainable returns for shareholders.
The Group seeks to manage its capital requirements to maximize value through the mix of debt and equity funding, while ensuring that Group entities continue to operate as going concerns, comply with applicable capital requirements and maintain strong credit ratings.
The Group assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its broader strategic plan. The Group continuously reviews its capital structure to ensure that (i) sufficient funds and financing facilities are available to implement the Group’s property development and business acquisition strategies, (ii) adequate financing facilities for unforeseen contingencies are maintained, and (iii) distributions to shareholders are maintained within the Group’s dividend distribution policy. The Group also protects its equity by taking out insurance.
F- 66
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.1            Risk management in the Agricultural Business (Continued)
The Group’s strategy is to maintain key financing metrics namely, net debt to total equity ratio (gearing) and loan-to value ratio (LTV) to ensure that asset level performance is translated into enhanced returns for shareholders whilst maintaining an appropriate risk reward balance to accommodate changing financial and operating market cycles.
The following table details the key metrics in relation to managing its capital structure of the Group. The levels of these metrics are within the ranges established by the Group’s strategy.
 
June 30,
2016
 
June 30,
2015
 
Gearing ratio (i) 65.33% 56.63%
LTV ratio (ii) 56.44% 55.21%
(i)
Calculated as total debt over total capital (including equity plus total debt).
(ii)
Calculated as total debt over total property at fair value (including trading properties, properties, plant and equipment, investment properties, farmland rights to receive units under barter agreements).
(e)
Other non-financial risks
Nature risk:
The Group’s revenue arising from agricultural activities depends significantly on the ability to manage biological assets and agricultural produce. The ability to manage biological assets and agricultural produce may be affected by unfavorable local weather conditions and natural disasters. Weather conditions such as floods, droughts, hail, windstorms and natural disasters such as fire, disease, insect infestation and pests are examples of such unpredictable events. The Group manages this risk by locating its farmlands in different geographical areas. The Group has not taken out insurance for this kind of risks. The occurrence of severe weather conditions or natural disasters may affect the growth of our biological assets, which in turn may have a material adverse effect on the Group’s ability to harvest agricultural produce in sufficient quantities and in a timely way.
F- 67
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina:
The risk management function within the Group is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting period. Financial risk comprises market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, liquidity risk and capital risk.
The Group’s diverse activities are exposed to a variety of financial risks in the normal course of business. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures when deemed appropriate based on its internal management risk policies.
The Group’s principal financial instruments comprise cash and cash equivalents, receivables, payables, interest bearing assets and liabilities, other financial liabilities, other investments and derivative financial instruments. The Group manages its exposure to key financial risks in accordance with the Group’s risk management policies.
The Group’s management framework includes policies, procedures, limits and allowed types of derivative financial instruments. The Group has established a Risk Committee which was detailed in note 4.1.
This section provides a description of the principal risks that could have a material adverse effect on the Group’s strategy, performance, results of operations and financial condition. The risks facing the businesses, set out below, do not appear in any particular order of potential materiality or probability of occurrence.
The analysis of sensitivities to market risks included below are based on a change in one factor while holding all other factors constant. In practice this is unlikely to occur, and changes in some of the factors may be correlated – for example, changes in interest rate and changes in foreign currency rates.
This sensitivity analysis provides only a limited, point-in-time view. The actual impact on the Group’s financial instruments may differ significantly from the impact shown in the sensitivity analysis.
(f)
Market risk management
The market risk is the risk of changes in the market price of financial instruments with whom the Group operates. The Group’s market risks arise from open positions in foreign currencies, interest-bearing assets and liabilities and equity securities of certain entities, to the extent that these are exposed to market value movements. Management sets limits on the exposure to these risks that may be accepted, which are monitored on a regular basis.
F- 68
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
Foreign exchange risk and associated derivative financial instruments
As mentioned in note 4.1, the Group publishes its consolidated financial statements in Argentine pesos but conducts operations and holds positions in other currencies. As a result, the Group is exposed to foreign currency exchange risk through exchange rate movements, which affect the value of the Group’s foreign currency positions. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.
The real estate, commercial and/or financial activities of the Group's subsidiaries in the operations center in Argentina have as functional currency the Argentine Peso. A significant majority of the activity of these subsidiaries is conducted in such local currency, thus not exposing the Group to foreign exchange risk. Other Group's subsidiaries have other functional currencies, principally US dollar. In the ordinary course of business, the Group, through its subsidiaries, transacts in currencies other than the respective functional currencies of the subsidiaries. These transactions are primarily denominated in US dollars and New Israeli Shekel. Net financial position exposure to the functional currencies is managed on a case-by-case basis, partly by entering into foreign currency derivative instruments and/or by borrowing in foreign currencies, or other methods, considered adequate by the Management, according to circumstances.
Financial instruments are considered sensitive to foreign exchange rates when they are not in the functional currency of the entity that holds them. The following table shows the net carrying amounts of the Company’s financial instruments nominated in US$ and NIS broken down by functional currency in which the Company operates, for the years ended June 30, 2016 and 2015. The amounts are presented in Argentine Pesos, the presentation currency of the Group:
 Net monetary position (Liability)/Asset
Functional currencyJune 30, 2016June 30, 2015
 US$NISUS$NIS
Argentine Peso (5,370)-(2,576)-
Uruguayan Peso 6-(67)-
US Dollar -(7)-(245)
Total (5,364)(7)(2,643)(245)
The Group estimates that, other factors being constant, a 10% appreciation of the US dollar against the respective functional currencies at year-end would increase loss before income tax for the year ended June 30, 2016 for an amount of Ps. 536. A 10% depreciation of the US dollar against the functional currencies would have an equal and opposite effect on the income statements.
F- 69
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
On the other hand, the Group in its operations center Argentina, also uses derivative instruments, such as forward foreign exchange contracts to manage its exposure to foreign exchange risk. As of June 30, 2016 there are exchanges contract pending for an amount of US$ 21 million. Net book value of contracts amounts to Ps. (3).
Interest rate risk
As explained in note 4.1, the Group is exposed to interest rate risk on its investments in debt instruments, short-term and long-term borrowings and derivative financial instruments.
The Note 23 shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans for the years ended June 30, 2016 and 2015.
The Group estimates that, other factors being constant, a 1% increase in floating rates at year-end would increase net loss before income tax for the year ended June 30, 2016, in Ps. 13.7. A 1 % decrease in floating rates would have an equal and opposite effect on the income statement.
Other price risk
The Group is exposed to equity securities price risk because of investments held in entities that are publicly traded, which are classified on the consolidated statement of financial position at “fair value through profit or loss”. The Group regularly reviews the prices evolution of these equity securities in order to identify significant movements.
As of June 30, 2016 and 2015 the total value of Group´s investments in shares and derivative financial instruments of public companies, in the operations center Argentina, amounts to Ps. 822 and Ps. 1,803, respectively.
The Group estimates that, other factors being constant, a 10% decrease in quoted prices of equity securities and in derivative financial instruments portfolio at year-end would generate a loss before income tax for the year ended June 30, 2016 of Ps. 82. An increase of 10% on these prices would have an equal and opposite effect in the statement of income.
F- 70
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
(g)
Credit risk management
The credit risk arises from the potential non-performance of contractual obligations by the parties, with a resulting financial loss for the Group. Credit limits have been established to ensure that the Group deals only with approved counterparties and that counterparty concentration risk is addressed and the risk of loss is mitigated. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Group.
The Group is subject to credit risk arising from deposits with banks and financial institutions, investments of surplus cash balances, the use of derivative financial instruments and from outstanding receivables. Credit risk is managed on a country-by-country basis. Each local entity is responsible for managing and analyzing the credit risk.
The Group’s policy is to manage credit exposure to deposits, short-term investments and other financial instruments by maintaining diversified funding sources in various financial institutions. All the institutions that operate with the Group are well known because of their experience in the market and high quality credit. The Group places its cash and cash equivalents, investments, and other financial instruments with various high credit quality financial institutions, thus mitigating the amount of credit exposure to any one institution. The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents and short-term investments in the statement of financial position.
Trade receivables related to leases and services provided by the Group represent a diversified tenant base and account for 11% and 38% of the Group’s total trade receivables as of June 30, 2016 and 2015, respectively. The Group has specific policies to ensure that rental contracts are transacted with counterparties with appropriate credit quality. The majority of the Group’s shopping center, offices and other rental properties’ tenants are well recognized retailers, diversified companies, professional organizations, and others. Owing to the long-term nature and diversity of its tenancy arrangements, the credit risk of this type of trade receivables is considered to be low. Generally, the Group has not experienced any significant losses resulting from the non-performance of any counterpart to the lease contracts and, as a result, the allowance for doubtful account balance is low. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Group. If customers are independently rated, these ratings are used. If there is no independent rating, risk control assesses the credit quality of the customer, taking into account its past experience, financial position, actual experience and other factors. Based on the Group’s analysis, the Group determines the size of the deposit that is required from the tenant at inception. Management does not expect any losses from non-performance by these counterparties. See Note 17 for details.
F- 71
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
On the other hand, property receivables related to the sale of trading properties represent 0.3% and 17% of the Group’s total trade receivables as of June 30, 2016 and 2015, respectively. Payments on these receivables have generally been received when due. These receivables are generally secured by mortgages on the properties. Therefore, the credit risk on outstanding amounts is considered very low.
(h)
Liquidity risk management
The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements, and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage liquidity risks could have a material impact on the Group’s cash flow and statement of financial position. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding its existing and prospective debt requirements by maintaining diversified funding sources.
The Group monitors its current and projected financial position using several key internally generated reports: cash flow; debt maturity; and interest rate exposure. The Group also undertakes sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key profitability, liquidity and balance sheet ratios.
The Group’s debt and derivative positions are continually reviewed to meet current and expected debt requirements. The Group maintains a balance between longer-term and shorter-term financings. Short-term financing is principally raised through bank facilities and overdraft positions. Medium to longer-term financing comprises public and private bond issues, including private placements. Financing risk is spread by using a variety of types of debt. The maturity profile is managed in accordance with Group’s needs, by spreading the repayment dates and extending facilities, as appropriate.
The following tables show financial liabilities, including Group’s derivative financial liabilities groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows and as a result, they do not reconcile to the amounts disclosed on the statement of financial position. However, undiscounted cash flows in respect of balances due within 12 months generally equal their carrying amounts in the statement of financial position, as the impact of discounting is not significant. The tables include both interest and principal flows.
F- 72
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
Where the interest payable is not fixed, the amount disclosed has been determined by reference to the existing conditions at each reporting date.
As of June 30, 2016Less than 1 yearBetween 1 and 2 yearsBetween 2 and 3 yearsBetween 3 and 4 yearsMore than 4 yearsTotal
Trade and other payables                                                 6272041--832
Borrowings (Excluding finance lease liabilities)3,5184944754916,76011,738
Finance lease obligations                                                 211--4
Derivative financial instruments                                                 3----3
Total                                                 4,1506994774916,76012,577
As of June 30, 2015Less than 1 yearBetween 1 and 2 yearsBetween 2 and 3 yearsBetween 3 and 4 yearsMore than 4 yearsTotal
Trade and other payables                                                 356113--370
Borrowings (Excluding finance lease liabilities)8832,822321431,5105,390
Finance lease obligations                                                 211--4
Derivative financial instruments                                                 264237---501
Total                                                 1,5053,071361431,5106,265
(i)
Capital risk management
The capital structure of the Group consists of shareholders’ equity and net borrowings. The type and maturity of the Group’s borrowings are analyzed further in Note 23. The Group’s equity is analyzed into its various components in the statement of changes in equity.
Capital is managed so as to promote the long-term success of the business and to maintain sustainable returns for shareholders.
The Group seeks to manage its capital requirements to maximize value through the mix of debt and equity funding, while ensuring that Group entities continue to operate as going concerns, comply with applicable capital requirements and maintain strong credit ratings.
The Group assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its broader strategic plan. The Group continuously reviews its capital structure to ensure that (i) sufficient funds and financing facilities are available to implement the Group’s property development and business acquisition strategies, (ii) adequate financing facilities for unforeseen contingencies are maintained, and (iii) distributions to shareholders are maintained within the Group’s dividend distribution policy. The Group also protects its equity in assets by taking out insurance.
F- 73
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
The Group’s strategy is to maintain key financing metrics namely, net debt to total equity ratio (gearing) and loan-to-value ratio (LTV) to ensure that asset level performance is translated into enhanced returns for shareholders whilst maintaining an appropriate risk reward balance to accommodate changing financial and operating market cycles.
The following table details the key metrics in relation to managing its capital structure of the Group. The levels of these metrics are within the ranges established by the Group’s strategy.
 June 30, 2016 June 30, 2015
Gearing ratio (i) 89.24% 63.45%
LTV ratio (ii) 29.39% 20.42%
(i)
Calculated as total of current and non-current borrowings over total current and non-current borrowings plus equity of the parent company.
(ii)
Calculated as total current and non-current borrowings over total properties at fair value (including trading properties, property, plants and equipment, investment properties and rights to receive future units under barter agreements).
Property risk
There are several risks affecting the Group’s property investments. The composition of the Group’s property portfolio including asset concentration and lot size may affect liquidity and relative property performance. The Group has a large multi-asset portfolio and monitors its concentration and average lot size.
A change in trends and economic conditions causes shifts in customer demands for properties and impacts on new lettings, renewal of existing leases and reduces rental growth. In addition, increases risk of tenant insolvencies. The Group conducts several actions to mitigate some of these risks whenever possible. The variety of asset types and geographical spread as well as a diversified tenant base, with monitoring of its concentration, helps mitigating these risks.
F- 74
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.2            Risk management in the Urban Properties and investment business in Argentina (Continued)
The development, administration and profitability of shopping centers are impacted by various factors including: the accessibility and the attractiveness of the area where the shopping center is located, the intrinsic attractiveness of them, the flow of people, the level of sales of each rental unit, the increasing competition from internet sales, the amount of rent collected from each rental unit and the fluctuations in occupancy levels. In the event that there is an increase in operational costs, caused by inflation or other factors, it could have a material adverse effect on the Group if its tenants are unable to pay their higher rent obligations due to the increase in expenses. Argentine Law No. 24,808 provides that tenants may rescind commercial lease agreements after the initial six months upon not less than sixty days written notice, subject to penalties of only one-and-a-half month rent if the tenant rescinds during the first year of the lease, and one-month rent if the tenant rescinds during the second year of the lease. The exercise of such rescission rights could materially and adversely affect the Group.
Risks associated with development properties activities include the following: a) the potential abandonment of development opportunities; b) construction costs exceeding original estimates, possibly making a project uneconomical; c) occupancy rates and rents at newly completed projects may be insufficient to make the project profitable. On the other hand: a) the Group may not be able to obtain financing on favorable terms for the development of the project; b) construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs; c) the Group may not be able to obtain, or delay in obtaining, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations; d) preconstruction buyers may default on their purchase contracts or units in new buildings may remain unsold upon completion of constructions; and e) prices for residential units may be insufficient to cover development cost. The Group also takes several actions to monitor these risks and respond appropriately whenever it is under its control. The Group has in-house property market research capability and development teams that monitor development risks closely. The Group generally adopts conservative assumptions on leasing and other variables and monitors the level of committed future capital expenditure on development programs relative to the level of undrawn facilities.
The Group’s hotel properties face specific risks as well. The success of the Group’s hotel properties will depend, in large part, upon the Group’s ability to compete in areas such as access, location, quality of accommodations, room rate structure, quality and scope of food and beverage facilities and other services and amenities. The Group’s hotels may face additional competition if other companies decide to build new hotels or improve their existing hotels such that they are more attractive to potential guests. In addition, their profitability depends on (i) the Group’s ability to form successful relationships with international operators to run the hotels; (ii) changes in travel patterns, including seasonal changes; and (iii) taxes and governmental regulations which influence or determine wages, prices, interest rates, construction procedures and costs.
F- 75
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.3            Risk management in the Urban Properties and investment business in Israel
Given the diversity of the activities conducted by IDBD and its subsidiaries, and the resulting risks, IDBD manages the exposure to its own key financial risks and those of its wholly-owned subsidiaries (except for IDB Tourism) in conformity with a centralized risk management policy, with the non-wholly owned IDBD subsidiaries being responsible for establishing the risk policy, taking action to cover market risks and managing their activities in a decentralized fashion. Both IDBD as holding and each subsidiary are responsible for managing their own financial risks in accordance with agreed global guidelines. The Chief Financial Officers of each entity are responsible for managing the risk management policies and systems, the definition of hedging strategies, insofar as applicable and based on any restriction that may be apply as a result of financial liability, the supervision of its implementation and the answer to such restrictions. The management framework includes policies, procedures, limits and allowed types of derivative financial instruments.
This section provides a description of the principal risks related to the operations center in Israel that could have a material adverse effect on the IDBD’s strategy, performance, results of operations and financial condition. The risks facing the businesses, set out below, do not appear in any particular order of potential materiality or probability of occurrence.
(a)Market risk management
Foreign currency risk
Real estate, business and/or financial activities of IDBD subsidiaries in the operations center in Israel are developed mainly in Israeli currency, although some operations, mostly borrowing, are expressed in US’ dollars, thereby exposing IDBD to a foreign currency risk.
Net financial position exposure to the functional currencies is managed in a decentralized way on a case-by-case basis, by using different foreign currency derivative instruments and/or by borrowing in foreign currencies, as the case may be, or by other methods considered adequate by the Management, according to circumstances.
As of June 30, 2016, the Israeli subsidiaries’ net financial position which exposes the Group to the foreign currency risk amounts to Ps. 1,686. The Group estimates that, other factors being constant, a 5% appreciation of the US dollar against the Israeli currency would increase loss before income tax for the year ended June 30, 2016 for an amount of Ps. 84.3. An equivalent depreciation of the Israeli currency would have an equal but opposite effect in the income statement.  
F- 76
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.3            Risk management in the Urban Properties and investment business in Israel (Continued)
Risk of fluctuations of the Consumer Price Index ("CPI") of Israel
IDBD has financial liabilities indexed by the Israeli CPI. As of the date of this consolidated financial statements, more than half of the financial liabilities arising from the center of operations in Israel were adjusted by the Israeli CPI.
Net financial position exposure to the Israeli CPI fluctuations is managed in a decentralized way on a case-by-case basis, by using different derivative financial instruments, as the case may be, or by other methods, considered adequate by the Management, according to circumstances.
The Group estimates that, other factors being constant, a 1% appreciation of the CPI would increase loss before income tax for the year ended June 30, 2016 for an amount of Ps. 415. An equivalent depreciation of the CPI would have result in a profit before income tax for the year June 30, 2016 for an amount of Ps. 319. 
Interest rate risk
The IDBD’s interest rate risk principally arises from long-term borrowings (Note 23). Borrowings issued at a flooting rate expose IDBD to cash flow interest rate risk, are partially offset by financial assets at floating interest rate. Borrowings issued at fixed rates expose IDBD to fair value interest rate risk.
IDBD manages the exposure to this risk on a dynamic basis. Various scenarios are simulated by IDBD, taking into consideration refinancing, renewal of existing positions, alternative financing sources or hedging instruments, maintaining an appropriate mix between fixed and floating rate interest bearing liabilities. The exposure to the interest rate risk is managed in a decentralized way and is monitored regularly by different management offices with a view to confirming that there are no adverse effects over its ability to meet its financial obligations and to comply with its borrowings covenants.
As of the date of these financial statements, the 96% of the Group’s long-term financial borrowings in the operations center in Israel are at fixed interest rate; therefore, IDBD is not significantly exposed to the interest rate fluctuation risk
IDBD estimates that, other factors being constant, a 1% increase in floating rates at year-end would increase net loss before income tax for the year ended June 30, 2016, in Ps. 25, approximately. An equivalent decrease of the floating rates would have result in a profit before income tax for the year June 30, 2016 for an amount of Ps. 26. 
F- 77
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.3            Risk management in the Urban Properties and investment business in Israel (Continued)
Other price risk
IDBD is exposed to equity securities price risk or derivative financial instruments price risk because of investments held in entities that are publicly traded.
As indicated in Note 18, investment in Clal is classified on the statements of financial position at “fair value through profit or loss” and represents the most significant IDBD’s exposure to price risk. IDBD has not used hedging against these risks.
IDBD regularly reviews the prices evolution of these equity securities in order to identify significant movements.
(b)
Credit risk management
The credit risk arises from the potential non-performance of contractual obligations by the parties, with a resulting financial loss for IDBD. IDBD’s credit risk, as well as that of its wholly-owned subsidiaries (except for IDB Tourism), is managed in a centralized manner by IDBD. In contrast, the credit risk of the other subsidiaries is managed in a decentralized fashion by each subsidiary. Each entity is responsible for managing and analyzing the credit risk and limits have been established to ensure that IDBD deals only with approved counterparties and that counterparty concentration risk is addressed and the risk of loss is mitigated. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to IDBD.
IDBD and subsidiaries invest their surplus liquidity so as to obtain a fair return on it, while maintaining a suitable return-risk ratio, in solid channels – mainly short-term shekel deposits in a number of major Israeli financial institutions, and they also invest in liquid securities, which mainly include trust funds, exchange traded funds, government and corporate bonds with a rating of at least A- and corporate bonds abroad have been rated with the international rating of Investment Grade and above. In addition, the maximum percentage of securities of a single issuer, which IDBD or a subsidiary holds in its portfolio does not exceed 10% of the value of its investment portfolio. IDBD and subsidiaries carry out transactions in derivative financial instruments only through banking corporations and entities that are required to maintain collateral levels in accordance with scenarios.
F- 78
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.3            Risk management in the Urban Properties and investment business in Israel (Continued)
IDBD’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and interest risk. IDBD generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to each counter party. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty’s obligations exceed the obligations that IDBD has with that counterparty. The credit risk associated with derivative financial instruments is representing by the carrying value of the assets positions of these instruments.
IDBD’s policy is to manage credit exposure to trade and other receivables counterparties within defined trading limits. All of IDBD’s significant counterparties are assigned internal credit limits.
Trade receivables from investment and development property activities are primarily derived from leases and services from shopping centers, offices and other rental properties; receivables from the sale of trading properties and investment properties (primarily undeveloped land and non-retail rental properties). IDBD has a large customer base and is not dependent on any single customer. (Note 17).
There is not a high credit risk concentration in trade receivables from telecommunications and supermarket activity, as the business does not rely on few customers and most of the transactions are paid in cash or by credit card. (Note 17).
(c)
Liquidity risk management
The most important risk in the operations center in Israel is liquidity risk, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements, and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage liquidity risks could have a material impact on IDBD’s cash flow and statements of financial position. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, IDBD aims to maintain flexibility in funding its existing and prospective debt requirements by maintaining diversified funding sources.
IDBD monitors its current and projected financial position using several key internally generated reports: cash flow forecasts, debt maturity and interest rate exposure. IDBD also undertakes sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key profitability, liquidity and balance sheet ratios.
F- 79
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
4.
Financial risk management and fair value (Continued)
4.3            Risk management in the Urban Properties and investment business in Israel (Continued)
The IDBD’s debt and derivative positions are continually reviewed to meet current and expected debt requirements. IDBD maintains a balance between longer-term and shorter-term financings. Short-term financing is principally raised through bank facilities and overdraft positions. Medium- to longer-term financing comprises public and private bond issues, including private placements. Financing risk is spread by using a variety of types of debt. The maturity profile is managed in accordance with IDBD’s needs, by spreading the repayment dates and extending facilities, as appropriate.
The table below shows financial liabilities, including Group’s derivative financial liabilities in the operations center Israel, groupings based on the remaining period at the statements of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result, they do not reconcile to the amounts disclosed on the statements of financial position.
However, undiscounted cash flows in respect of balances due within 12 months generally equal their carrying amounts in the statements of financial position, as the impact of discounting is not significant. The tables include both interest and principal flows.
Where the interest payable is not fixed, the amount disclosed has been determined by reference to the existing conditions at the reporting date.
As of June 30, 2016Less than 1 yearBetween 1 and 2 yearsBetween 2 and 3 yearsBetween 3 and 4 yearsMore than 4 yearsTotal
Trade and other payables                                                 13,04623456154413,899
Borrowings                                                 20,71419,32829,5229,43552,232131,231
  Financial/ Operating leases
2,254 2,086 1,802 1,487 3,398 11,027 
Derivative financial instruments                                                 1054758--210
  Purchase obligations
1,089 162 15 1,266 
Total                                                 37,20821,85731,95810,97655,634157,633
Given the current financial liability conditions of the Operations Center in Israel, in particular in the holding company IDBD, the main source of funding has been capital contributions. See Note 26 that includes a description of commitments and restrictions related to loans and renegotiation processes under way.
F- 80
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
5.
Significant judgments, key assumptions and estimates
The Group’s significant accounting policies are stated in Note 2. Not all of these significant accounting policies require management to make subjective or complex judgments or estimates. The following section is intended to provide an understanding of the policies that management considers critical because of the level of complexity, judgment or estimation involved in their application and their impact on the consolidated financial statements. These judgments involve assumptions or estimates in respect of future events. Actual results may differ from these estimates.
EstimationMain assumptionsPotential implicationsMain references
Business combination - Allocation of acquisition pricesAssumptions regarding timing, amount of future revenues and expenses, revenue growth, expected rate of return, economic conditions, discount rate, among others.Should any of the assumptions made be inaccurate the recognized combination may not be correct.Note 3 – Acquisitions and disposals
Recoverable amounts of cash-generating units (even those including goodwill), associates and assets.
The discount rate and the expected growth rate before taxes – in connection with cash-generating units.
The discount rate and the expected growth rate after taxes – in connection with associates.
Cash flows are determined based on past experiences with the asset or with similar assets and in accordance with the Group’s best factual assumption relative to the economic conditions expected to prevail.
Business continuity and share market value of the public companies in connection with cash-generating units.
Appraisals made by external appraisers and valuators with relation to the assets’ fair value, net of realization costs (including real estate assets).
Should any of the assumptions made be inaccurate, this could lead to differences in the recoverable values of cash-generating units.
Note 10 - Investment properties
Note 11 - Property, plant and equipment
Note 13 - Intangible assets
Control, joint control or significant influenceJudgment relative to the determination that the Group holds an interest in the shares of investees (considering the existence and influence of significant potential voting rights), its right to designate members in the executive management of such companies (usually the Board of directors) based on the investees’ bylaws; the composition and the rights of other shareholders of such investees and their capacity to establish operating and financial policies for investees or to take part in the establishment thereof.Accounting treatment of investments as subsidiaries (consolidation) or associates (equity method).Note 2.3
Estimated useful life of intangible assets, investment properties and property, plant and equipmentEstimated useful life of assets based on their conditions.Recognition of accelerated or decelerated depreciation by comparison against final actual earnings (losses).
Note 10 - Investment properties
Note 11 - Property, plant and equipment
Note 13 - Intangible assets
Fair value valuation of investment propertiesFair value valuation made by external appraisers and valuators.Incorrect exposure of investment property values.
Note 10 - Investment properties
Income tax
The Group estimates the income tax amount payable for transactions where the Treasury’s Claim cannot be clearly determined.
Additionally, the Group evaluates the recoverability of assets due to deferred taxes considering whether some or all of the assets will not be recoverable.
Upon the improper determination of the provision for income tax, the Group will be bound to pay additional taxes, including fines and compensatory and punitive interest.Note 25 – Taxation
Allowance for doubtful accountsA periodic review is conducted of receivables risks in the Group’s clients’ portfolios. Bad debts based on the expiration of account receivables and account receivables’ specific conditions.Improper recognition of charges / reimbursements of the allowance for bad debt.Note 17 – Trade and other receivables
Hybrid financial instrument related to the non-recourse loan from Koor (Adama)
The value of Adama’s shares.
Unobserved data underlying the binomial model applied to the determination of the embedded derivative instruments’ value.
Changes in losses or profits resulting from the variation in the fair value of the embedded derivative, and variations in the book amount of the primary contract recognized as revenues or expenses from financing.Note 23 – Borrowings
Level 2 and 3 financial instruments
Main assumptions used by the Group are:
Discounted projected income as per discount rate
Values determined in accordance with the company’s shares in equity funds on the basis of its financial statements, based on fair value or investment assessments.
Comparable market multiple (EV/GMV ratio).
Underlying asset price (market price) and share price volatility (historical) and market interest rate (Libor curve).
Wrong recognition of a charge to income.Note 16 – Financial instruments by category
Probability estimate of contingent liabilitiesWhether more economic resources may be spent in relation to litigation against the Group; such estimate is based on legal advisors’ opinions.Charge / reversal of provision in relation to a claim.Note 22 – Provisions
Biological assetsMain assumptions used in valuation are: yields, operating costs, selling expenses, future of sales prices, discount rate.Wrong recognition/valuation of biological assets. See sensitivities modeled on these parameters in Note 14.Note 14 – Biological assets
F- 81
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are component of an entity about which separate financial information is available that is evaluated regularly by the CODM. According to IFRS 8, the CODM represents a function whereby strategic decisions are made and resources are assigned. The CODM function is carried out by the President of the Group, Mr. Eduardo S. Elsztain. In addition, and due to the acquisition of IDBD, two responsibility levels have been established for resource allocation and assessment of results of the two operations centers, through executive committees in Argentina and Israel.
Following the control of IDBD, the Group reports its financial and equity performance based on the new segment structure for the year-end 2016.
Segment information is reported from the perspective of products and services: (i) agricultural business and (ii) urban properties and investment business. In addition, this last segment is reported divided from the geographic point of view in two Operations Centers to manage its global interests: Argentina and Israel. Within each operations center, the Group considers separately the various activities being developed, which represent reporting operating segments given the nature of its products, services, operations and risks. Management believes the operating segment clustering in each operations center reflects similar economic characteristics in each region, as well as similar products and services offered, types of clients and regulatory environments.
Agricultural business:
In the third quarter, the Group has changed the presentation of the agricultural business segments which are reviewed by the CODM for a better alignment with the current business vision and the metrics used to such end. Four operating segments (crops, cattle, dairy and sugarcane) have been aggregated into a single operating segment named “Agricultural production”. Management consider for the aggregation the nature of the production processes (growing of biological assets), the methods used to distribute their products and the nature of the regulatory environment (agricultural business). Therefore this quarter three segments are considered:
The"Agricultural production"segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton and sunflowers; breeding, purchasing and/or fattening of free-range cattle for sale to slaughterhouses and local livestock auction markets; breeding and/or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers; and planting, harvesting and sale of sugarcane.
The“Land transformation and sales”segment comprises gains from the disposal and development of farmlands activities.
F- 82
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6. 
Segment information (Continued)
The"Other segments"column includes, principally, agricultural services (for example, irrigation); leasing of the Group's farms to third parties; feedlot farming, slaughtering and processing in the meat refrigeration plant; and brokerage activities, among others.
The amounts corresponding to the fiscal year ended June 30, 2015 and 2014, have been retroactively adjusted to reflect changes in segment information.
Urban properties and investments:
Operations Center in Argentina
Within this center, the Group operates in the following segments:
o
The “Shopping centers” segment includes assets and results of the activity of shopping centers portfolio, principally comprised of lease and service revenues related to rental of commercial space and other spaces in the shopping centers of the Group.
o
The “Office and others” segment includes the assets and the operating results of the activity of lease of office space and other rental properties and service revenues related to this activity.
o
The “Sales and developments” segment includes assets and the operating results of the sales of undeveloped parcels of land and/or trading properties, as the results related with its development and maintenance. Also included in this segment are the results of the sales of real property intended for rent, sales of hotels and other properties included in the International segment.
o
The "Hotels" segment includes the operating results of the hotels principally comprised of room, catering and restaurant revenues.
o
The “International” segment primarily includes assets and operating profit or loss from business related to associates Condor and Lipstick. Through these associates, the Group derives revenue from hotels and an office building in United States, respectively. Until September 30, 2014, this segment included revenue from a subsidiary that owned the building located at 183 Madison Ave in New York, United States, which was sold on September 29, 2014. Additionally, until October 11, 2015, this international segment only included results from the investment in IDBD carried at fair value.
o
The “Financial operations and others” segment primarily includes the financial activities carried out by BHSA and Tarshop and other residual financial operations.
F- 83
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
The CODM periodically reviews the results and certain asset categories and assesses performance of the operating segments corresponding to the agricultural business and urban properties and investment business of the operations center Argentina based on a measure of profit or loss of the segment composed by the operating income plus the equity in earnings of joint ventures and associates. The valuation criteria used in preparing this information are consistent with IFRS standards used for the preparation of the financial statements, except for the following:
Operating results of joint ventures: Cresca, Cyrsa, NPSF, Puerto Retiro, Baicom and Quality are evaluated by the CODM applying proportional consolidation method. Under this method the income/loss generated and assets, are reported in the income statement line-by-line based on the percentage held in joint ventures rather than in a single item as required by IFRS. Management believes that the proportional consolidation method provides more useful information to understand the business return. Moreover, operating results of EHSA joint venture is accounted for under the equity method. Management believes that, in this case, this method provides more adequate information for this type of investment, given its low materiality and considering it is a company without direct trade operations, where the main asset consists of an indirect interest of 25% of LRSA.
Operating results from shopping centers and offices do not include the amounts pertaining to building administration expenses and collective promotion funds ("FPC", as per its Spanish acronym) as well as total recovered costs, whether by way of building administration expenses or other concepts included under financial results (for example default interest and other concepts). The CODM examines the net amount from both concepts (total surplus or deficit between building administration expenses and FPC and recoverable expenses).
The assets’ categories examined by the CODM are: investment properties, property, plant and equipment, trading properties, inventories, right to receive future units under barter agreements, investment in associates and goodwill. The sum of these assets, classified by business segment, is reported under “assets by segment”. Assets are allocated to each segment based on the operations and/or their physical location.
Within the operations center in Argentina, most revenue from its operating segments is derived from, and their assets are located in, Argentina, except for earnings of associates included in the “International” segment located in United States.
Revenues for each reporting segments derive from a large and diverse client base and, therefore, there is no revenue concentration in any particular segment.
F- 84
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
Operations Center in Israel:
Within this center, the Group operates in the following segments:
o
The “Real Estate” segment includes mainly assets and operating income derived from business related to the subsidiary PBC. Through PBC, the Group operates rental properties and residential properties in Israel, United States and other parts of the world and carries out commercial projects in Las Vegas, United States.
o
The “Supermarkets” segment includes assets and operating income derived from the business related to the subsidiary Shufersal. Through Shufersal, the Group mainly operates a supermarket chain in Israel.
o
The “Agrochemicals” segment includes income derived from the associate Adama. Adama is a company specialized in agrochemicals, particularly for the production of crops.
o
The “Telecommunications” segment includes assets and operating income derived from the business related to the subsidiary Cellcom. Cellcom is a provider of telecommunication services and its main activities include the provision of mobile phone services, fixed line phone services, data and Internet, among others.
o
The "Insurance" segment includes the investment in Clal. This company is one of the most important insurance groups in Israel, and is mainly engaged in pension and social security insurance, among others. As indicated in Note 18, 51% of the controlling shares of Clal are held in a trust following the instructions of the Israel Securities Commission in order to comply with the sale of the controlling shares of Clal. As a result, the Company is not fully consolidated on a line-by-line basis but rather in a single line as a financial instrument at fair value, as required by the IFRS under the current circumstances where no control is exercised.
o
The "Others" segment includes the assets and income derived from other diverse business activities, such as technological developments, tourism, gas and oil assets, electronics, and others.
The CODM periodically reviews the results and certain asset categories and assesses performance of this operating segment based on a measure of profit or loss of the segment composed by the operating income plus the equity in earnings of joint ventures and associates. The valuation criteria used in preparing this information are consistent with IFRS standards used for the preparation of the consolidated financial statements.
As indicated under Note 2, the Group decided to consolidate income derived from its operations center in Israel with a three month lag, adjusted for the effects of significant transactions. Hence, operating results of IDBD for the period extending from October 11, 2015 (acquisition date) through March 31, 2016 are included in the Group’s comprehensive income for the fiscal year ended June 30, 2016.
F- 85
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
Furthermore, comparative information has not been modified for as of that date the Group did not exercise control over IDBD. The assessment of this investment was part of the international segment of the urban properties and investment business in the operations center in Argentina.
Goods and services exchanged between segments are calculated based on market prices. Intercompany transactions between segments, if any, are eliminated.
As to those business segments involving the operations center in Argentina where assets are reported under the proportional consolidation method, each reported asset includes the proportional share of the Group in the same class of assets of the associates and/or joint ventures. Only as an example, the amount of investment properties reported includes (i) the balance of investment properties as stated in the statement of financial position, plus (ii) the Group’s share in the balances of investment properties of joint ventures.
Within the agricultural business, most revenue from its operating segments are generated from and their assets are located in Argentina and Brazil, mainly.
Within the urban properties and investment business in the operations center in Argentina, most revenue from its operating segments are generated from and their assets are located in Argentina, except for earnings of associates included in the “International” segment located in USA.
Within the urban properties and investment business in the operations center in Israel, most revenue from its operating segments are generated from and their assets are located in Israel, except for certain earnings from the Real Estate segment generated outside Israel, mainly in USA.
Within the agricultural business and the urban properties and investments business from the operations center in Argentina, the assets categories reviewed by the CODM are: investment properties, property, plant and equipment, trading properties, inventories, biological assets, right to receive future units under barter agreements, investment in joint ventures and associates and goodwill. The aggregate of these assets, classified by business segment, are disclosed as “segment assets”. Assets are allocated to each segment based on the operations and/or their physical location.
F- 86
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
Below is a summarized analysis of the lines of business of the Group for the year ended June 30, 2016:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina 
Operations Center in
Israel
 Subtotal  
Revenues 2,912 3,284 28,229 31,513 34,425
Costs (3,821) (839) (20,481) (21,320) (25,141)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,717 - - - 1,717
Changes in the net realizable value of agricultural produce after harvest208 - - - 208
Gross profit 1,016 2,445 7,748 10,193 11,209
Gain from disposal of investment properties - 1,056 45 1,101 1,101
Loss from disposal of farmlands (2) - - - (2)
General and administrative expenses (314) (554) (1,387) (1,941) (2,255)
Selling expenses (338) (264) (5,686) (5,950) (6,288)
Other operating results, net (70) 31 - 31 (39)
Profit from operations  292 2,714 720 3,434 3,726
Share of profit / (loss) of joint ventures and associates 23 99 338 437 460
Segment profit  315 2,813 1,058 3,871 4,186
          
Investment properties 11 3,340 - 3,340 3,351
Property, plant and equipment 2,736 244 - 244 2,980
Trading properties - 253 - 253 253
Goodwill 10 25 - 25 35
Rights to receive future units under barter agreements - 90 - 90 90
Biological assets 1,144 - - - 1,144
Inventories 660 28 - 28 688
Interests in joint ventures and associates 54 964 - 964 1,018
Operating assets from Operations Center in Israel - - 146,989 146,989 146,989
Total segment assets 4,615 4,944 146,989 151,933 156,548
          
Operating liabilities from Operations Center in Israel - - 132,865 132,865 132,865
F- 87
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
Below is a summarized analysis of the lines of business of the Group for the year ended June 30, 2015:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina  
Revenues 2,395 2,547 4,942
Costs (3,419) (633) (4,052)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 - 1,347
Changes in the net realizable value of agricultural produce after harvest(34) - (34)
Gross profit 289 1,914 2,203
Gain from disposal of investment properties - 1,150 1,150
Gain from disposal of farmlands 570 - 570
General and administrative expenses (247) (378) (625)
Selling expenses (286) (195) (481)
Other operating results, net (19) 29 10
Profit from operations  307 2,520 2,827
Share of profit / (loss) of joint ventures and associates 1 (1,037) (1,036)
Segment profit  308 1,483 1,791
      
Investment properties 77 3,494 3,571
Property, plant and equipment 2,079 256 2,335
Trading properties - 136 136
Goodwill 8 25 33
Rights to receive future units under barter agreements - 90 90
Biological assets 588 - 588
Inventories 496 23 519
Interests in joint ventures and associates 33 2,382 2,415
Total segment assets 3,281 6,406 9,687
F- 88
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
Below is a summarized analysis of the lines of business of the Group for the year ended June 30, 2014:
 Agricultural business Urban properties and investments business Total
   Operations Center in Argentina  
Revenues 1,813 2,157 3,970
Costs (2,617) (649) (3,266)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 - 1,172
Changes in the net realizable value of agricultural produce after harvest(17) - (17)
Gross profit 351 1,508 1,859
Gain from disposal of investment properties - 231 231
Gain from disposal of farmlands 91 - 91
General and administrative expenses (241) (300) (541)
Selling expenses (210) (150) (360)
Other operating results, net (29) (49) (78)
(Loss) / Profit from operations  (38) 1,240 1,202
Share of profit / (loss) of joint ventures and associates 11 (437) (426)
Segment (loss) / profit  (27) 803 776
      
Investment properties 51 3,539 3,590
Property, plant and equipment 2,417 238 2,655
Trading properties - 143 143
Goodwill 11 26 37
Rights to receive future units under barter agreements - 85 85
Assets held for sale - 1,358 1,358
Biological assets 652 - 652
Inventories 433 18 451
Interests in joint ventures and associates 37 1,966 2,003
Total segment assets 3,601 7,373 10,974
F- 89
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
(I)
Agriculture line of business:
The following tables present the reportable segments of the agriculture line of business:
 June 30, 2016
 Agricultural production 
Land
transformation and sales
 Others 
Total Agricultural
business (i)
Revenues 1,689 - 1,223 2,912
Costs (2,727) (9) (1,085) (3,821)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,717 --- 1,717
Changes in the net realizable value of agricultural produce
after harvest 
208 --- 208
Gross profit / (loss) 887 (9) 138 1,016
Loss from disposal of farmlands - (2) - (2)
General and administrative expenses (256) (1) (57) (314)
Selling expenses (247) - (91) (338)
Other operating results, net (72) - 2 (70)
Profit / (Loss) from operations  312 (12) (8) 292
Share of profit / (loss) of associates 26 - (3) 23
Segment profit / (loss)  338 (12) (11) 315
        
Investment properties --- 11 11
Property, plant and equipment 2,673 13 50 2,736
Goodwill 10 - - 10
Biological assets 1,144 - - 1,144
Inventories 499 - 161 660
Investments in associates 54 - - 54
Total segment assets (ii) 4,380 13 222 4,615
(i)
From all of the Group’s revenues corresponding to Agricultural Business, Ps. 2,212 are generated in Argentina and Ps. 700 in other countries, principally in Brazil for Ps. 503.
(ii)
From all of the Group’s assets included in the segment corresponding to Agricultural Business, Ps. 2,062 are located in Argentina and Ps. 2,556 in other countries, principally in Brazil for Ps. 1,470.
F- 90
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
 June 30, 2015
 Agricultural production 
Land transformation
and sales
 Others 
Total Agricultural
business (i)
Revenues 1,400 - 995 2,395
Costs (2,545) (9) (865) (3,419)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 - - 1,347
Changes in the net realizable value of agricultural produce
after harvest 
(34) - - (34)
Gross profit / (loss) 168 (9) 130 289
Gain from disposal of farmlands - 570 - 570
General and administrative expenses (210) (2) (35) (247)
Selling expenses (193) (2) (91) (286)
Other operating results, net (15) (5) 1 (19)
(Loss) / Profit from operations  (250) 552 5 307
Share of profit of associates 1 - - 1
Segment (loss) / profit  (249) 552 5 308
        
Investment properties - - 77 77
Property, plant and equipment 1,997 13 69 2,079
Goodwill 7 - 1 8
Biological assets 587 - 1 588
Inventories 370 - 126 496
Investments in associates 33 - - 33
Total segment assets (ii) 2,994 13 274 3,281
(i)
From all of the Group’s revenues corresponding to Agricultural Business, Ps. 1,679 are generated in Argentina and Ps. 716 in other countries, principally in Brazil for Ps. 578.
(ii)
From all of the Group’s assets included in the segment corresponding to Agricultural Business, Ps. 1,379 are located in Argentina and Ps. 1,902 in other countries, principally in Brazil for Ps. 1,186.
F- 91
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
 June 30, 2014
 Agricultural production 
Land
transformation
and sales
 Others 
Total
Agricultural
business (i)
Revenues 1,105 - 708 1,813
Costs (2,011) (8) (598) (2,617)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 - - 1,172
Changes in the net realizable value of agricultural produce
after harvest 
(17) - - (17)
Gross profit / (loss) 249 (8) 110 351
Gain from disposal of farmlands - 91 - 91
General and administrative expenses (208) (1) (32) (241)
Selling expenses (139) (4) (67) (210)
Other operating results, net (29) - - (29)
 (Loss) / Profit from operations  (127) 78 11 (38)
Share of profit of associates 11 - - 11
Segment (loss) / profit  (116) 78 11 (27)
        
Investment properties - - 51 51
Property, plant and equipment 2,365 7 45 2,417
Goodwill 10 - 1 11
Biological assets 647 - 5 652
Inventories 334 - 99 433
Investments in associates 34 - 3 37
Total segment assets (ii) 3,390 7 204 3,601
(i)
From all of the Group’s revenues corresponding to Agricultural Business, Ps. 1,279 million are generated in Argentina and Ps. 534 million in other countries, principally in Brazil for Ps. 415 million.
(ii)
From all of the Group’s assets included in the segment corresponding to Agricultural Business, Ps. 1,252 million are located in Argentina and Ps. 2,348 million in other countries, principally in Brazil for Ps. 1,727 million.
F- 92
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
(II)
Urban properties line of business and investments
The following tables present the reportable segments from the Operations Center in Argentina:
 June 30, 2016
 Shopping Center
 Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
Revenues (i) 2,406 340 3 534 - 1 3,284
Costs (403) (53) (20) (362) - (1) (839)
Gross profit / (loss) 2,003 287 (17) 172 - - 2,445
Gain from disposal of investment properties - - 1,056 - - - 1,056
General and administrative expenses (179) (50) (131) (103) (91) - (554)
Selling expenses (145) (12) (36) (69) - (2) (264)
Other operating results, net (42) (6) (8) (2) 88 1 31
Profit / (Loss) from operations 1,637 219 864 (2) (3) (1) 2,714
Share of profit / (loss) of joint ventures and associates- 14 5 - (151) 231 99
Segment profit / (loss) 1,637 233 869 (2) (154) 230 2,813
              
Investment properties 2,282 879 173 - - 6 3,340
Property, plant and equipment 49 25 2 166 2 - 244
Trading properties 1 - 252 - - - 253
Goodwill 14 6 5 - - - 25
Rights to receive future units under barter agreements- - 90 - - - 90
Inventories 19 - 1 8 - - 28
Investment in joint ventures and associates - 31 62 - (832) 1,703 964
Total segment assets (ii) 2,365 941 585 174 (830) 1,709 4,944
(i)
From all the Group's revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 3,284 are generated in Argentina. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)
From all of the Group's assets included in the segment corresponding to the urban properties and investment business of the operations Center in Argentina, Ps. 5,618 are located in Argentina and Ps. (674) in other countries, principally in United States for Ps. (832) and Uruguay for Ps. 158, respectively.
F- 93
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6. 
Segment information (Continued)
 June 30, 2015
 Shopping Center
 Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
Revenues (i) 1,778 333 14 396 26 - 2,547
Costs (291) (36) (19) (279) (7) (1) (633)
Gross profit / (loss) 1,487 297 (5) 117 19 (1) 1,914
Gain from disposal of investment properties - - 1,150 - - - 1,150
General and administrative expenses (135) (59) (50) (78) (56) - (378)
Selling expenses (113) (21) (9) (52) - - (195)
Other operating results, net (49) (118) 13 - 185 (2) 29
Profit / (Loss) from operations 1,190 99 1,099 (13) 148 (3) 2,520
Share of (loss) / profit of joint ventures and associates- (3) (2) 1 (1,191) 158 (1,037)
Segment profit / (loss) 1,190 96 1,097 (12) (1,043) 155 1,483
              
Investment properties 2,321 978 188 - - 7 3,494
Property, plant and equipment 48 31 1 175 1 - 256
Trading properties 1 - 135 - - - 136
Goodwill 14 6 5 - - - 25
Rights to receive future units under barter agreements- - 90 - - - 90
Inventories 16 - - 7 - - 23
Interests in joint ventures and associates - 21 47 - 910 1,404 2,382
Total segment assets (ii) 2,400 1,036 466 182 911 1,411 6,406
(i)
From all the Group's revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 2,521 are originated in Argentina and Ps. 26 in United States. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)
From all of the Group's assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 4,767 are located in Argentina and Ps. 1,639 in other countries, principally in United States for Ps. 1,533 and Uruguay for Ps. 106, respectively.
F- 94
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6. 
Segment information (Continued)
 June 30, 2014
 Shopping Center
 Offices and others Sales and developments Hotels International 
Financial operations
and others
 Total
Revenues (i) 1,383 271 86 332 84 1 2,157
Costs (297) (45) (35) (217) (54) (1) (649)
Gross profit 1,086 226 51 115 30 - 1,508
Gain from disposal of investment properties - - 231 - - - 231
General and administrative expenses (102) (42) (37) (60) (59) - (300)
Selling expenses (73) (21) (14) (42) - - (150)
Other operating results, net (47) (3) 8 (3) (1) (3) (49)
Profit / (Loss) from operations 864 160 239 10 (30) (3) 1,240
Share of (loss) / profit of joint ventures and associates- (1) 6 1 (616) 173 (437)
Segment profit / (loss) 864 159 245 11 (646) 170 803
              
Investment properties 2,275 834 423 - - 7 3,539
Property, plant and equipment 20 36 4 176 2 - 238
Trading properties 1 - 142 - - - 143
Goodwill 9 12 5 - - - 26
Rights to receive future units under barter agreements- - 85 - - - 85
Assets held for sale - - - - 1,358 - 1,358
Inventories 11 - 1 6 - - 18
Interests in joint ventures and associates - 23 38 22 629 1,254 1,966
Total segment assets (ii) 2,316 905 698 204 1,989 1,261 7,373
(i)
From all the Group's revenues corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 2,073 are originated mainly in Argentina and Ps. 84 in United States. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)
From all of the Group's assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Argentina, Ps. 5,274 are located in Argentina and Ps. 2,099 in other countries, principally in United States for Ps. 1,988.
F- 95
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
6.            Segment information (Continued)
The following table presents the reportable segments of the Operations Center in Israel:
 June 30, 2016
 Real Estate Supermarkets Agrochemicals Telecommunications Insurance Others Total
Revenues (i)                                        1,538 18,610 - 6,655 - 1,426 28,229
Costs                                        (837) (13,925) - (4,525) - (1,194) (20,481)
Gross profit                                        701 4,685 - 2,130 - 232 7,748
Gain from disposal of investment properties45 - - - - - 45
General and administrative expenses(100) (203) - (708) - (376) (1,387)
Selling expenses                                        (29) (4,058) - (1,493) - (106) (5,686)
Profit / (Loss) from operations 617 424 - (71) - (250) 720
Share of profit / (loss) of joint ventures and associates97 - 334 - - (93) 338
Segment profit / (loss)                                        714 424 334 (71) - (343) 1,058
              
Operating assets (ii)                                        60,197 29,440 - 27,345 4,602 25,405 146,989
Operating liabilities                                        (49,452) (23,614) - (21,657) - (38,142) (132,865)
 10,745 5,826 - 5,688 4,602 (12,737) 14,124
(i)
From all the Group's revenues corresponding to the urban properties and investment business of the Operations Center in Israel, Ps. 512 are originated in United States and Ps. 27,717 in Israel. No external client represents 10% or more of revenue of any of the reportable segments.
(ii)
From all of the Group's assets included in the segment corresponding to the urban properties and investment business of the Operations Center in Israel, Ps. 14,070 are located in United States, Ps. 786 in India and the remaining in Israel.
F- 96
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
The following tables present a reconciliation between the total results of operations as per the segment information and the profit from operation as per the statement of income. The adjustments relate to the presentation of the results of operations of joint ventures accounted for under the equity method under IFRS and the non-elimination of the inter-segment transactions.
 June 30, 2016    
 
Total
segment information
Adjustment for share of profit / (loss) of joint ventures
Expenses
and collective promotion funds
Adjustment to
income for elimination of
 inter-segment transactions
Total
statement of income
Revenues 34,425(89)1,194(146)35,384
Costs (25,141)111(1,207)147(26,090)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,717(57)--1,660
Changes in the net realizable value of agricultural produce after harvest208---208
Gross profit / (loss) 11,209(35)(13)111,162
Gain from disposal of investment properties1,101---1,101
Loss from disposal of farmlands (2)---(2)
General and administrative expenses (2,255)5-6(2,244)
Selling expenses (6,288)8-1(6,279)
Other operating results, net (39)(2)-(3)(44)
Profit / (Loss) from operations before share of
Profit / (Loss) of joint ventures and associates
3,726(24)(13)53,694
Share of (loss) / profit of joint ventures and associates46013--473
Profit / (Loss) from operations before financing and taxation 4,186(11)(13)54,167
F- 97
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
 June 30, 2015
 
Total
segment information
 
Adjustment for share of Profit / (Loss)
of joint ventures
 
Expenses
and collective promotion funds
 
Adjustment
to income for elimination of
 inter-segment transactions
 
Total
statement of income
Revenues                                                   4,942 (53) 887 (124) 5,652
Costs                                                   (4,052) 61 (901) 122 (4,770)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,347 (23) - - 1,324
Changes in the net realizable value of agricultural produce after harvest(34) - - - (34)
Gross profit / (loss)                                                   2,203 (15) (14) (2) 2,172
Gain from disposal of investment properties1,150 - - - 1,150
Gain / (Loss) from disposal of farmlands570 (20) - - 550
General and administrative expenses                                                   (625) 4 - 3 (618)
Selling expenses                                                   (481) 6 - 1 (474)
Other operating results, net                                                   10 3 - (1) 12
Profit / (Loss) from operations before share of Profit / (Loss) of joint ventures and associates2,827 (22) (14) 1 2,792
Share of (loss) / profit of joint ventures and associates(1,036) 10 - - (1,026)
Profit / (Loss) from operations before financing and taxation 1,791 (12) (14) 1 1,766
 June 30, 2014
 
Total
segment information
 
Adjustment for share of Profit / (Loss)
of joint ventures
 
Expenses
and collective promotion funds
 
Adjustment to
income for
elimination of
 inter-segment transactions
 
Total
statement of income
Revenues                                                   3,970 (63) 736 (39) 4,604
Costs                                                   (3,266) 60 (744) 37 (3,913)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,172 (20) - - 1,152
Changes in the net realizable value of agricultural produce after harvest(17) - - - (17)
Gross profit / (loss)                                                   1,859 (23) (8) (2) 1,826
Gain from disposal of investment properties231 - - - 231
Gain from disposal of farmlands                                                   91 - - - 91
General and administrative expenses                                                   (541) 5 - 3 (533)
Selling expenses                                                   (360) 6 - - (354)
Other operating results, net                                                   (78) 4 - (1) (75)
Profit / (Loss) from operations before share of Profit / (Loss) of joint ventures and associates1,202 (8) (8) - 1,186
Share of (loss) / profit of joint ventures and associates(426) 16 - - (410)
Profit / (Loss) from operations before financing and taxation 776 8 (8) - 776
F- 98
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
The following tables present a reconciliation between total segment assets and liabilities and total assets as per the statement of financial position. Adjustments are mainly related to the filing of certain classes of assets in segment information and to the proportional consolidation of joint ventures mentioned previously.
 June 30, 2016 June 30, 2015 June 30, 2014
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total
   Operations Center in Argentina
Operations Center in
Israel
Subtotal     
Operations
Center in
Argentina
     
Operations
Center in
Argentina
  
Total Assets per segment              
4,615 4,944146,989151,933 156,548 3,281 6,406 9,687 3,601 7,373 10,974
Less:                   
Proportionate share in reportable assets per segment of joint ventures (*)(529) (117)-(117) (646) (382) (95) (477) (294) (149) (443)
Measurement adjustments at fair value                   
Plus:                   
Investments in joint ventures (**)233 203-203 436 177 181 358 64 308 372
Other non-reportable assets (***)3,102 6,561-6,561 9,663 2,794 2,914 5,708 2,606 2,275 4,881
Total Consolidated assets as per Statement of financial position7,421 11,591146,989158,580 166,001 5,870 9,406 15,276 5,977 9,807 15,784
F- 99
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
(*) Below is a detail of the proportionate share in assets by segment of joint ventures included in the information reported by segment.
 June 30, 2016 June 30, 2015 June 30, 2014
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business Urban properties and investments business Total
   Operations Center in Argentina
Operations
Center in
Israel
Subtotal     
Operations
Center in Argentina
     
Operations
Center in Argentina
  
Investment properties                                       2 115-115 117 - 96 96 - 135 135
Property, plant and equipment                                       509 (5)-(5) 504 366 (9) 357 273 - 273
Trading properties                                       - 1-1 1 - 3 3 - 6 6
Goodwill                                       - 5-5 5 - 5 5 - 7 7
Biological assets                                       12 --- 12 9 - 9 11 - 11
Inventories                                       6 1-1 7 7 - 7 10 1 11
Total proportionate share in assets per segment of joint ventures529 117-117 646 382 95 477 294 149 443
F- 100
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
6.
Segment information (Continued)
(**) 
Represents the equity-accounted amount of those joint ventures, which were proportionate-consolidated for segment information purposes.
 June 30, 2016 June 30, 2015 June 30, 2014
 Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total Agricultural business 
Urban properties
and investments business
 Total
   Operations Center in Argentina
Operations
Center in
Israel
Subtotal     
Operations
Center in
Argentina
     
Operations
Center in Argentina
  
Total Liabilities per segment - -132,865132,865 132,865 - - - - - -
Plus:                   
Liabilities corresponding to agricultural business and urban properties and investment business of the operations center in Argentina5,323 12,581-12,581 17,904 4,209 7,165 11,374 4,213 7,136 11,349
Total Consolidated liabilities as per Statement of financial position5,323 12,581132,865145,446 150,769 4,209 7,165 11,374 4,213 7,136 11,349
(***) 
Includes deferred income tax assets, income tax credit, restricted assets, trade and other receivables, financial assets held for sale, investment in financial assets, derivative financial instruments, employee benefits, cash and cash equivalents and intangible assets except for goodwill and right to receive units.
F- 101
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
7.
Information about principal subsidiaries
The Group conducts its business through several operating subsidiaries and holdings. The Group considers that the subsidiaries below are the ones with non-controlling interests material to the Group. As of June 30, 2016 and 2015 correspond to urban properties and investment business from the operations center in Argentina and agricultural business.
 As of June 30, 2016 Year ended June 30, 2016
 
Non-controlling shareholders’ interest
%
 Current assets Non-current assets Current liabilities 
Non-
 current liabilities
 Net assets 
Book value of
non-controlling shareholders
 Revenues 
Net
(Loss)/ Incomes
 Other comprehensive (Loss)/ Income 
Total comprehensive
Loss/ income
 Profit (loss) attributable to non-controlling shareholders 
Other comprehensive loss
 attributable to
non-controlling shareholders
 
Cash of
operating activities
 Cash of investment activities 
Cash of
 financial activities
 Net increase (decrease) in cash and cash equivalents Dividends distributed to non-controlling shareholders
Elron (1) 49.68% 2,145 922 82 31 2,954 2,522 3 (97) (103) (200) (55) (71) (171) (58) 13 (216) -
PBC (1) 23.55% 10,435 47,546 9,925 37,567 10,489 8,419 1,538 621 (267) 354 370 (116) 1,039 280 (2,414) (1,095) (322)
Cellcom (1) 58.23% 9,368 16,113 7,629 13,210 4,642 3,795 6,655 (64) (3) (67) (39) - 1,442 (241) (776) 425 (6)
Shufersal (1) 47.05% 9,929 18,764 13,202 10,411 5,080 3,596 18,610 312 (19) 293 193 (13) 769 (483) (2,436) (2,150) (151)
BrasilAgro 57.82% 898 2,260 415 205 2,538 1,380 467 (21) 619 598 (12) 358 (66) 353 (426) (139) (9)
IRSA 36.23% 42,763 116,237 43,600 101,899 13,501 12,386 32,675 (1,872) 3,892 2,020 (618) 3,400 4,139 8,210 (3,968) 8,381 (615)
 As of June 30, 2015 Year ended June 30, 2015
 
Non-controlling shareholders’ interest
%
 Current assets Non-current assets Current liabilities 
Non-
 current liabilities
 Net assets Book value of non-controlling shareholders Revenues 
Net
Income / (Loss)
 Other comprehensive income 
Total comprehensive
income
 Profit (loss) attributable to non-controlling shareholders 
Other comprehensive loss
 attributable to
non-controlling shareholders
 
Cash of
operating activities
 Cash of investment activities 
Cash of
 financial activities
 Net increase (decrease) in cash and cash equivalents Dividends distributed to non-controlling shareholders
                                    
BrasilAgro 64.30% 1,896 8,347 2,691 4,682 2,870 872 2,509 164 106 270 81   736 301 (1,298) (261)  
IRSA 39.77% 1,315 1,667 583 195 2,204 1,257 321 59 (472) (413) -   (161) (46) 11 (196)  
N/A: Not applicable. Not considered a significant non-controlling interest.
(1)
Corresponds to the Group's indirect interest. The percentage of the non-controlling interest represents the equity interest which is not owned by DIC.
F- 102
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
7.
Information about principal subsidiaries (Continued)
Significant events
Cellcom is the largest provider of mobile telecommunications in Israel, it offers its services approximately to 2.9 million subscribers with a wide range of services. By the end of 2014, the Company launched television services over the Internet. Under Israeli laws, in order for a shareholder to be able to exert control over a Telecommunications Company, such shareholder must first secure the approval of the Ministry of Communications of Israel. Such approval, consequence of change in control of IDBD, has not yet been obtained.
In November 2015, Cellcom entered into an agreement, subject to approval, with Golan Telecom Ltd. ("Golan") and its shareholders to acquire all of Golan’s shares for a price of NIS 1,170 million, subject to certain adjustments. To complete the transaction, Cellcom intends to raise funds by way of a public offering and DIC expects to subscribe shares for up to NIS 100 million at that public offering to maintain its current equity interests. During April 2016, the Anti-trust Commission of Israel and the Ministry of Communications notified Cellcom their objection to the transaction described above but failed to state the grounds for such objection.
In June 2016, Hot Mobile Ltd. ("Hot"), a mobile phone carrier of Israel, announced it intended to enter into a non-exclusive long-term agreement for the provision of hosting services to Golan for the network used by Hot, which is subject to approval and directives by the Israel regulatory authorities.
Cellcom informed Golan that the transaction with Hot amounts to a material breach of the stock purchase agreement (“SPA”) mentioned above and of the intra-national roaming agreement (the “Roaming Agreement”) between Cellcom and Golan, including an exclusivity commitment in relation to the provision of services and the commitment to not apply any material change to the business acquired. Cellcom notified Golan and its shareholders that unless the breach to the SPA and the Roaming Agreement were cured, Cellcom would be entitled to terminate the SPA and claim the immediate reimbursement of an aggregate amount of NIS 600 million, in addition to the reimbursement of sums of money already paid by Cellcom to Golan. Non-performance will allow Cellcom to claim damages for the future payments that should have been made by Golan until the end of the exclusivity period agreed upon between the parties.
In July 2016, Cellcom started a legal action against Golan, including a motion filed to suspend the agreement between Golan and Hot; in this respect, on July 21, 2016 the District Court issued a temporary restraining order against finalizing the agreement between Golan and Hot, as requested by Cellcom. In August 2016, Golan filed a motion with the Supreme Court challenging the temporary order.
F- 103
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
7.
Information about principal subsidiaries (Continued)
Analysis of the impact of the Concentration Act law
As mentioned in note 1 to these financial statements, IDBD is analyzing the implications of the Concentration Act law. The alternatives under evaluation include: (i) delisting of IDBD or DIC so that it becomes a private company, or (ii) a merger between IDBD and DIC. At the time of approval of these financial statements, the preceding alternatives are merely under evaluation and there is no certainty as to implementation of the structural changes described above or the date of any such implementation. IDBD and DIC estimate that one of these alternatives are likely to be carried out, allowing the Group to continue holding control of Cellcom after December 2019.
As indicated for IDBD, PBC is also assessing the implications of this Act in relation to its holdings in controlled companies, for the purpose of continuing to exercise control; and it believes it will continue to do so.
IDBD and DIC assess whether it is necessary to recognize deferred tax liabilities for the temporary differences arising in relation to its investments in subsidiaries. In this respect, IDBD, DIC and PBC estimate that if each of them is required to dispose of its respective holdings in subsidiaries, they would not be liable to income tax on the sale and, for such reason, they did not recognize the deferred tax liabilities related to this difference in these financial statements.
8.
Interests in joint ventures
Evolution in the Group’s investments in joint ventures for the years ended June 30, 2016 and 2015 were as follows:
 June 30, 2016 June 30, 2015
Beginning of the year 378 395
Capital contribution 77 95
Balance incorporated by business combination (Note 3) 960 -
Share of profit 143 5
Currency translation adjustment 645 28
Cash dividends (i) (17) (34)
Capital reduction (ii) - (111)
End of the year 2,186 378
(i)
During the fiscal year ended June 30, 2016, Ps. 7 corresponds to Cyrsa, Ps. 4 to NPSF and Ps. 6 to Manaman. During the fiscal year ended June 30, 2015, Ps. 31 corresponds to Cyrsa and Ps. 3 to NPSF.
(ii)
During the fiscal year ended June 30, 2015, Cyrsa carried out a distribution to IRSA due to capital reduction for Ps. 111.
F- 104
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
8. 
Interests in joint ventures (Continued)
The table below shows the value of interests in joint ventures for the fiscal years ended June 30, 2016 and 2015, as well as the Group’s interest in comprehensive income/(loss) of such companies for the fiscal years ended June 30, 2016, 2015 and 2014:
Name of the entityPlace of business / Country of incorporationMain activity
Nature
of the
relationship
Common shares 1 voteValue of Group's interest in equity 
Group's interest in
 comprehensive income / (Operations)
 % of ownership interest held 
June 30,June 30, June 30,Last financial statement issued
20162015 201620152014 201620152014Share Capital (nominal value)(Loss) / profit for the yearShareholders' equity
Cresca S.A.                      
ParaguayAgricultural(1)138,154230176 54262 50%50%50%144(i) 27588
Mehadrin                                   IsraelAgricultural(2)1,509,889985- 433-- 45.41%--(*) 3(*) 70(*) 499
Others joint ventures                                     (3) 971202 301725    ---
     2,186378 7883327       
(1)
Cresca is a joint venture between the Company and Carlos Casado S.A. with agriculture operations in Paraguay.
(2)
Mehadrin is a company engaged in the production and exports of citrus, fruits and vegetables. The Group has entered into a joint venture agreement in relation to this company.
(3)
The group also has interest in a number of individually immaterial joint ventures that are accounted for using the equity method.
(i)
   As per financial statements for the six-month period ended June 30, 2016.
(*) Amounts in millions of NIS.
F- 105
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
8.         Interests in joint ventures (Continued)
Information about significant joint ventures
Set out below is the summarized financial information for those joint ventures that are material to the Group:
 As of June 30, 2016 Year ended June 30, 2016
 Current assets 
Non-current
assets
 Current liabilities 
Non-
 current
liabilities
 Net assets Dividends distribution Net assets at end of the year % of ownership interest held Investments in joint venture Goodwill and others 
 
Net book amount
 Revenues 
Net
Income / (loss)
 
Total
 comprehensive income
 
Cash od
operating activities
 Cash of investment activities 
Cash of
financial activities
 Changes in cash and cash equivalents
Cresca S.A. 144 668 325 25 462 - 462 50% 231 (1) 230 120 6 (6) 77 (60) - 17
Mehadrin 2,475 2,814 2,678 673 1,938 - 1,938 45.41% 880 105 985 (*) 819 (*) 68 (*) 68 (*) 96 (*) (4) (*) 64 (*) 156
 As of June 30, 2015 Year ended June 30, 2015
 Current assets 
Non-current
assets
 Current liabilities 
Non-
 current
liabilities
 Net assets Dividends distribution Net assets at end of the year % of ownership interest held Investments in joint venture Goodwill and others 
 
Net book amount
 Revenues 
Net
Income / (loss)
 
Total
 comprehensive income
 
Cash od
operating activities
 Cash of investment activities 
Cash of
financial activities
 Changes in cash and cash equivalents
Cresca S.A. 71 544 54 205 356 - 356 50% 178 (1) 177 52 (3) 56 - - - -
Cyrsa 17 43 24 1 35 31 35 50% 18 - 18 11 14 14 7 (7) 1 1
Puerto Retiro (i) 1 46 4 9 34 - 34 50% 17 28 45 2 (2) (2) (2) - 3 1
Quality (ii) 4 150 6 2 146 - 146 50% 73 1 74 16 4 4 (16) - 15 (1)
(i)
On April 18, 2000, Puerto Retiro was notified of a filing made by the National Government, through the Ministry of Defense, to extend the petition in bankruptcy of Indarsa to Puerto Retiro. At the request of plaintiff, the bankruptcy court for the Buenos Aires District issued an order restraining the ability of Puerto Retiro to sell or dispose in any manner the land. Indarsa had acquired 90% of the capital stock of Tandanor to a formerly estate owned company in 1991. Indarsa did not comply with the payment of the outstanding price for the acquisition of the stock of Tandanor, and therefore the Ministry of Defense requested the bankruptcy of Indarsa, pursuing to extend the bankruptcy to Puerto Retiro. In addition, Tandanor filed a civil action against Puerto Retiro and other accused parties in the criminal case for violation of section 174 subsection 5, under section 173 subsection 7 of Criminal Code. The claim expects that upon invalidation of executive order that approved the bid of Dársena Norte plot of land, Tandanor be reimbursed any other sum of money that it claims to have lost due to the alleged fraudulent purchase-sale transaction of the real property disputed in the case. The Management and legal advisors of Puerto Retiro estimate that there are legal and technical arguments sufficient to consider that the request for bankruptcy will be denied by the court. However, given the current status of the case, we cannot predict its outcome. On July 12, 2016, Puerto Retiro S.A. has been notified of a ruling rendered by the Federal Court 5 which decided on the defenses raised by all co-defendants in the civil case. As regards the defenses raised by Puerto Retiro S.A., the Court rejected them on the grounds of legal defect and lack of procedural standing as defendant, whereas in relation to the lack of standing to sue and the statute of limitations defense, it deferred its treatment until it renders a judgment on the merits of the case. Puerto Retiro S.A. has filed a remedy for reversal with right to an appeal, challenging both defenses.
(ii)
In March 2011, Quality purchased an industrial plant located in San Martín, Province of Buenos Aires. The facilities have the necessary features and scales for multiple uses. On January 20, 2015, Quality entered into an Urbanization Agreement with the Municipality of San Martín which contemplates a monetary compensation to the City Council totaling Ps. 40, payable in two installments of Ps. 20 each. The first of such installments was actually paid on June 30, 2015. On January 5, 2016 the Official Bulletin of the Province of Buenos Aires published the Order of Provincial Ratification (of the Municipal Ordinance), whereby the urban parameters originally requested entered into full force, thus concluding the legislative enactment process. Even though validation is a condition precedent to the Agreement’s effectiveness, the obligation to pay the second installment will not become in force until the first drawing is registered with the Dirección de Geodesia (Geodesy Office) of the province of Buenos Aires. Quality is assessing several alternatives in order to file the plan with the final project.

(*) 
Amount in million of NIS.
F- 106
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
9.
Investments in associates
Evolution of the Group’s investment in associates for the years ended June 30, 2016 and 2015 were as follows:
 June 30, 2016 June 30, 2015
Beginning of the year 2,031 1,803
Acquisition / increase in equity interest in associates 157 1,257
Unrealized profit / (loss) from investments at fair value 77 (1,001)
Decrease for IDBD business combination (1,047) -
Associates incorporated by business combination (Note 3)8,308 -
Capital contribution 180 31
Share of profit / (loss) 311 (30)
Currency translation adjustment 4,173 53
Cash dividends (ii) (518) (18)
Sale of equity interest in associates (4) (34)
Reclassification to financial instruments - (30)
Hedging instruments (93) -
Defined benefit plans (10) -
Impairment (58) -
End of the year (i) 13,507 2,031
(i)
Includes a balance of Ps. (841) and Ps. (363) reflecting interests in companies with negative equity as of June 30, 2016 and 2015, respectively, which are reclassified to “Provisions” (Note 22).
(ii)
During the fiscal year ended June 30, 2016 the balance corresponds Ps. 10 to Millenium, Ps. 495 to Adama, Ps. 10 to Emco and Ps. 3 to Agro-Uranga. During the fiscal year ended June 30, 2015 the balance corresponds to dividends received from BHSA.
F- 107
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
9. Interests in associates (Continued)
The table below shows the value of the Group´s interest in associates for the years ended June 30, 2016 and 2015, as well as the Group’s interest in comprehensive income/(loss) of these companies for the fiscal years ended June 30, 2016, 2015 and 2014:
Name of the entityPlace of business / country of incorporationMain activityNature of the relationshipCommon shares 1 voteValue of Group's interest in equityGroup's interest in comprehensive income / (operations)% of ownership interest held   
June 30,June 30,June 30,Last financial statement issued
20162015201620152014201620152014
Share capital
(nominal value)
Profit / (Loss)
for the year
Shareholders' equity
BHSA                                 ArgentinaFinancing(1)448,689,0721,6091,35625914318429.91%29.99%29.77%1,5008375,234
IDBD                                 IsraelInvestment(2)324,445,664-908137(917)(508)N/A49.00%26.65%---
Adama                                 IsraelAgrochemical(3)55,196,35210,847-4,141--40%N/AN/A(**) 138(**) 319(**) 6,155
PBEL                                 IndiaReal Estate(4)450,000864-194--45.40%N/AN/A(**) 1(**) (29)(**) (523)
Agro-Uranga S.A.                 
ArgentinaAgricultural 893,06954302611135.72%35.72%35.72%374119
Others associates               
  (5) 133
(263)
(254)(205)(145)N/AN/AN/A---
     13,5072,0314,503(978)(458)      
(1)
BHSA is a full-service commercial bank offering a wide variety of banking activities and related financial services to individuals, small- and medium-sized companies and large corporations.
(2)
The Group acquired IDBD on May 7, 2014. IDBD is one of the Israeli biggest and most diversified investment groups. The Group has valued its interest in IDBD at fair value through profit or loss according to an exemption under IAS 28. See Note 3 for further information. Since interest in IDBD was valued at fair value, participation in financial statements and other comprehensive statement of income of IDBD is not shown in the table above. Share market value was 1.957 NIS as of June 30, 2015. (Note 3)
(3)
Adama is specialized in the chemical industry, mainly, in the agrochemical industry.
(4)
PBEL is a real estate company with developments mainly in India.
(5)
The group also has interest in a number of individually immaterial associates that are accounted for using the equity method.
(*)      
Amount in million of dollars.
(**) 
Amount in million of NIS.
F- 108
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
9.            
Interests in associates (Continued)
Information about significant associates
Set out below are the summarized financial information of the significant Group's associates as of June 30, 2016 and 2015:
 As of June 30, 2016 Year ended June 30, 2016
 Current assets 
Non-current
assets
 Current liabilities 
Non-
 current
liabilities
 Net assets Dividends distribution Net assets at end of the year (i) % of ownership interest held Interest in associates Goodwill and others Net book amount Revenues 
Net
income /
(loss)
 
Total
 comprehensive income
 
Cash on
operating activities
 Cash of investment activities 
Cash
financial activities
 Changes in cash and cash equivalents
BHSA 20,307 20,544 28,255 7,244 5,352 - 5,234  (ii) 30.66% 1,605 4 1,609 6,821 837 837 (9,462) (410) 4,099 (2,756)
Adama41,879 25,470 23,018 20,336 23,995 495 23,995 40.00% 9,598 1,249 10,847 5,854 328 265 87 (337) (825) (1,075)
PBEL1,510 257 354 3,456 (2,043) -    (2,043) 45.40% (928) 1,792 864 - (*) (30) (*) (28) (*) 45 (*) (18) (*) (28) (*) (1)
 As of June 30, 2015 Year ended June 30, 2015
 Current assets 
Non-current
assets
 Current liabilities 
Non-
 current
liabilities
 Net assets Dividends distribution Net assets at end of the year (i) % of ownership interest held Interest in associates (iii) Goodwill and others Net book amount Revenues 
Net
income /
(loss)
 
Total
 comprehensive income
 
Cash on
operating activities
 Cash of investment activities 
Cash
financial activities
 Changes in cash and cash equivalents
BHSA24,850 10,234 26,893 3,725 4,466 13 4,398 (ii) 30.74% 1,352 4 1,356 4,500 461 461 (3,334) (46) 1,515 193
IDBD (iii)30,344 64,935 24,209 61,684 9,386 - 9,386 49% N/A N/A 1,529 43,296 713 151 2,909 1,389 (4,505) (207)
(i)
                      Net of non-controlling interest.
(ii)
Considering the effect of treasury shares.
(iii)
The book value has been computed based on the fair value of the investment (Note 3).
(*) Amount in million of NIS.
F- 109
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
9. Interests in associates (Continued)
BHSA
In accordance with the regulations of the “BCRA”, there are certain restrictions on the distribution of profits by BHSA.
The fair value of the Group’s investment in BHSA was estimated based on the present value of future business cash flows. The principal premises used to calculate the fair value as of June 30, 2016 were the following:
-
The Group considered the period 2017-2024 as horizon for the projection of BHSA cash flows.
-
The “Private BADLAR” interest rate was projected based on internal data and information gathered from external consultants.
-
The projected exchange rate was estimated in accordance with internal data and external information provided by independent consultants.
-
The discount rate used to discount real dividend flows and calculate the fair value is 12.41%.
Based on the described premises, the Group estimated the fair value of its investment in BHSA as of June 30, 2016 to be Ps. 3,246.
Adama
Adama is specialized in the chemical industry, mainly, in the agrochemical industry. In this framework, Adama is engaged in developing, manufacturing and selling crop protection products, while also operating in other areas based on its basic capacities (the agricultural and chemical sectors), but to a immaterial extent.
In 2011, Koor (a wholly own subsidiary of DIC) sold 60% of Adama’s shares to China National Agrochemical Corporation (“ChemChina”) and was also granted a non-recourse loan in the aggregate amount of US$ 960 million, which is secured by the remaining 40% of ADAMA shares held by Koor as of June 30, 2016. The loan is disclosed in Note 21 under non-current loans.
On July 17, 2016 DIC informed the market that it has accepted the tender offer by ChemChina who intends to acquire 40% of Adama’s shares currently held by Koor, indirectly controlled by IDBD through DIC. In August 2016, Koor and a subsidiary of ChemChina executed the corresponding agreement. The price of the transaction includes a payment in cash of US$ 230 million plus the total repayment of the non-recourse loan and its interests, which had been granted to Koor by a Chinese bank.
The Group expects that this sale transaction will be finalized during November, 2016, subject to compliance with certain conditions, including obtaining approvals by the Chinese regulatory and antitrust authorities.
F- 110
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
10.
Investment properties
Changes in the Group’s investment properties for the years ended June 30, 2016 and 2015 were as follows:
 
Leased-out
farmland
 
 
 Rental properties (iii)
 
Undeveloped
 parcels of land
 
Properties
under development
 Total (iv)
At July 1, 2014         
Costs53 4,244 422 364 5,083
Accumulated depreciation(2) (1,626) - - (1,628)
Net book amount51 2,618 422 364 3,455
Year ended June 30, 2015:         
Opening net book amount51 2,618 422 364 3,455
Additions8 66 2 186 262
Reclassifications to trading properties- (3) - - (3)
Reclassification of property, plant and equipment41 20 - - 61
Reclassification to property, plant and equipment(12) (8) - (9) (29)
Transfers (ii)- 514 25 (539) -
Disposals- (103) (3) (2) (108)
Depreciation charges (i)(5) (152) - - (157)
Currency translation adjustment(6) - - - (6)
Closing net book amount77 2,952 446 - 3,475
At June 30, 2015         
Costs84 4,599 446 - 5,129
Accumulated depreciation(7) (1,647) - - (1,654)
Net book amount77 2,952 446 - 3,475
Year ended June 30, 2016:         
Opening net book amount77 2,952 446 - 3,475
Assets incorporated by business combination (Note 3)- 25,256 1,439 2,891 29,586
Currency translation adjustment8 14,437 805 1,512 16,762
Additions- 260 11 919 1,190
Reclassification to trading properties- (4) (67) - (71)
Transfers- 1,330 (67) (1,263) -
Reclassification to property, plant and equipment(74) 63 - (1) (12)
Reclassification of property, plant and equipment(1) - - - (1)
Impairment (Note 33)- (182) (77) (80) (339)
Disposals(1) (272) (7) - (280)
Depreciation charges (i)- (538) (6) - (544)
Closing net book amount9 43,302 2,477 3,978 49,766
At June 30, 2016         
Costs14 45,517 2,485 3,978 51,994
Accumulated depreciation(5) (2,215) (8) - (2,228)
Net book amount9 43,302 2,477 3,978 49,766
(i)
Depreciation charges of investment property has been charged in “Costs” in the income statement (Note 30).
(ii)
Includes transfers due to the inauguration of Alto Comahue and Distrito Arcos Shopping Centers.
(iii)
Distrito Arcos - Injuction: In December 2013, the Judicial Branch confirmed an injunction order that suspended the opening of the shopping center on the grounds that it did not have certain governmental permits in the context of two legal proceedings, where a final decision has been rendered for the company. The plaintiff filed a petition for the continuation of the preliminary injunction by means of an extraordinary appeal of unconstitutionality which was by the lower and appellate courts; consequently, it filed an appeal with the Supreme Court of Justice of the Autonomous City of Buenos Aires, which so far has not rendered a decision. Nowadays, the Shopping Center Distrito Arcos is open to the public and operating normally.

 Distrito Arcos - Concession status: The National State issued Executive Order 1723/2012 whereby several plots of land located in prior rail yards of Palermo, Liniers and Caballito rail stations ceased to be used for rail purposes, in order to be used for development of integral urbanization projects. In this respect and as part of several measures related to other licensed persons and/or concessionaires, we have notified in the file of proceedings the corresponding Resolution 170/2014 revoking the Contract for Reformulation of the Concession of Rights of use and Development No. AF000261 issued by the Agencia de Administración de Bienes del Estado (State Assets Administration Office, or AABE as per its Spanish acronym). It should further be pointed out that such measure: (i) has not been adopted due to non-compliance of our subsidiary; (ii) to date has not involved the interruption of the commercial development or operation of the shopping center, which continues to operate under normal conditions. Notwithstanding the foregoing, Arcos del Gourmet S.A. has filed the relevant administrative remedies (appeal) and has also filed a judicial action requesting that the revocation of such concession be overruled. Furthermore, it has started a so-called “juicio de consignación”, that is an action where the plaintiff deposits with the court sums of money that the defendant refuses to accept. Under this legal action, the company has deposited in due time and form all rental payments under the Contract for Reformulation of the Concession of Rights of Use and Development, which the Company considers to have been unduly revoked.
(iv)
Certain of the Group’s investment property assets have been mortgaged or otherwise restricted to secure some of the Group’s borrowings and other payables. Book amount of those properties amounts to Ps. 15,544, Ps. 61 and Ps. 154 as June 30, 2016, 2015 and 2014, respectively.
F- 111
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
10.
Investment properties (Continued)
The following amounts have been recognized in the statement of income:
 June 30, 2016 June 30, 2015 June 30, 2014
Rental and services income5,264 2,995 2,449
Cost of rental and services(2,396) (1,234) (1,142)
Development expenses(11) (4) (2)
Gain from disposal of investment properties1,101 1,150 231
As of June 30, 2016 and 2015, fair value of investment properties corresponding to the urban properties and investment business of the operations center in Argentina, amounts to Ps. 28,304 and Ps. 22,446, respectively. The fair values are based on comparable values of certain qualified external appraisers (Level 2 of fair value hierarchy) except in the case of shopping centers, where fair value is based on the market capitalization valuation (Level 3 of the fair value hierarchy). In the first case, sale prices of comparable properties are adjusted considering the specific aspects of each property, being the square meter the most relevant premise. In the second case, was computed considering the specific aspects of each property using a weighted average capitalization rate of 10.9% and 12%, respectively (a 9.8% to 13.3% range was considered for fiscal year 2016 and 10% to 15% for fiscal year 2015).
As of June 30, 2016, the fair value of investment properties of the operations center in Israel, amounts to Ps. 48,032. The fair values are based on valuations performed by independent appraisers, who used the methodologies of discounted cash flows and market capitalization rates, as appropriate (Level 3 and 2 of the fair value hierarchy). Independent appraisers estimated cash flows of the properties to which they applied discount rates and / or capitalization rates according to market data. They were determined considering the specific characteristics of each asset (location, sales, occupation, surface condition and type of property, etc.). Discount rates used ranged fron 7% to 10% and capitalization rate used ranged from 6% to 11%. The average occupancy of the properties was 96%.
F- 112
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
11. Property, plant and equipment
Changes in the Group’s property, plant and equipment for the years ended June 30, 2016 and 2015 are as follows:
 
Owner occupied farmland
(iii)
 
Buildings and facilities
 
 
Machinery
and
equipment
 Communication networks Others (i) 
Total
 
At July 1, 2014           
Cost2,261 545 37 - 192 3,035
Accumulated depreciation(204) (302) (20) - (127) (653)
Net book amount2,057 243 17 - 65 2,382
Year ended June 30, 2015:           
Opening net book amount2,057 243 17 - 65 2,382
Currency translation adjustment(223) (6) - - (7) (236)
Additions144 40 23 - 17 224
Reclassifications of investment properties12 8 5 - 4 29
Reclassifications to investment properties(41) (20) - -   (61)
Disposals(255) (7)   - (4) (266)
Depreciation charge (ii)(54) (19) (9) - (13) (95)
Closing net book amount1,640 239 36 - 62 1,977
At June 30, 2015           
Cost1,833 560 125 - 140 2,658
Accumulated depreciation(193) (321) (89) - (78) (681)
Net book amount1,640 239 36 - 62 1,977
Year ended June 30, 2016:           
Opening net book amount1,640 239 36 - 62 1,977
Incorporated by business combination (Note 3)- 8,224 1,719 3,536 1,625 15,104
Currency translation adjustment401 4,840 1,018 2,034 901 9,194
Additions64 392 291 310 203 1,260
Reclassifications of investment properties84 (72) - - - 12
Reclassifications to investment properties1 - - - - 1
Disposals- - - - (1) (1)
Impairments (Note 33)- (10) - (3) - (13)
Depreciation charge (ii)(52) (278) (251) (467) (186) (1,234)
Closing net book amount2,138 13,335 2,813 5,410 2,604 26,300
At June 30, 2016           
Cost1,957 13,970 3,203 5,974 2,852 27,956
Accumulated depreciation181 (635) (390) (564) (248) (1,656)
Net book amount2,138 13,335 2,813 5,410 2,604 26,300
(i)
Includes furniture and fixtures, vehicles and aircrafts.
(ii)
For the fiscal years ended June 30, 2016 and 2015, depreciation charges of property, plant and equipment were included in “Costs” for an amount of Ps. 693 and Ps. 88, "General and administrative expenses" for an amount of Ps. 131 and Ps. 6 and “Selling expenses” for an amount of Ps. 413 and Ps. 1, respectively in the statement of income.
(iii) The active establishments include (Cremaq, Jatobá, Preferencia, Chaparral, Araucaria and Planta frigorífica) have been mortgaged to secure certain Group's borrowings for a total amount of Ps. 844 and Ps. 855 as of June 30, 2016 and 2015, respectively
F- 113
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
12.
Trading properties
Changes in the Group’s trading properties for the years ended June 30, 2016 and 2015 are as follows:
 Completed properties Properties under development (i) Undeveloped sites (ii) Total
At July 1, 20147 119 11 137
Additions- 1 - 1
Currency translation adjustment- (6) - (6)
Reclassifications of investment properties- - 3 3
Disposals(2) - - (2)
At June 30, 20155 114 14 133
Additions51 291 13 355
Currency translation adjustment73 1,120 457 1,650
Reclassifications of investment properties- 67 4 71
Disposals(1) (151) - (152)
Transfers- 142 (142) -
Assets incorporated by business combination (see Note 3)108 1,724 824 2,656
At June 30, 2016236 3,307 1,170 4,713
(i)
Include Liveck´s plots of land have been mortgaged to secure Group's borrowings. The net book value of these assets amounts to Ps. 156 and Ps. 106 as of June 30, 2016 and 2015, respectively. Additionally, the Group has contractual obligations not provisioned related to these plots of land committed when certain properties were acquired or real estate projects were approved, and amounts to Ps. 120 and Ps. 71, respectively. The projected developments are expected to be completed in 2029.
(ii)
The Group is owner of an air space of approximately 23,000 square meters area on top of Hipermercado Coto, near the Abasto Shopping Center. The Group acquired rights to receive functional units, parking spaces, and the rights to increase the height of such property. On June 2016, a conditional Exchange Agreement was executed for a one year term, to be later formalized through the execution of a conveyance deed. The project will be a residential development for a consideration of apartments covering an area of 3,621 square meters plus US$ 1 million. The consideration will be delivered no later than June 2021 for Tower I, and no later than September 2022 for Tower II. The value in the bill of sale was set at US$ 7.5 million.
The Group also owns a plot of land next to Córdoba Shopping. In May 2016, an Exchange Agreement was executed for a building capacity of 13,500 square meters, subject to conditions for a term of one year, after which it may be formalized through a title conveyance deed. The project will be a mixed development, combining residential and office space, and the consideration will include apartments covering 2,160 square meters, parking space, and procedures to obtain permits, combinations and subdivisions of 3 plots of land. Delivery of the consideration will take place no later than May 2021 for Tower I and no later than July 2023 for Tower II. The Exchange Value was set at US$ 4 million.
 Both above-mentioned contracts that are part of the Coto residential project and the Córdoba Shopping exchange project include conditions precedent and/or suspensive clauses
 June 30, 2016 June 30, 2015
Non-current4,472 130
Current241 3
Total4,713 133
F- 114
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
13. Intangible assets
Changes in the Group’s intangible assets for the years ended June 30, 2016 and 2015 are as follows:
 Goodwill Trademarks Licenses 
 
Customer relations
 
Information systems
 and software
 
Contracts
and others
(ii) (iii)
 Total
At July 1, 2014             
Cost30 - - - 36 137 203
Accumulated amortization- - - - (27) (2) (29)
Net book amount30 - - - 9 135 174
Year ended June 30, 2015             
Opening net book amount30 - - - 9 135 174
Currency translation adjustment(2) - - - (1) - (3)
Additions- - - - 7 5 12
Amortization charge (i)- - - - (5) (2) (7)
Closing net book amount28 - - - 10 138 176
At June 30, 2015             
Cost28 - - - 41 142 211
Accumulated amortization- - - - (31) (4) (35)
Net book amount28 - - - 10 138 176
Year ended June 30, 2016             
Opening net book amount28 - - - 10 138 176
Assets incorporated by business combination (Note 3)1,391 2,131 515 2,474 635 848 7,994
Currency translation adjustment819 1,243 292 1,327 363 455 4,499
Additions- - - - 137 - 137
Disposals- - - - (1) - (1)
Amortization charge (i)- (19) (48) (582) (187) (155) (991)
Closing net book amount2,238 3,355 759 3,219 957 1,286 11,814
At June 30, 2016             
Cost2,238 3,378 817 3,923 1,202 1,478 13,036
Accumulated amortization- (23) (58) (704) (245) (192) (1,222)
Net book amount2,238 3,355 759 3,219 957 1,286 11,814
(i)
Amortization charges of intangible assets are included in “General and administrative expenses” in the statement of income. (Note 30). There are no impairment charges for any of the years presented.
(ii)
Includes "Rights of use". Correspond to Distrito Arcos Depreciation began in January, 2015, upon delivery of the shopping center.
(iii)
Includes "Right to receive future units under barter agreements". Correspond to in kind receivables representing the right to receive residential apartments in the future under barter agreements. The ongoing transactions are: A) Caballito: on June 29, 2011, the Group and TGLT entered into a barter agreement for US$ 12.8 million. A neighborhood association secured a preliminary injunction that suspended the works to be carried out by TGLT in the property. Once said preliminary injunction was deemed final, the Government of the City of Buenos Aires and TGLT were served notice of the complaint. The Group is not involved in these proceedings and has not been sued or summoned as a third party by any of the parties involved in the legal action. B) Beruti: on October 13, 2010, the Group and TGLT entered into an agreement for US$ 18.8 million. An association named Asociación Amigos Alto Palermo presented an injunction requesting the prohibition of the construction and obtained a suspense interim measure for this purpose. Later, the Court of Appeals from the Autonomous City of Buenos Aires ordered the lifting of such interim measure suspending the continuation of the work. On June 11, 2015 final judgment was rendered in favor of IRSA CP and TGLT.
F- 115
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14.
Biological assets
Changes in the Group’s biological assets for the years ended June 30, 2016 and 2015 are as follows:
Agricultural business
 Crops fieldsSugarcane fieldsCattleDairyOther cattleOthersTotal
At June 30, 20141471433033765641
Purchases--14-1-15
Initial recognition and changes in fair value of biological assets (i)89716216213-11,235
Decrease due to harvest(960)(198)----(1,158)
Sales--(118)(10)--(128)
Addition from lease agreement-22----22
Consume--(1)--(1)(2)
Currency translation adjustment(30)(16)----(46)
At June 30, 2015541133604075579
Purchases--31-4-35
Initial recognition and changes in fair value of biological assets (i)1,01634124420331,627
Decrease due to harvest(749)(296)----(1,045)
Sales--(125)(11)(3)-(139)
Consume--(1)--(1)(2)
Currency translation adjustment5722(2)---77
At June 30, 2016378180507491171,132
(i)
Biological assets with a production cycle of more than one year (that is, sugarcane and cattle) generated “Initial recognition and changes in fair value of biological assets” amounting to Ps. 608 and Ps. 337 for the years ended June 30, 2016 and 2015, respectively. For the years ended June 30, 2016 and 2015, amounts of Ps. 145 and Ps. 16, was attributable to price changes, and amounts of Ps. 124 and Ps. 144, was attributable to physical changes, respectively.
Crops and oilseeds
The Group’s crops generally include crops and oilseeds (corn, wheat, soybean and sunflower) as well as peanut. The Group measures biological assets that have attained significant biological growth at fair value less costs to sell. The Group measures biological assets that have not attained significant biological growth or when the impact of biological transformation on price is not expected to be material, at cost less any impairment losses, which approximates fair value.
F- 116
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14.
Biological assets (Continued)
The following table shows the stages and average periods where the Group´s crops have a significant biological growth, based on agronomical studies and other inputs:
Argentina
CropsTotal days (planting/harvest)
Average days
(planting/harvest)
Significant biological growthTotal days (planting/significant growth)Average days (planting/significant growth)
WheatFrom 150 to 1801657 (milk grain stage)From 110 to 140125
CornFrom 150 to 180165R3 (milk grain stage)From 80 to 11095
SoybeansFrom 120 to 160140R5 (beginning of seed filling)From 75 to 9082.5
SunflowersFrom 120 to 150135R6 (end of flowering stage)From 80 to 10090
PeanutFrom 180 to 270240R5 (beginning of seed filling)From 90 to 10095
CottonFrom 130 to 1801553 (end of flowering stage)From 90 to 120105
Bolivia
CropsTotal days (planting/harvest)
Average days
(planting/harvest)
Significant biological growthTotal days (planting/significant growth)Average days (planting/significant growth)
WheatFrom 100 to 1121067 (milk grain stage)From 80 to 9085
CornFrom 130 to 140130R3 (milk grain stage)From 88 to 9692
SorghumFrom 110 to 1301207 (milk grain stage)From 80 to 9085
SoybeansFrom 110 to 120117R5 (Start of seed filling at node)From 75 to 8580
SunflowersFrom 105 to 115110R6 (end of flowering stage)From 75 to 8580
Brazil
CropsTotal days (planting/harvest)
Average days
(planting/harvest)
Significant biological growthTotal days (planting/significant growth)Average days (planting/significant growth)
CornFrom 125 to 150137.5R3 (milk grain stage)From 88 to 9692
SoybeansFrom 100 to 140120R5 (Start of seed filling at node)From 75 to 9082.5
Sugarcane
The Group’s sugarcane production is based in Brazil and to a lesser extent in Bolivia. This crop’s production requires specific weather conditions (tropical and subtropical climates) because it is a perennial and long-term crop with an average life cycle of five years. Each sugarcane planting generally yields five harvests. Once the production life cycle is over, crop renewal is brought about. The Group recognizes these crops at a fair value net of costs of sales from the moment of planting.
F- 117
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14. Biological assets (Continued)
Fair value of biological assets
When an active market exists for biological assets, the Group uses the quoted market price in the principal market as a basis to determine the fair value of its biological. Live cattle is measured at fair value less selling costs, based on market quoted at an auction involving cattle of the same age, breed and genetic merit adjusted, if applicable, to reflect any difference. When there is no active market or market-determined prices are not available, (for example, unharvested crops with significant growth), the Group determines the fair value of a biological asset in its present location and condition based on the present value of expected net cash flows from the biological asset discount (“DCF”).
The DCF model requires the input of highly subjective assumptions including observable and unobservable data. The not observable information is determined based on the best information available for example, by reference to historical information of past practices and results, statistics and agricultural information and other analytical techniques. Key assumptions utilized in the DCF method include future market prices, estimated yields at the point of harvest and estimated future costs of harvesting and other costs.
Market prices are generally determined by reference to observable data in the principal market for the agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated based on several factors including the location of the farmland and soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of the Group’s control including but not limited to extreme or unusual weather conditions, plagues and other crop diseases.
The key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used may result in a significant increase or decrease to the fair value of biological assets recognized at any given time. Cash flows are projected based on estimated production. Estimates of production in themselves are dependent on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact on estimated production, and could therefore affect estimates of future cash flows used in the assessment of fair value. The valuation models and their assumptions are reviewed periodically, and, if necessary, adjusted.
As of June 30 of each year, the Group’s biological assets that are subject to a valuation model include unharvested crops and sugarcane plantations.
F- 118
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14. Biological assets (Continued)
The following tables present the Group’s biological assets as of June 30, 2016 and 2015 and their allocation to the fair value hierarchy:
  June 30, 2016
 ClassificationLevel 1 Level 2 Level 3 Total
DairyProduction- 49 - 49
CattleProduction- 432 - 432
Sugarcane fieldsProduction- - 180 180
Other cattleProduction- 9 - 9
Others biological assetsProduction7 - - 7
Total non-current biological assets 7 490 180 677
Cattle and cattle for saleConsumable- 75 - 75
Other cattleConsumable- 2 - 2
Crops fieldsConsumable23 - 355 378
Total current biological assets 23 77 355 455
Total biological assets 30 567 535 1,132
  June 30, 2015
 ClassificationLevel 1 Level 2 Level 3 Total
DairyProduction- 40 - 40
CattleProduction- 295 - 295
Sugarcane fieldsProduction- - 113 113
Other cattleProduction- 6 - 6
Others biological assetsProduction5 - - 5
Total non-current biological assets 5 341 113 459
Cattle and cattle for saleConsumable- 65 - 65
Other cattleConsumable- 1 - 1
Crops fieldsConsumable14 - 40 54
Total current biological assets 14 66 40 120
Total biological assets 19 407 153 579
During years ended June 30, 2016 and 2015, there have been no transfers between the several tiers used in estimating the fair value of the Group’s biological assets, or reclassifications among their respective categories.
The fair value less estimated point of sale costs of agricultural produce at the point of harvest amount to Ps. 1,097 and Ps. 1,218 for the years ended June 30, 2016 and 2015, respectively.
F- 119
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14.
Biological assets (Continued)
The following table presents the changes in Level 3 instruments for the years ended June 30, 2016 and 2015:
 Crops fields with significant biological growth Sugarcane fields
At June 30, 2014137 143
Initial recognition and changes in the fair value of biological assets 462 162
Harvest(558) (198)
Lease contract- 22
Currency translation adjustment(1) (16)
At June 30, 201540 113
Initial recognition and changes in the fair value of biological assets 836 341
Harvest(522) (296)
Currency translation adjustment1 22
At June 30, 2016355 180
F- 120
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
14.
Biological assets (Continued)
When no quoted prices in an active market are available, the Group uses a range of valuation models. The following table presents main parameters:
  
 
Pricing model
     Sensitivity (i)
       201620152014
Description  Parameters Range IncreaseDecreaseIncreaseDecreaseIncreaseDecrease
Cattle (Level 2) Comparable market prices Price per livestock head/kg and per category         
Crops fields (Level 3) Discounted cash flows Yields – Operating costs –Selling expenses - Future of sale prices Argentina       
Yields: 0.0 - 11.5 tn./ha. 42(42)8(8)19(19)
Future of sale prices: 2,587 - 12,861 Ps./tn. 59(59)17(17)26(26)
Operating cost: 833 - 7,659 Ps./ha. (24)24(11)11(14)14
              
Sugarcane fields
(Level 3)
 Discounted cash flows 
Yields – Operating costs –Selling expenses - Future of sale prices
Discount rate
 Brazil:       
Yields: 86.06 tn./ha. 32(32)21(21)23(23)
   Future of sale prices: 79.51 Rs./tn. 92(92)12(12)7(7)
   Operating cost: 59.23 Rs./tn. (43)43(31)31(25)25
           
   Bolivia:       
   Yields: 51 - 116 tn./ha. 7(7)5(5)4(4)
   Future of sale prices: 23.50 - 23.40 US$/tn. 13(13)8(8)6(6)
   Operating cost: 275 - 500 US$/ha. (9)9(5)5(3)3
      Others:       
(i)
Sensitivities have been modeled considering a 10% change in the indicated variable, all else being equal.
As of June 30, 2016 and 2015, the better and maximum use of biological assets shall not significantly differ from the current use.
F- 121
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
15.
Inventories
Breakdown of Group’s inventories as of June 30, 2016 and 2015 are as follows:
 June 30,   2016 June 30,   2015
Crops325 270
Materials and inputs250 154
Seeds and fodders109 61
Beef31 19
Hotel supplies9 7
Goods for resale and supplies2,849 -
Telephones and others communication equipment327 -
Total inventories3,900 511
As of June 30, 2016 and 2015 the cost of inventories recognized as expense amounted to Ps. 946 and Ps. 950, respectively and they have been included in “Costs” in the statements of income.
16.
Financial instruments by category
The following note shows the carrying amount of financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items “Trade and other receivables” and “Trade and other payables” contain both financial instruments and non-financial assets or liabilities (such as prepayments, trade payables in-kind and tax payables), the reconciliation is shown in the columns headed “Non-financial assets” and “Non-financial liabilities”. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy.
IFRS 9 defines the fair value of a financial instrument as the amount for which an asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 7. This valuation hierarchy provides for three levels.
In the case of Level 1, valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can refer to at the date of valuation.
In the case of Level 2, fair value is determined by using valuation methods based on inputs directly or indirectly observable in the market. If the financial instrument concerned has a fixed contract period, the used inputs for valuation must be observable for the whole of this period.
F- 122
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as that information is not available. The inputs used reflect the Group’s assumptions regarding the factors which any market player would consider in their pricing.
The Group’s Finance Division has a team in place in charge of estimating valuation of financial assets required to be reported in the financial statements, including the fair value of Level 3 instruments. The team directly reports to the Chief Financial Officer ("CFO"). The CFO and the valuation team discuss the valuation methods and results upon the acquisition of an asset and, if necessary, on a quarterly basis, in line with the Group’s quarterly reports.
According to the Group’s policy, transfers among the several categories of valuation tiers are recognized when occurred, or when there are changes in the prevailing circumstances requiring the transfer.
Financial assets and financial liabilities as of June 30, 2016 were as follows:
 Financial assets at amortized cost 
Financial assets
at fair value through profit or loss
 
Subtotal
financial assets
 Non-financial assets Total
   Level 1Level 2Level 3      
June 30, 2016           
Assets as per statement of financial position           
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)13,211 102-1,931 15,244 2,878 18,122
Investment in financial assets:           
   - Public companies´ securities- 1,400-499 1,899 - 1,899
   - Private companies´ securities- -151,324 1,339 - 1,339
   - Deposits1,172 49-- 1,221 - 1,221
 - Bonds(i) 121 4,169-- 4,290 - 4,290
 - Mutual funds- 2,920-- 2,920 - 2,920
 - Others- 90-140 230 - 230
Derivative financial instruments (Note 19)- 2041- 61 - 61
Financial assets held for sale (Note 18)  4,602-- 4,602 - 4,602
Restricted assets(i) 877 --- 877 - 877
Cash and cash equivalents (excluding bank overdrafts) (Note 20)6,359 7,737-- 14,096 - 14,096
Total assets21,740 21,089563,894 46,779 2,878 49,657
(i) The fair values approximate their respective carrying amounts.
F- 123
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
 Financial liabilities at amortized cost Financial liabilities at fair value 
Subtotal
financial liabilities
 Non-financial liabilities Total
   Level 1Level 2Level 3      
June 30, 2016           
Liabilities as per statement of financial position           
Trade and other payables (Note 21)18,917 --- 18,917 1,054 19,971
Borrowings (excluding finance lease liabilities) (Note 23)106,271 --10,999 117,270 - 117,270
Derivative financial instruments (Note 19)- 2653- 268 - 268
Total liabilities125,188 265310,999 136,455 1,054 137,509
Financial assets and financial liabilities as of June 30, 2015 were as follows:
 Financial assets at amortized cost Financial assets at fair value through profit or loss 
Subtotal
financial assets
 Non-financial assets Total
   Level 1Level 2Level 3      
June 30, 2015           
Assets as per statement of financial position           
IDBD (i)- 907-- 907 - 907
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)1,807 56-- 1,863 456 2,319
Investment in financial assets:           
  - Equity securities in public companies- 88-349 437 - 437
 - Equity securities in private companies- 102-- 102 - 102
  - Mutual funds- 384-- 384 - 384
 - Bonds(ii) 100 104-- 204 - 204
Derivative financial instruments (Note 19)- 231-7 238 - 238
Restricted assets611 --- 611 - 611
Cash and cash equivalents (excluding bank overdrafts) (Note 20)521 113-- 634 - 634
Total assets3,039 1,985-356 5,380 456 5,836
(i) The Group has reported its interest in the associate IDBD at fair value with changes through profit or loss, as per IAS 28.
(ii) The fair values approximate their respective carrying amounts.
F- 124
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
 Financial liabilities at amortized cost 
Financial liabilities
at fair value
 
Subtotal
financial liabilities
 Non-financial liabilities Total
   Level 1Level 2Level 3      
June 30, 2015           
Liabilities as per statement of financial position           
Trade and other payables (Note 21)763 --- 763 808 1,571
Borrowings (excluding finance lease liabilities)(Note 23)8,259 -15- 8,274 - 8,274
Derivative financial instruments (Note 19)           
 - Commitment to tender offer shares in IDBD- --503 503 - 503
 - Foreign-currency contracts- -10- 10 - 10
 - Crops futures- 11-- 11 - 11
 - Crops options- 9-- 9 - 9
Total liabilities9,022 2025503 9,570 808 10,378
Liabilities carried at amortized cost also include liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17 “Leases”. The categories disclosed are determined by reference to IFRS 9. Finance leases are excluded from the scope of IFRS 7 “Financial Instruments: Disclosures”. Therefore, finance leases have been shown separately.
There were no level transfers in the fiscal years filed.
The following are details of the book value of financial instruments recognized, which were offset in the statements of financial position:
 As of June 30, 2016 
 Gross amounts recognized Gross amounts offset Net amount presented 
June 30, 2016      
Financial assets      
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)16,779 (1,296) 15,483 
Financial Liabilities      
Trade and other payables (Note 21)(15,546) 1,296 (14,250) 
 As of June 30, 2015 
 Gross amounts recognized Gross amounts offset Net amount presented 
June 30, 2015      
Financial assets      
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 17)1,961 (98) 1,863 
Financial Liabilities      
Trade and other payables (Note 21)(859) 98 (761) 
F- 125
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
Income, expense, gains and losses on financial instruments can be assigned to the following categories:
 
Financial assets / liabilities at
 amortized cost
 
Financial assets / liabilities at
 fair value through profit or loss
  Total
June 30, 2016      
Interest income689 116  805
Interest expense(2,716) (23)  (2,739)
Foreign exchange losses(2,908) 6  (2,902)
Dividends income- 72  72
Fair value loss in financial assets at fair value through profit or loss (i))- (1,241)  (1,241)
Gain on the revaluation of receivables arising from the sale of farmland- 33  33
Gain from derivative financial instruments (except commodities)- 1,089  1,089
Fair value gain on associates- 77  77
Loss from repurchase of non-convertibles notes(39) -  (39)
Other financial results(875) (106)  (981)
Net result(5,849) 23  (5,826)
 
Financial assets / liabilities at
 amortized cost
 
Financial assets / liabilities at
 fair value through profit or loss
  Total
June 30, 2015      
Interest income100 -  100
Interest expense(874) -  (874)
Foreign exchange losses(562) -  (562)
Dividends income17 -  17
Fair value gains financial assets at fair value through profit or loss- 188  188
Gain on the revaluation of receivables arising from the sale of farmland- 53  53
Loss from derivative financial instruments (except commodities)- (83)  (83)
Fair value gain on associates- (1,001)  (1,001)
Loss from repurchase of Non-convertible notes(2) -  (2)
Other financial results(125) -  (125)
Net result(1,446) (843)  (2,289)
F- 126
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
 
Financial assets / liabilities at
amortized cost
 
Financial assets / liabilities at
fair value through profit or loss
  Total
June 30, 2014      
Interest income119 -  119
Interest expense(715) -  (715)
Foreign exchange losses(1,900) -  (1,900)
Dividends income15 -  15
Fair value gains in financial assets at fair value through profit or loss- 379  379
Loss from repurchase of Non-convertible Notes(45) -  (45)
Loss from derivative financial instruments (except commodities)- (365)  (365)
Gain on the revaluation of receivables arising from the sale of farmland- 21  21
Other financial results(83) -  (83)
Net result(2,609) 35  (2,574)
The following table presents the changes in Level 3 financial instruments for the years ended June 30, 2016 and 2015:
 Equity securities in public companies Equity securities in private companies Others 
Warrants
of Condor
 Investment in associate IDBD 
Commitment
to tender offer shares in IDBD
 Trade and other receivables - Cellcom Non-recourse loans Total
Total as of June 30, 2014211 - - - - (321) - - (110)
Currency translation adjustment- - - - 83 (45) - 19 57
Transfer to Level 3- - - - 1,826 - - (86) 1,740
Transfer from associates- 30 - - - - - - 30
Gains or losses for the year (Note 33)138 72 - 7 (1,001) (137) - 52 (869)
Balance as of June 30, 2015349 102 - 7 908 (503) - (15) 848
Additions and acquisitions50 27 - - - - - - 77
Write off- - - - - 500 - - 500
Currency translation adjustment- 291 52 - 60 (18) 705 (3,610) (2,520)
Obtainment of control over IDBD- 861 88 - (1,047) - 1,187 (7,336) (6,247)
Gains and losses for the year (Note 33)100 43 - (7) 79 21 39 (38) 237
Balance as of June 30, 2016499 1,324 140 - - - 1,931 (10,999) (7,105)
Securities and warrants of Condor
Upon initial recognition of the new instrument (January, 2012), the consideration paid for the Shares and Warrants of Condor was assigned to both instruments based on the relative fair values of those instruments upon acquisition. The fair value of these instruments exceeded the transaction price and were determined using a valuation technique that uses inputs not observable in the market. As a result of the use of this technique, the Group has not recognized a gain at the time of initial recognition.
F- 127
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
In March 2016, the Group has exchanged its preferred Class C shares for a new Class D preferred shares issued by Condor and, additionally, it has received cash in the amount of US$ 1.2 million and a promissory note for US$ 1.1 million related to dividends receivable.
In this new issue the company “Stepstone Real Estate” has been added as new partner by making a contribution of US$ 30 million, which will be used to redeem Class A and B preferred shares and for the acquisition of new hotels.
The new Class D preferred shares will accrue annual interest at a rate of 6.25% and will be convertible into common shares at a price of US$ 1.60 share.
There were no changes to the warrants held by the Group.
The Board of Directors of Condor is now formed by four directors of the company, three directors appointed by Stepstone Real Estate and two independent directors. In addition, the voting power held by the company in Condor amounts to 49%, thus keeping significant influence.
Investment in IDBD, associate and warrants
As described in Note 3 until taking control over IDBD, the Group stated its equity interest in IDBD as an associate measured at fair value, invoking the exception under IAS 28 and the warrants to acquire IDBD’s common shares were booked at their quoted prices. Since October 11, 2015, as result of consolidation, the equity interest in IDBD as an associate and the warrants were eliminated following the consolidation to add IDBD’s assets and liabilities on a line-by-line basis.
Non-recourse loans
IDBD relied on an independent appraiser to determine the value of the non-recourse loan. The valuation model is a binomial tree where the main variable is Adama’s share price. 
F- 128
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
16.
Financial instruments by category (Continued)
When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table:
DescriptionPricing modelPricing methodParametersRange
Investment in financial assets – Public companies securities - Preferred shares of CondorBinomial treeTheoretical priceUnderlying asset price (Market price); share price volatility (historical) and market interest-rate (Libor rate curve).
Underlying asset price 1.4 to 1.7
Share price volatility 58% to 78%
Money market interest-rate
1.0% to 1.3%
Investment in financial assets – Public companies securities - Promissory noteDiscounted cash flowTheoretical priceMarket interest-rate (Libor rate curve)
Money market interest-rate
1.0% to 1.3%
Derivative financial instruments - Warrants of CondorBlack-ScholesTheoretical priceUnderlying asset price (Market price); share price volatility (historical) and interest-rate curve (Libor rate).
Underlying asset price 1.4 to 1.7
Share price volatility 58% to 78%
Money market interest-rate
1.0% to 1.3%
Interest rate swapsCash flowTheoretical priceInterest rate futures contract and cash flow-
Call option of ArcosDiscounted cash flow-Projected revenues and discounting rate.-
Investments in financial assets - Private companies - Avenida Inc.Market multiplesTheoretical priceComparable market multiple (EV/GMV ratio)Comparable market multiple (EV/GMV ratio) 2.94x to 3.59x
Investments in financial assets - Private companies - OthersDiscounted cash flows / NAVTheoretical price
Projected revenue discounted at the discount rate / The value is calculated in accordance with the company’s shares in the equity funds on the basis of their financial statements, based on fair value or investment assessments.
1 - 3.5
Investments in financial assets - OthersDiscounted cash flows / NAVTheoretical priceProjected revenue discounted at the discount rate / The value is calculated in accordance with the company’s shares in the equity funds on the basis of its financial statements, based on fair value or investment assessments1 - 3.5
Borrowings - Non-recourse loanBinomial treeTheoretical priceUnderlying asset price (obtained by discounted cash flow valuation), capital cost, market rate; control premium, underlying asset volatility.Underlying asset price US$ 760MM to US$ 940MM, capital cost 11.8% to 14.4%, discounted market interest rate 7.9% to 12.9%, control premium 3.3% to 6.6%, underlying asset volatility 25.7% to 33.1%.
F- 129
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
17.
Trade and other receivables
The table below shows trade and other receivables of the Group as of June 30, 2016 and 2015:
 June 30, 2016 June 30, 2015
Non-current   
Trade receivables   
Trade, leases and services receivable2,015 63
Trade receivables related to agricultural properties54 104
Less: allowance for doubtful accounts(2) (2)
Non-current trade receivables2,067 165
Other receivables   
Tax credits119 73
Guarantee deposits24 17
Prepayments1,320 11
VAT receivables- 27
Loans239 116
Others4 18
Non-current other receivables1,706 262
Non-current trade and other receivables3,773 427
Current   
Trade receivables   
Trade, leases and services receivable921 695
Receivables from sale of agricultural products and farmlands leases362 268
Trade receivables related to agricultural properties22 88
Deferred checks received304 -
Trade receivables5,970 -
Credit card receivables3,872 -
Less: allowance for doubtful accounts (189) (118)
Current trade receivables11,262 933
Other receivables   
Tax credits180 117
Guarantee deposits78 39
Prepayments681 145
VAT credit to be transferred11 -
Borrowings granted, deposits, and other balances1,243 392
Advance payments328 105
Others375 41
Current other receivables2,896 839
Current trade and other receivables14,158 1,772
Total trade and other receivables17,931 2,199
The carrying amounts of the Group’s trade and other receivables in foreign currencies are detailed in Note 37.
Trade receivables are generally presented in the statements of financial position net of allowances for doubtful receivables. Impairment polices and procedures by type of receivables are discussed in detail in Note 2.
F- 130
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
17.
Trade and other receivables (Continued)
The fair values of current trade and other receivables approximate their respective carrying amounts, due to their short-term nature, as the impact of discounting is not significant. Present value of non-current trade receivables related to sales of equipment installments, as performed by Cellcom (mainly in 36 installments), as of June 30, 2016 were calculated at a 3.3% discount rate. Other non-current receivables conform to or approximate their fair values. Fair values are based on discounted cash flows. (Level 3 of the fair value hierarchy).
The evolution of the Group’s provision for impairment of trade receivables were as follows:
 June 30,   2016 June 30, 2015 June 30, 2014
Beginning of the year120 90 87
Recovery(53) 21 (14)
Used during the year(4) (14) (9)
Creation113 21 24
Currency translation adjustment15 2 2
End of the year191 120 90
The Group’s trade receivables comprise several classes. The maximum exposure to credit risk at the reporting date is the carrying value of each class of credit. (Note 4)
The Group has also receivables with related parties. Neither of which are due nor impaired.
Due to the distinct characteristics of each type of receivables, an aging analysis of past due unimpaired and impaired receivables are shown by type and class as of June 30, 2016 and 2015 (includes receivables not past due to reconcile with the amounts in the statements of financial position):
 Expired     
 Up to 3 months
3 to 6
months
Over 6 monthsNot past dueAllowanceTotal% of representationAdditions (reversals) for bad debts 
Agricultural products6078256183492.6%1 
Shopping leases and services5053776789126.7%12 
Office leases and services137186350.3%(6) 
Hotel leases and services161223312273902.9%1 
Consumer financing----15150.1%1 
Hotel operations1--481500.4%- 
Disposal of properties--1699-1150.9%- 
Sale of communication equipment2,250--1,714664,03029.8%- 
Telecommunication services1,763356672196723,48225.8%61 
Tourism activities161220219513182.3%(3) 
Sale of products (supermarkets)2719553,665583,82428.3%4 
Total as of June 30, 20164,1844148047,12699213,520100%71 
          
Agricultural products4131991622318.3%16 
Shopping leases and services4210145627069857.3%14 
Office leases and services4042129675.5%- 
Hotel leases and services1--161181.5%- 
Consumer financing---515201.6%- 
Disposal of properties---183919215.8%- 
Total as of June 30, 20158715199771201,218100%30 
F- 131
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
18.
Financial assets held for sale
Group’s financial assets and other assets held for sale as of June 30, 2016 and 2015 were as follows:
June 30, 2016June 30, 2015
Non-current
Clal3,346-
Non-current financial assets held for sale3,346-
Current
Clal1,256-
Current financial assets held for sale1,256-
Total Financial assets held for sale4,602-
Clal is a holding company that mainly operates in the insurance and pension markets and in segments of pension funds. The company holds assets and other businesses (such as insurance agencies) and is one of the largest insurance groups in Israel. Clal mainly develops its activities in three operating segments: long-term savings, general insurance and health insurance.
Given that IDBD failed to meet the requirements set forth by the Capital Markets, Insurance and Savings Commission, which is dependent on the Ministry of Finance of Israel, to have control over an insurance company, on August 21, 2013, such commission required that IDBD granted an irrevocable power of attorney to Mr. Moshe Tery ("the Trustee") by 51% of the shareholding capital and vote in Clal, thus transferring control over that investee.
On December 30, 2014, the Insurance Commission sent an additional letter setting a term by which IDBD’s control over and equity interests in Clal were to be sold and giving directions as to the Trustee’s continuity in office, among other aspects.
The sale arrangement outlined in the letter involves IDBD’s and the Trustee’s interests in the sale process under different options and timeframes. As of June 30, 2016, the current sale arrangement involved the sale of the interest in the stock exchange or by over-the-counter trades, as per the following detail and by the following dates:
a.
IDBD would have to sell at least 5% of its equity interest in Clal from May 7, 2016.
b.
During each of the subsequent four-month periods, IDBD would have to sell at least an additional 5% of its equity interest in Clal.
c.
If IDBD sells more than 5% of its equity interest in Clal in any given four-month period, the percentage in excess of the required 5% would be offset against the percentage required in the following period.
F- 132
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
18.
Financial assets held for sale (Continued)
In case IDBD does not fulfills its obligation in the manner described in the above paragraph the Trustee would be entitled to act upon the specified arrangement in lieu of IDBD, pursuant to all powers that had been vested under the representations of the trust letter. The consideration for the sale would be transferred to IDBD, with the expenses incurred in the sale process to be solely borne by IDBD.
During February 2016, bondholders and minority shareholders filed a complaint against the Insurance Commission and the Trustee so that the order by the Trustee to sell the shares in the market was revoked, for this would cause irreversible damage to the company and its bondholders. As of the date of these Consolidated Financial Statements, no decision has been rendered on the complaint.
In June 30, 2016 the holding of IDBD to Clal was of 55%, and as a result of the circumstances mentioned above, IDBD has accounted for it as an available-for-sale financial asset. Valuation as of June 30, 2016 amounts to Ps. 4,602, and a loss of Ps. 1,951 were recorded, reflecting the fall in the market price, in financial results, net.
Claims against Clal
Clal set up a reserve for all legal actions brought against Clal’s investees out of the ordinary course of business in the amount of approximately NIS 96 million (equivalent to Ps. 376 million at the closing exchange rate). Most legal actions are related to consumer claims and actions erasing from those claims. The total amount claimed is NIS 29,200 million (equivalent to Ps. 114,275 million at the closing exchange rate).
F- 133
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
19.
Derivative financial instruments
Group’s derivative financial instruments as of June 30, 2016 and 2015 are as follows:
 June 30, 2016 June 30, 2015
Assets   
Non-current   
Crops options- 2
Warrants IDBD (Note 3)- 199
Warrant Condor- 7
Others8 -
Total non-current8 208
Current   
Foreign-currency futures contracts25 -
Crops futures- 1
Crops options7 -
Foreign-currency options2 -
Warrants IDBD (Note 3)- 29
Interest-rate swaps4 -
Others15 -
Total current53 30
Total assets61 238
Liabilities   
Non-current   
Crops options16 2
Foreign-currency futures contracts- 3
Commitment to tender offer shares in IDBD (Note 3)- 265
Forward contracts105 -
Total non-current121 270
Current   
Foreign-currency futures contracts31 7
Foreign-currency options1 -
Crops options5 7
Crops futures17 11
Commitment to tender offer shares in IDBD (Note 3)- 238
Forward contracts93 -
Total current147 263
Total liabilities268 533
F- 134
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
20.
Cash flow information
The following table shows the balances of cash and cash equivalents as of June 30, 2016 and 2015:
 June 30, 2016 June 30, 2015
Cash at bank and in hand6,259 438
Short-term bank in deposits100 84
Mutual funds7,737 112
Total cash and cash equivalents14,096 634
Following is a detailed description of cash flows generated by the Group’s operations for the years ended as of June 30, 2016, 2015 and 2014.
  June 30, 2016 June 30, 2015 June 30, 2014
(Loss) Profit for the year (1,891) 175 (1,409)
Adjustments for:
      
Income tax expense (197) 303 (389)
Depreciation and amortization 2,769 259 297
Gain from disposal of investment properties (1,101) (1,150) (231)
Loss / (Gain) from disposal of farmlands 2 (550) (91)
Gain on the revaluation of receivables arising from the sale of farmland (33) (53) (21)
(Gain) / Loss from disposal of property, plant and equipment (6) 1 -
Release of investment property and property, plant and equipment - 2 2
Impairment of investment property 352 - -
Dividends income (72) (17) (15)
Share based payments 54 31 69
Unrealized (Gain) / Loss on derivative financial instruments (1,064) 131 350
Changes in fair value of financial assets 1,286 (187) (379)
Unrealized initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest (615) (105) (406)
Changes in the net realizable value of agricultural produce after harvest (208) 34 17
Provisions 255 90 113
Financial results, net 6,038 1,418 2,542
Share of loss of joint ventures and associates (473) 1,026 409
Reversal of currency translation adjustment (96) (189) -
Gain from disposal of subsidiaries and joint ventures (4) (22) -
Loss from repurchase of Non-convertible notes 39 2 45
Changes in operating assets and liabilities:      
Decrease in biological assets 135 115 287
Increase in inventories (79) (132) (197)
Decrease in trading properties 229 - 7
(Increase) Decrease in trade and other receivables (487) (480) 268
(Increase) Decrease in derivative financial instruments (46) 4 (6)
Increase (Decrease) in trade and other payables 182 145 (170)
Increase in employee benefits 52 85 72
Decrease in provisions (155) (12) (1)
Net cash generated from operating activities before income tax paid 4,866 924 1,163
F- 135
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
20.
Cash flow information (Continued)
The following table shows a detail of non-cash transactions occurred in the years ended June 30, 2016, 2015 and 2014:
 June 30, 2016 June 30, 2015 June 30, 2014
Increase in restricted funds from the sale of farmlands- 590 -
Reimbursement of expired dividends6 1 3
Dividends payable64 48 57
Dividends not collected4 - -
Acquisition of non-controlling interest139 - -
Payment of non-convertible notes through a decrease in trade and other receivables22 - -
Decrease in borrowings through a decrease in investment in joint ventures and associates9 137 -
Increase in financial assets through a decrease in trade and other receivables71 - -
Increase in financial assets through a decrease in investment in joint ventures and associates- 30 -
Increase in financial assets through an increase in trade and other payables180 - -
Increase in property, plant and equipment through an increase in trade and other payables and borrowings116 2 1
Decrease in property, plant and equipment and investment properties through an increase in trade and other receivables- - 24
Decrease in intangible assets through an increase in assets held for sale- - 77
Increase in trading properties through a decrease in intangible assets- - 7
Increase in trading properties through a decrease in investment properties71 - -
Decrease in trading properties through a decrease in trade and other payables- 1 -
Increase in investment properties through an increase in borrowings302 - -
Increase in investment properties through a decrease in property, plant and equipment1 - -
Decrease in investment properties through an increase in property, plant and equipment- - 12
Decrease in investment properties through an increase in intangible assets- - 1
Decrease in investment properties through an increase in assets held for sale- - 1,099
Decrease in trade and other receivables through an increase in assets held for sale- - 18
Decrease in trade and other payables through an increase in liabilities directly associated with assets classified as held for sale- - 170
Decrease in borrowings through an increase in liabilities directly associated with assets classified as held for sale- - 603
Decrease in deferred income tax liabilities through an increase in liabilities directly associated with assets classified as held for sale- - 33
Increase in restricted assets through a decrease in trade and other payables- - 146
Stock plan granted(4) (16) -
Distribution of treasury stock- (55) -
Options expired- 106 -
Increase in non-controlling interest hrough a decrease in assets from derivative financial instruments128 - -
Decrease in restricted assets through an increase in assets held for sale- 9 164
Decrease in borrowings trough an increase of investment in associates, and joint ventures- - 24
F- 136
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
20.
Cash flow information (Continued)
Incorporation for business combination
June 30, 2016June 30, 2015June 30, 2014
Investment properties29,586--
Property, plant and equipment15,104--
Trading properties2,656--
Intangible assets6,603--
Investments in joint ventures and associates9,268--
Deferred income tax(4,681)--
Trade and other receivables9,713--
Investment in financial assets5,824--
Derivative financial instruments, net(54)--
Inventories1,919--
Income tax credits91--
Financial assets and other assets held for sale5,129--
Trade and other payables(19,749)--
Borrowings(60,306)--
Provisions(969)--
Income tax liabilities(267)--
Employee benefits(405)--
Total(538)--
Non-controlling interest(8,630)--
Goodwill1,391--
Total assets incorporated by business combination, net of cash and cash equivalents(7,777)--
Cash incorporated by business combination9,193--
F- 137
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
21.
Trade and other payables
Group’s trade and other payables as of June 30, 2016 and 2015 were as follows:
 June 30, 2016 June 30, 2015
Non-current   
Trade payables   
Trade payables525 216
Total non-current trade payables525 216
Other payables   
Payment plan for payable taxes- 24
Deferred income65 7
Taxes payable8 7
Others930 10
Total non-current other payables1,003 48
Total non-current trade and other payables1,528 264
Current   
Trade payables   
Admission rights188 143
Trade payables11,180 316
Accrued invoices612 223
Leases and services payments received in advance4,594 226
Guarantee deposits24 -
Total current trade payables16,598 908
Other payables   
Deferred incomes2 24
Taxes payable333 220
Dividends payable to non-controlling shareholders435 124
Others1,075 31
Total current other payables1,845 399
Total current trade and other payables18,443 1,307
Total trade and other payables19,971 1,571
The fair value of trade and other payables approximate their respective carrying amounts, due to their short-term nature, the effect of discounting is not significant. Fair values are based on discounted cash flows
F- 138
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
22.
Provisions
The Group is subject to claims, lawsuits and other legal proceedings in the ordinary course of business, including claims from clients where a third party seeks reimbursement or damages. The Group’s responsability under such claims, lawsuits and legal proceedings cannot be estimated with certainty. From time to time, the status of each major issue is evaluated and its potential financial exposure is assessed. If the potential loss involved in the claim or proceeding is deemed probable and the amount may be reasonably estimated, a liability is recorded. The Group estimates the amount of such liability based on the available information and in accordance with the provisions of the IFRS. If additional information becomes available, the Group will make an evaluation of claims, lawsuits and other outstanding proceeding, and will revise its estimates.
The table below shows the evolution in the Group's provisions for other liabilities categorized by type of provision:
 Legal claims (i) 
Investments
in associates
 and joint ventures (ii)
 
 
Sited dismantling and remediation (iii)
 Onerous contracts (iv) 
Guarantees
and other provisions (v)
 Total
At July 1, 201465 177 - - - 242
Additions48 159 - - - 207
Unused amounts reversed(34) - - - - (34)
Contributions- (2) - - - (2)
Currency translation adjustment- 29 - - - 29
As of June 30, 201579 363 - - - 442
Additions17 234 39 (16) (10) 264
Unused amounts reversed(64) - - - (6) (70)
Contributions- (18) - - - (18)
Liabilities incorporated by business combination (Note 3)424 - 47 199 299 969
Currency translation adjustment248 262 28 113 144 795
As of June 30, 2016704 841 114 296 427 2,382
(i)
Additions and recoveries are included in "Other operating results, net".
(ii)
Corresponds to equity interests in associates with negative equity, mainly New Lipstick. Additions and recoveries are included in "Share of profit / (loss) of joint ventures and associates". Additions and recoveries are included in Costs.
(iii)
The Group’s companies are required to recognize certain costs related to dismantling assets and remediating sites here such assets are located. The calculation of expenses are based on the dismantling value for the current year, taking into consideration the best estimate of future changes in prices, inflation, etc. and such costs are capitalized at a risk-free interest rate. Volume projections for retired or built assets are restated based on expected changes from technological rulings and requirements. Additions and recoveries are included in Costs.
(iv)
Provisions for other contractual liabilities include a series of liabilities resulting from a contractual liability or laws, regarding which there is a high degree of certainty as to the terms and the necessary amounts to discharge such liability. Additions and recoveries are included in Costs.
(v)
Additions and recoveries are included in Costs.
F- 139
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
22.
Provisions (Continued)
Disclosure of total provisions is as follows:
 June 30, 2016 June 30, 2015
Non-current1,341 387
Current1,041 55
Total2,382 442
On February 23, 2016, a class action was filed against IRSA, the Company, some first-line managers and directors with the District Court of the United States for the Central District of California. The complaint, on behalf of people holding American Depositary Receipts of IRSA between November 3, 2014 and December 30, 2015, claims presumed violations to the US federal securities laws. In addition, it argues that defendants have made material misrepresentations and made some omissions related to the IRSA’s investment in IDBD.
Such complaint was voluntarily waived on May 4, 2016 by the plaintiff and filed again on May 9, 2016 with the US District Court by the East District of Pennsylvania.
Furthermore, the Company, some of its first-line managers and directors are defendants in a class action filed on April 29, 2016 with the US District Court of the East District of Pennsylvania. The complaint, on behalf of people holding American Depositary Receipts of the Company between May 13, 2015 and December 30, 2015, claims violations to the US federal securities laws. In addition, it argues that defendants have made material misrepresentations and made some omissions related to the IRSA’s investment in IDBD.
Subsequently, Cresud and IRSA requested that the complaint be moved to the district of New York, which request was later granted.
The Company holds that such allegations are meritless and intends to make a strong defense in both actions. No provision was set up in connection with the above mentioned.
IRSA CP

During the fiscal year ended June 30, 2014, the Group, through IRSA, acquired an additional 0.02% interest in IRSA CP for a total amount of Ps. 1.2 million. This resulted in a decrease in non-controlling interests of Ps. 0.2 million and an increase in equity attributable to holders of the parent of Ps. 1.0 million. The effect on shareholders’ equity of this change in the equity interest in IRSA CP is summarized as follows:

Ps.
Carrying amount of group’s interest acquired of0.18
Consideration paid for non-controlling interests(1.21)
Reserve recorded in shareholders’ equity(i) (1.03)

(i)  The Reserve includes Ps. 0.36 million for non-controlling interest

Futuros y Opciones.com S.A.

On December 20, 2013 Cresud sold 14,812 non-transferable nominative common shares, with a nominal value of Ps. 1 each and entitled to one vote per share, representing a 0.9075% interest of FyO for a total amount of Ps. 0.1 million.

Ps. (million)
Sale’s collected value                                                                                                          0.11
Increase in non-controlling interest                                                ��                                                         (0.21)
Reserve recorded in shareholders’ equity                                                                                                          (0.10)

BRASILAGRO

During the current fiscal year, the Group sold 10,400 shares of Brasilagro, representing a 0.02% interest, for a total amount of Ps. 0.27 million. Consequently, the Company recognized an increase in non-controlling interest for an amount of Ps. 0.25 million and a decrease in equity attributable to holders of the parent of Ps. 0.02 million. The effect on shareholders’ equity of this change in the equity interest in Brasilagro is summarized as follows:

Ps. (million)
Carrying amount of the non-controlling interests sold by the Group(0.25)
Consideration collected                                                                                                          0.27
Reserve recorded in shareholders’ equity                                                                                                          0.02



F-78

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)

On the other hand, on September 2, 2013, Brasilagro approved a share repurchase program for up to 3,511,130 common shares and for up to an aggregate amount not to exceed the balance of profits or available reserves disclosed in Brasilagro’s latest financial statements. As of June 30, 2014, Brasilagro purchased 99,900 common shares for an aggregate amount of Rs. 1.9 million. Below is a summary of the effects of such transaction on shareholders’ equity:

Ps. (million)
Amount paid for repurchase                                                                                                          (4.94)
Decrease in non-controlling interest                                                                                                          4.92
Reserve recorded in shareholders’ equity                                                                                                          (0.02)

IRSA

On July 25, 2013, IRSA’s Board of Directors set forth the terms and conditions governing the purchase of the Company's own stock pursuant to Section 64 of Law N° 26,831 and the CNV’s regulations, for up to an aggregate amount of Ps. 200.0 million and up to 5% of the capital stock, in the form of common shares or Global Depositary Shares (GDS) representing 10 common shares each, and up to a daily limit of 25% of the average daily transaction volume experienced by the Company’s shares, along with the markets where they are listed, during the prior 90 business days, and at a price ranging from a minimum of Ps. 1 up to Ps. 8 per share. On September 18, 2013 the Board of Directors approved an increase to the maximum price, raising it to Ps.10 per common share and US$ 10.50 per GDS. On October 15, 2013, the Board of Directors approved a new increase to the maximum price, raising it to Ps.11.00 per common share and US$ 11.50 per GDS. On October 22, 2013 the Board of Directors approved a new increase to the maximum price, raising it to Ps.14.50 per common share and US$ 15.00 per GDS. During the fiscal year ended June 30, 2014, the Company purchased 533,947 common shares (N.V. Ps. 1 per share) for a total amount of Ps. 5.2 million and 437,075 GDS (representing 4,370,750 common shares) for a total amount of US$ 5.2 million.

On June 10, 2014, the Board of Directors of IRSA resolved to terminate the stock repurchase plan that was approved by resolution of the Board on July 25, 2013, and modified by resolutions adopted on September 18, 2013, October 15, 2013 and October 22, 2013. During the term of the Stock Repurchase Plan, IRSA has repurchased 4,904,697 shares for an aggregate amount of Ps. 37,905,631.



F-79

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.  
Acquisitions and disposals (Continued)

Year ended June 30, 2013

Sale of farmlands

On June 19, 2013, the title deed was executed, by which Cresud sold to Vargas Derka SH a portion of “La Suiza” ranch of 5,613 hectares engaged in livestock activities located near “Villa Angela”, Province of Chaco, remaining in this establishment 36,380 hectares used by the Company to cattle and crop activities.

The offer price amounts to US$ 6.7 million, which had been totally collected by the date of the execution of the title deed, generating a gain of Ps. 29.8 million.

On October 11, 2012 Brasilagro sold Horizontina, a field of land located in Tasso Fragoso, State of Maranhão, Brazil for a total amount of Rs. 75 million (Ps. 174.8 million). The payments were collected as follows: an initial payment of Rs. 1 million, Rs. 26 million in October, 2012 and Rs. 45 million upon execution of the conveyance, on January 22, 2013. The remaining balance as of June 30, 2015 amounts to Rs. 3 million, and its collection is subject to compliance with certain conditions. The gain of the sale was Ps. 53.9 million less commission, expenses and taxes.

The Horizontina field had an area of 14,359 hectares and was acquired on March 10, 2010 by the subsidiary Inmobiliaria Ceibo for a total amount of Rs. 37.7 million.

On April 25, 2013, Brasilagro sold a total area of 394 hectares of Araucaria field. The establishment, located in the municipality of Mineros – GO was acquired in 2007 and had, at the time of sale, a total area of 9,862 hectares.

The sale was priced at Rs. 11.7 million (Ps. 26.6 million). The buyer made an initial payment of Rs. 1.7 million and the remaining balance will be collected in eight installments every six months. The first installment of Rs. 2.1 million was collected in August, 2013, the second, of Rs 2.0 million in March 2014, the third, of Rs.1.9 million, in August 2014 and the fourth, of Rs. 1.9 million, in March 2015. The remaining balance as of June 30, 2015 will be collected in three semi-annual installments. The last installment is due at the moment of the execution of the title deed, in August, 2016. The Group recognized a profit before tax for the sale of the Araucaria field for an amount of Rs. 6.7 million (equivalent to Ps. 12.6 million).

On May 10, 2013, Brasilagro sold a total area of 4,895 hectares of Cremaq field. The establishment, located in the municipality of Ribeiro Gonçalves-PI, Brazil was purchased in 2007 and had, at the time of sale, a total area of 32,702 hectares.



F-80

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


3.  
Acquisitions and disposals (Continued)

On February 20, 2015, while studying the acquired zone, a difference of 62 hectares between measures and the sales agreement, dated May 11, 2013, was verified. This resulted into an increase of 11,166 bags in the sales price.

The sale was priced at Rs. 42.6 million (Ps. 97.6 million). The buyer made an initial installment of Rs. 4.6 million and the remaining balance will be collected in five installments. The first installment of Rs. 4.3 million was collected in August, 2013, the second, of Rs 4.0 million was collected in October 2013, the third, of Rs.17.5 million, in June 2014 and the fourth, of Rs. 17.1 million, in June 2015. The remaining balance will be collected upon execution of the conveyance deed, in June, 2016. The Group recognized a profit before tax for the sale Cremaq field of Rs. 26.5 million (Ps. 53.2 million).

Transactions with non-controlling interests

IRSA

During the fiscal year ended June 30, 2013, the Group acquired an additional 1.25% interest in IRSA for a total consideration of Ps. 45.8 million. This resulted in a decrease in non-controlling interests of Ps. 33.9 million and an increase in equity attributable to holders of the parent of Ps. 11.9 million. The effect on shareholders’ equity of this change in the equity interest in IRSA is summarized as follows:

Ps. (million)
Carrying amount of group’s interest acquired of                                                                                                          33.9
Consideration paid for non-controlling interests                                                                                                          (45.8)
Reserve recorded in shareholders’ equity                                                                                                          (11.9)

IRSA CP

During the fiscal year ended June 30, 2013, the Group, through IRSA and E-Commerce Latina S.A., acquired an additional 0.1% interest in IRSA CP for a total consideration of Ps. 2.3 million. This resulted in a decrease in non-controlling interests of Ps. 0.8 million and an increase in equity attributable to holders of the parent of Ps. 1.5 million. The effect on shareholders’ equity of this change in the equity interest in IRSA CP is summarized as follows:

Ps. (million)
Carrying amount of group’s interest acquired of0.8
Consideration paid for non-controlling interests(2.3)
Reserve recorded in shareholders’ equity (i) (1.5)
(i)  The Reserve includes Ps. 0.5 million for non-controlling interest



F-81

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)

Arcos del Gourmet S.A. (“Arcos”)

On June 07, 2013, the Group, through IRSA CP, acquired an additional 1.815% equity interest of its controlled company Arcos for a total amount of US$ 0.8 million. The carrying amount of the non-controlling interest in Arcos on the date of acquisition was Ps. 7,357 (representing an 11.815% interest). This resulted in a decrease in non-controlling interest of Ps. 857 and an increase in equity attributable to holders of the parent of Ps. 3,687. The effect on shareholder´s equity of the parent of this change in the equity interest in Arcos during year 2013, is summarized as follows:

Ps. (million)
Carrying amount of group’s interest acquired of0.8
Consideration paid for non-controlling interests(4.5)
Reserve recorded in shareholders’ equity (i) (3.7)
(i)  The reserve includes Ps. 1.4 million for non-controlling interest

Acquisition of joint venture

On November 29, 2012, IRSA CP acquired shares of common stock, representing 50% of Entertainment Holdings S.A. (“EHSA”)’s capital stock and votes for Ps. 32.0 million. Under the acquisition agreement, IRSA CP is entitled to exercise joint control over EHSA. EHSA is an Argentine company whose main asset consists of an indirect interest of 50% in the capital and voting rights of La Rural S.A. (“LRSA”), whereby it has joint control over this Company together with Sociedad Rural Argentina (“SRA”), who owns the remaining 50%. Thus, IRSA CP is the owner of an indirect interest of 25% in LRSA, whose main asset consists of an usufruct agreement on the Predio Ferial de Buenos Aires, located between Cerviño, Sarmiento, Santa Fe Avenues and Oro street, in the City of Buenos Aires (the “Predio Ferial”) entered in 1999 into with SRA, owner of such Predio Ferial.

The amount of Ps. 6.1 million has been included as an asset, in the line trade and other receivables together with accrued interests.

The fair value of the IRSA CP’s investment in the joint venture was determined based on the fair value of EHSA’s net assets, with the rights of use being the main asset. IRSA CP has allocated the price paid at the fair value of the net assets acquired. Such fair value amounted to Ps. 15.2 million, which means a goodwill amount of Ps. 10.7 million recognized under the line “Investments in associates and joint venture” in the statement of Financial position as of June 30, 2013.


F-82

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)

The fair value of the right of use has been determined by the application of the discounted cash flow method. This estimate considered a discount rate that reflects the market assessments regarding uncertainties in terms of the cash flow amount and timing. The amount of net future cash flows was estimated based on the specific features of the property, the agreements in force, market information and future forecasts as of the valuation date. Net income forecasts, revenues growth rates and discount rates are among the most important assumptions used in the valuation.

Disposal of financial assets

During fiscal year ended June 30, 2013, the Group sold 17,105,629 ordinary shares of Hersha’s Hospitality Trust (Hersha) for a total amount of US$ 92.5 million, with a decrease on the equity interest from 9.13% (at the beginning of the year) to 0.49%.

In November and December 2012, IRSA sold all of its shareholdings in NH Hoteles S.A. (138,572 shares for a consideration of € 0.38 million) and in NH Hoteles S.A. (387,758 shares for a total consideration of US$ 1.4 million).

In December 2012, IRSA sold all of its shareholdings in Metrovacesa F (1,238,990 shares for a consideration of € 2.7 million); Metrovacesa SM (229,995 shares for a total consideration of € 0.5 million) and Metrovacesa F (919,087 shares for a consideration of US$ 2.7 million).

Significant sales of investment properties

On August 31, 2012, the Group sold through IRSA certain functional units of the “Libertador 498 Building” of the Autonomous City of Buenos Aires. The total price of the transaction amounted to Ps. 15 million and was collected upon the execution of the title conveyance deeds. This transaction generated a profit before tax of Ps. 12.3 million.

On September 14, 2012, IRSA sold certain functional units on floors 18 and 19, as well as parking areas, of the Bouchard 551 Building. The total price of the transaction was US$ 8.5 million paid upon execution of the conveyance deed. This transaction generated a profit before tax of Ps. 16.6 million.

On October 4 and 11, 2012, IRSA signed the transfer deed for the sale of several functional units (stores and parking spaces) of the “Libertador 498 Building”. The transactions price was set at Ps. 29.4 million, amount that has been completely collected. This transaction generated a profit before tax of Ps. 24.1 million.


F-83

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)

On January 8, 2013, IRSA sold several functional units (stores and parking spaces) of the “Costeros Dique IV Building”. The total price of the transaction was Ps. 9.2 million. This transaction generated a profit before tax of Ps. 7.5 million.

On May 8, 2013, IRSA signed the transfer deed for the sale of the 17th floor and two parking units of the Maipú 1300 Building and two parking units of the Libertador 498 Building. The total price of the transaction was Ps. 7.8 million (US$ 1.5 million). Such transaction generated a profit before tax of approximately Ps. 5.7 million.

On May 20, 2013, IRSA signed the transfer deed for the sale of the 6th floor and two parking units of the Maipú 1300 Building and two parking units of the Libertador 498 Building. The transactions price was set at Ps. 7.6 million (US$ 1.45 million), amount that has been completely collected. This transaction generated a profit before tax of Ps. 5.7 million.

On June 28, 2013, IRSA signed the transfer deed for the sale of 4th, 5th and 6th floors and 56 parking units of the Bouchard 551 Building. The total price of the transaction was Ps. 148.7 million, equivalent to US$ 27.6 million. This transaction generated a profit before tax of Ps. 106.2 million.

The properties mentioned above were classified as investment properties until the above mentioned transactions were executed, which represents a gross lease area of approximately 14,442 square meters.

All sales of the year led to a combined profit for the Group of Ps. 178.0 million, disclosed within the line “Gain from disposal of investment properties” in the income statement.

Acquisition of Rigby 183 LLC

On June 30, 2012, the Group held, through its subsidiary IMadison LLC, a 49% interest in the capital stock of Rigby 183 LLC (“Rigby”), a company that owns office buildings for rental at Madison Avenue 183, New York, USA. On November 27, 2012, the Group, through its subsidiary IRSA International LLC, acquired an additional equity interest of 25.5% in Rigby’s capital stock, thus taking control over said company. As a result of the acquisition, the Group expects to increase its footprint in the US real estate market. The goodwill from the acquisition, which amounts to Ps. 45.7 million, is attributable to the synergies expected to be achieved by combining the Group’s and Rigby’s operations.


F-84

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


3.
Acquisitions and disposals (Continued)

The acquisition-related costs, which amount to Ps. 2.6 million, were charged under “General and administrative expenses” line in the statements of income.

The fair value of the investment property acquired for Ps. 679.2 million was assessed by a qualified independent appraiser. The fair value of trade and other receivables amounts to Ps. 2.3 million, including trade receivables in the amount of Ps. 0.1 million. As of the acquisition date, the Group estimates that these receivables are recoverable. The fair value of the non-controlling interest in Rigby, an unlisted company, has been determined on a proportional basis to the fair value of net acquired assets.

The Group has recognized gains of Ps. 124.1 million derived from the reassessment of the fair value of the 49% ownership interest in Rigby before the business combination. In addition, all exchange gains (losses) accumulated in shareholder’s equity from the ownership interest in Rigby before the business combination (Ps. 12.9 million) were charged to income. These gains were disclosed under "Other operating results, net" line in the income statements.

The incomes Rigby has generated since November 27, 2012 and that have been disclosed in the consolidated income statements amount to Ps. 40.9 million. Rigby has also run a net gain of Ps. 8.1 million during said period. If Rigby had been included in the consolidation since July 1, 2012, the consolidated income statements would have shown pro forma revenues in the amount of Ps. 2,202.9 million and pro-forma net income of Ps. 297.5 million.

Disposal of joint ventures

On June 28, 2013, IRSA sold, assigned and transferred to Euromayor S.A. de Inversiones the 100% of its equity interest in Canteras Natal Crespo S.A., accounting for a 50% interest in that company’s capital stock for an aggregate amount of US$ 4.2 million; out of that amount, US$ 1.4 million was cashed in July 2013, with the balance being collected as follows: US$ 2.4 million on March 31, 2014 and US$ 0.4 million against delivery to IRSA of certain lots in the development to be carried out in Canteras Natal Crespo S.A.’s property. IRSA was granted a security interest on the 100% of Canteras Natal Crespo S.A.’s shares to secure payment of the remaining balance.

Disposal of subsidiaries

During the fiscal year ended June 30, 2013, IRSA sold to Doneldon S.A., the 100% of Sedelor S.A.'s, Alafox S.A.'s and Codalis S.A.'s capital stock, all of them companies incorporated in the Republic of Uruguay, with no business activity. Later, IRSA sold to Cresud the 100% of Doneldon S.A.'s capital stock.


F-85

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.
Acquisitions and disposals (Continued)

Transactions and authorizations pending

Urban properties and investments

Paraná plot of land

On June 30, 2009, the Group, through IRSA CP, subscribed a “Letter of Intent” by which it stated its intention to acquire from Wal-Mart Argentina S.A. a plot of land of about 10,022 square meters located in Paraná, Province of Entre Ríos, to be used to build, develop and operate a shopping center or mall.

On August 12, 2010, the agreement of purchase was executed. The purchase price stood at US$ 0.5 million to be paid as follows: i) US$ 0.05 million had been settled as a prepayment on July 14, 2009, ii) US$ 0.1 million was settled upon executing such agreement, and iii) US$ 0.35 million will be paid upon executing the title deed. The mentioned payments were recorded as an advance under “Trade and other receivables” line.

On December 29, 2011, possession of the real estate was granted, and a minute was signed in which the parties agreed that the deed transferring ownership would be granted on June 30, 2012, or within sixty (60) consecutive days as from the date in which the selling party evidenced with a certified copy before the buying party that the real estate was not subject to any encumbrance, burden, limit or restriction to the ownership, except for the electroduct administrative easement in favor of EDEER S.A..

On June 29, 2012, the parties have agreed to extend the term for the execution of the title conveyance deed, which shall be executed within sixty (60) days as from the date the seller provides reliable notification to the buyer that the property is not subject to any levy, encumbrance, restrictions on ownership, except for the right of way already mentioned. As of the consolidated financial statements date, evidence of such notice has not been provided.

Acquisition of commercial center goodwill

The Group, through IRSA CP, signed an offering letter for acquiring, building and running a commercial center in a real estate owned by INC S.A., located in the City of San Miguel de Tucumán, Province of Tucumán. The price of this transaction was US$ 1.3 million, of which US$ 0.05 million were paid. The mentioned payment was recorded as an advance under “Trade and other receivables” line.


F-86

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.           Acquisitions and disposals (Continued)

This transaction was subject to certain conditions precedent, among which the Group through IRSA CP should acquire from INC S.A. the goodwill constituted by the commercial center operating in Soleil Factory. Having complied with such condition on July 1, 2010, IRSA CP should have started the works: i) 12 months after complying with such conditions, or ii) on May 2, 2011, whichever occurs earlier. However, before starting with the works, INC S.A. should have: i) granted the title deeds to IRSA CP's future units to IRSA CP, and ii) transferred to IRSA CP the rights to the registered architectural project and the effective permissions and authorizations to be carried out in IRSA CP's future units. As of June 30, 2015, the two conditions have not been fulfilled.

Antitrust Law

Law N° 25,156, known as "Antitrust Law" as amended, prevents anticompetitive practices and requires administrative authorization for transactions that according to the Antitrust Law would lead to market concentration According to this law, such transactions include mergers, acquisitions and/or transfers either of businesses or assets by which the acquirer controls or substantially influences another party. Transactions completed by entities with an annual sales volume of more than Ps. 200.0 million must be submitted to the Comisión Nacional de Defensa de la Competencia (hereinafter referred to as the "Antitrust Commission") for approval. Certain exemptions apply. Submissions may be filed either prior to the transaction or within a week after its completion. The Antitrust Commission may (i) authorize the transaction, (ii) condition the transaction to the accomplishment of certain acts, or (iii) reject the authorization.

In general, acquisitions effected by the Group are within the scope of the Antitrust Law. In this cases, the Group directly requests authorization. In other cases, the Group may request the Antitrust Commission to issue a prior statement about whether a particular transaction should be either notified or submitted for approval by the Group.

As of June 30, 2015 and 2014, the following cases are pending resolution by the Antitrust Commision:

(i)The Group requested the Antitrust Commission to issue a statement about the Group's obligation to either notify or submit for authorization the acquisition of the property formerly owned by Nobleza Piccardo S.A.I.C.y F. The Antitrust Commission stated that the operation had to be notified. The Group appealed this decision. Subsequently, the Court of Appeals confirmed the Antitrust Commission’s decision regarding the obligation to notify and, therefore, on February 23, 2012, local form F1 was filed, which is being processed as of the date these consolidated financial statements are issued.


F-87

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



3.           Acquisitions and disposals (Continued)

(ii)Purchase of Arcos shares: On December 3, 2009 the Group requested that the CNDC issued a ruling on the notification requirement. The CNDC confirmed that the transaction had to be notified; as a result, notice was served in December 2010 and as of the consolidated financial statements date it is still pending.

(iii)Acquisition of shares in Nuevo Puerto Santa Fe (NPSF): On August 23, 2011 the Group informed the CNDC of the direct and indirect acquisition of NPSF (IRSA CP directly acquired 33.33% of NPSF and indirectly a 16.66% through its controlled company Torodur SA). On December 14, 2014 the CNDC notified approval of the transaction.

(iv)Acquisition of shares in Entertainment Holdings SA (EHSA): On December 7, 2012, the Group informed the CNDC of the acquisition of shares in EHSA, which indirectly owns 50% of La Rural S.A. – a company that operates a convention center known as Predio Ferial de Palermo. As of the consolidated financial statements date, the transaction is pending approval by the CNDC.

4.           Financial risk management

Risk management principles and processes

The risk management function within the Group is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting period. Financial risk comprises market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, liquidity risk and capital risk.

The Group’s diverse activities are exposed to a variety of financial risks in the normal course of business. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures when deemed appropriate based on its internal management risk policies.

The Group’s principal financial instruments comprise cash and cash equivalents, receivables, payables, interest bearing assets and liabilities, other financial liabilities, other investments and derivative financial instruments. The Group manages its exposure to key financial risks in accordance with the Group’s risk management policies.


F-88

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.  
Financial risk management (Continued)

The Group´s risk management policies are established to all its subsidiaries companies in order to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group’s management framework includes policies, procedures, limits and allowed types of derivative financial instruments. The Group has established a Risk Committee, comprising Senior Management and a member of the Audit Committee, which reviews and oversees management’s compliance with these policies, procedures and limits and has overall accountability for the identification and management of risk across the Group.

This section provides a description of the principal risks and uncertainties that could have a material adverse effect on the Group’s strategy, performance, results of operations and financial condition. The principal risks and uncertainties facing the businesses, set out below, do not appear in any particular order of potential materiality or probability of occurrence.

(a)  Market risk management

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group’s market risks arise from open positions in foreign currencies, interest-bearing assets and liabilities, commodity price risk and equity securities price risks, to the extent that these are exposed to general and specific market movements. Management sets limits on the exposure to these risks that may be accepted, which are monitored on a regular basis.

The examples of sensitivities to market risks included below are based on a change in one factor while holding all other factors constant. In practice this is unlikely to occur, and changes in some of the factors may be correlated – for example, changes in interest rate and changes in foreign currency rates.

Foreign exchange risk and associated derivative financial instruments:

The Group publishes its consolidated financial statements in Argentine Pesos but conducts business in many foreign currencies. As a result, the Group is subject to foreign currency exchange risk due to exchange rate movements, which affect the Group’s transaction cost. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.


F-89

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.  
Financial risk management (Continued)

The real estate, commercial, agro-industrial and/or financial activities of the Group's subsidiaries are primarily developed in Argentina and have as functional currency the Argentine Peso. The agricultural activities of the Group’s subsidiaries are primarily developed in Argentina, Brazil and Bolivia, where the functional currencies are the respective local currencies. A significant majority of the activity of these subsidiaries is conducted in such local currencies, thus not exposing the Group to foreign exchange risk. Other Group's subsidiaries have other functional currencies, principally US dollar. In the ordinary course of business, the Group, through its subsidiaries, transacts in currencies other than the respective functional currencies of the subsidiaries. These transactions are primarily denominated in US dollars and new Israeli shekel. Net financial position exposure to the functional currencies is managed on a case-by-case basis, partly by entering into foreign currency derivative instruments and/or by borrowing in foreign currencies, or other methods, considered adequate by the Management, according to circumstances.

Financial instruments are considered sensitive to foreign exchange rates when they are not in the functional currency of the entity that holds them. The following table shows the Group's US dollar-denominated (US$) and new Israeli shekel (NIS), net carrying amounts of its financial instruments broken down by functional currency in which the Company operates, for the years ended June 30, 2015 and 2014. The amounts are presented in Argentine Pesos, the presentation currency of the Group:

  Net monetary position (Liability)/Asset  Net monetary position (Liability)/Asset 
  June 30, 2015  June 30, 2014 
Functional currency US$  NIS  US$  NIS 
Argentine Peso                                                  (4,826,015)  -   (4,866,439)  - 
Brazilian Reais                                                  152,764   -   68,525   - 
Uruguayan Peso                                                  (67,082)  -   (63,254)  - 
Bolivian Peso                                                  122   -   (68,464)  - 
US Dollar                                                  -   (244,923)  -   (86,581)
Total                                                  (4,740,211)  (244,923)  (4,929,632)  (86,581)

The Group estimates that, other factors being constant, a 10% appreciation of the US dollar against the respective functional currencies at year-end would result in an additional loss before income tax for the year ended June 30, 2015, 2014 and 2013 for an amount of Ps. 474.02 million, Ps. 492.96 million and Ps. 269.6 million, respectively. A 10% depreciation of the US dollar against the functional currencies would have an equal and opposite effect on the income statements.


F-90

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

Moreover, the Group estimates that, all other factors being equal, a depreciation of the NIS to the US$ by 10% as of the balance sheet date would increase loss before tax by Ps. 24.5 million as of June 30, 2015. An appreciation of 10% of the new Israeli shekel against functional currencies would have the same and opposite effect on the income statements.

This sensitivity analysis provides only a limited, point-in-time view of the foreign exchange risk sensitivity of certain of the Group’s financial instruments. The actual impact of the foreign exchange rate changes on the Group’s financial instruments may differ significantly from the impact shown in the sensitivity analysis.

On the other hand, the Group also uses derivative instruments, such as forward foreign exchange contracts to manage its exposure to foreign exchange risk. As of June 30, 2015 and 2014 foreign exchange contracts were pending, for a total amount of (Ps. 25,333) and (Ps. 36,361), respectively.

Interest rate risk and associated derivative financial instruments:

The Group is exposed to interest rate risk on its investments in debt instruments, short-term and long-term borrowings and derivative financial instruments.

The primary objective of the Group’s investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, the Group diversifies its portfolio in accordance with the limits set by the Group. The Group maintains a portfolio of cash equivalents and short-term investments in a variety of securities, including both government and corporate obligations and money market funds.


F-91

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

Investments in both fixed rate and floating rate instruments carry varying degrees of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates. In general, longer dated securities are subject to greater interest rate risk than shorter dated securities. While floating rate securities are generally subject to less interest rate risk than fixed rate securities, floating rate securities may produce less income than expected if interest rates decrease. Due in part to these factors, the Group’s investment income may fall short of expectations or the Group may suffer losses in principal if securities that have declined in market value due to changes in interest rates are sold. As of June 30, 2014, the nominal value of rate interest swaps was US$ 10 million and Ps. 280 million and due between September 1, 2014 and December 31, 2014. These agreements were not subject to hedge accounting. On June 30, 2014, the Group recorded an asset in the amount of Ps. 1,089, related to the estimated fair value of the swaps on that date. The fair value of swaps was calculated using a discounted cash flow analysis. On June 30, 2014, the impact on the fair value of interest rate swaps in the event of a change in interest rates does not materially affect the results of operations or the financial position of the Group. As of June 30, 2015, the Group has no balances related to interest rate swaps.

The Group’s interest rate risk principally arises from long-term borrowings (Note 25). Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group manages this risk by maintaining an appropriate mix between fixed and floating rate interest bearing liabilities. These activities are evaluated regularly to determine that the Group is not exposed to interest rate movements that could adversely impact its ability to meet its financial obligations and to comply with its borrowing covenants.

The Group manages its cash flow interest rate risk exposure by different hedging instruments, including but not limited to interest rate swap, depending on each particular case. For example, interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates or viceversa. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals, the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts.


F-92

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

The interest rate risk policy is approved by the Board of Directors. Management analyses the Group’s interest rate exposure on a dynamic basis. Various scenarios are simulated, taking into consideration refinancing, renewal of existing positions and alternative financing sources. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. Trade payables are normally interest-free and have settlement dates within one year. The simulation is done on a regular basis to verify that the maximum potential loss is within the limits set by management.

The following tables show a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases) for the years ended June 30, 2015 and 2014. All amounts are shown in thousands of Argentine Pesos the Group’s presentation currency:

  
June 30, 2015
Functional currency
 
Rate per currency denomination Argentine Peso  Brazilian Reais  Bolivian Peso  Uruguayan Peso  US Dollar  Total 
Fixed rate:                  
Argentine Peso  826,038   -   -   -   -   826,038 
Bolivian Peso  -   -   -   -   -     
Brazilian Reais  -   184,631   -   -   -   184,631 
US Dollar  5,361,806   -   -   70,959   10,784   5,443,549 
Subtotal fixed-rate borrowings  6,187,844   184,631   -   70,959   10,784   6,454,218 
Floating rate:                        
Argentine Peso  1,426,226   -   -   -   -   1,426,226 
Bolivian Peso  -   -   6,509   -   -   6,509 
Brazilian Reais  -   258,805   -   -   -   258,805 
US Dollar  127,778   -   -   -   -   127,778 
Subtotal floating rate borrowings  1,554,004   258,805   6,509   -   -   1,819,318 
Total borrowings as per analysis  7,741,848   443,436   6,509   70,959   10,784   8,273,536 
Finance leases  3,270   22,197   -   -   -   25,467 
Total borrowings as per statement of financial position  7,745,118   465,633   6,509   70,959   10,784   8,299,003 


F-93

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

  
June 30, 2014
Functional currency
  
Rate per currency denomination Argentine Peso  Brazilian Reais  Bolivian Peso  Uruguayan Peso  US Dollar  Total  
Fixed rate:                   
Argentine Peso  386,007   -   -   -   -   386,007  
Bolivian Peso  -   -   8,402   -   -   8,402  
Brazilian Reais  -   371,981   -   -   -   371,981  
US Dollar  5,614,494   -   -   64,672   677,365   6,356,531  
Subtotal fixed-rate borrowings  6,000,501   371,981   8,402   64,672   677,365   7,122,921  
Floating rate:              -   -      
Argentine Peso  1,073,710   -   -   -   -   1,073,710  
Bolivian Peso  -   -   -   -   -      
Brazilian Reais  -   237,298   -   -   -   237,298  
US Dollar  120,629   -   -   -   -   120,629  
Subtotal floating rate borrowings  1,194,339   237,298   -   -   -   1,431,637  
Total borrowings as per analysis  7,194,840   609,279   8,402   64,672   677,365   8,554,558  
Finance leases  3,289   -   -   -   -   3,289  
Total borrowings as per statement of financial position  7,198,129   609,279   8,402   64,672   677,365   8,557,847 (i)
(i)  Includes Ps. 603,021 included in Liabilities directly associated with assets classified as held for sale (Note 44).

The Group estimates that, other factors being constant, a 1% increase in floating rates at year-end would decrease profit before income tax for the years ended June 30, 2015 and 2014, in Ps. 14 million. A 1% decrease in floating rates would have an equal and opposite effect on the income statements. The table below shows the Group’s sensitivity to interest rate risks. The amounts are presented in Argentine Pesos.

  June 30, 2015 
Rate per currency denomination Argentine Peso  Brazilian Reais  Bolivian Peso  Uruguayan Peso  Total 
Floating rate:               
Argentine Peso  14.26   -   -   -   14.26 
Bolivian Peso  -   -   0.07   -   0.07 
Brazilian Reais  -   2.72   -   -   2.72 
US Dollar  1.28   -   -   -   1.28 
Total effects on Profit before income tax  15.54   2.72   0.07   -   18.33 



F-94

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.
Financial risk management (Continued)

  June 30, 2014 
Rate per currency denomination Argentine Peso  Brazilian Reais  Bolivian Peso  Uruguayan Peso  Total 
Floating rate:               
Argentine Peso  10.74   -   -   -   10.74 
Bolivian Peso  -   -   -   -     
Brazilian Reais  -   2.37   -   -   2.37 
US Dollar  1.21   -   -   -   1.21 
Total effects on Profit before income tax  11.95   2.37   -   -   14.32 

This sensitivity analysis provides only a limited, point-in-time view of this market risk sensitivity of certain of the Group’s financial instruments. The actual impact of the interest rate changes on the Group’s financial instruments may differ significantly from the impact shown in the sensitivity analysis.

Commodity price risk and associated derivative financial instruments:

The Group’s agricultural activities expose it to specific financial risks related to commodity prices. Prices for commodities have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agricultural industry.

Generally, the Group uses derivative instruments to hedge risks arising out of its agricultural business operations. The Group uses a variety of commodity-based derivative instruments to manage exposure to price volatility stemming from its integrated crop production activities. These instruments consist mainly of crop forwards, future contracts and put and call option contracts. Contract positions are designed to ensure that the Group will receive a defined minimum price for certain quantities of its production. The Group combines option contracts with future contracts only as a means of reducing the exposure towards the decrease in commodity prices, as being a producer means that the price is uncertain until the time the products are harvested and sold. The Group manages maximum and minimum prices for each commodity and the idea is to choose the best spot price at which to sell.


F-95

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.  
Financial risk management (Continued)

The Group generally covers up to 50% of its crop production in order to finance its operating costs. The hedge consists of taking positions on purchased puts or sold futures and calls that assure a fixed exit price. In the past, the Group has never kept a short position greater than its crop inventories and does not intend to. On the other hand, it is not the Group’s current intention to be exposed in a long derivative position in excess of its actual production.

The following tables show the outstanding positions for each type of derivative contract for the years ended June 30, 2015 and 2014. The amounts are presented in thousands of Argentine Pesos.

  June 30, 2015 
Type of derivative
contract
 Tons  Margin  Premium paid or (collected)  Derivatives at fair value  Gain/ (loss) for valuation at fair value at year-end 
Futures:               
Sell               
Corn                                  8,600   527   -   (879)  (560)
Soybeans                                  107,727   4,792   -   (10,202)  (3,668)
Wheat                                  7,000   6   -   -   (6)
Purchase                    
Corn                                  1,400   (50)  -   -   27 
Soybeans                                  2,200   (178)  -   -   (201)
Wheat                                  1,000   503   -   -   (515)
Options:                    
Sell put                    
Soybeans                                  9,952   (1,312)  (431)  (1,389)  (1,323)
Purchase put                    
Soybeans                                  20,412   -   2,877   995   (1,883)
Sale call                    
Soybeans                                  44,124   322   (2,903)  (6,911)  (4,009)
Total                                  202,415   4,610   (457)  (18,386)  (12,138)

  June 30, 2014 
  Type of derivative
contract
 Tons  Margin  Premium paid or (collected)  Derivatives at fair value  Gain/ (loss) for valuation at fair value at year-end 
Futures:               
Sell               
Corn                                  20,225   1,377   -   1,328   1,090 
Soybeans                                  197,428   1,482   -   2,980   1,317 
Wheat                                  1,100   72   -   6   (132)
Purchase                    
Corn                                  2,400   (116)  -   (116)  (117)
Soybeans                                  4,300   415   -   415   (358)
Wheat                                  1,700   137   -   137   (227)
Options:                    
Sell put                    
Soybeans                                  16,204   -   -   753   4,066 
Total                                  243,357   3,367   -   5,503   5,639 


F-96

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

  June 30, 2013 
Type of derivative
 contract
 Tons  Margin  Premium paid or (collected)  Derivatives at fair value  Gain/ (loss) for valuation at fair value at year-end 
Futures:               
Sell               
Corn                                  12,640   235   -   4,058   715 
Soybeans                                  61,760   821   -   28,682   4,431 
Options:                    
Sell put                    
Soybeans                                  12,240   -   6,168   7,135   967 
Corn                                  300   3   -   -   (9)
Total                                  86,940   1,059   6,168   39,875   6,104 

Gains and losses on commodity-based derivative instruments were Ps. 8.1 million (gain), Ps. 14.8 million (loss) and Ps. 5.1 million (gain) for the years ended June 30, 2015, 2014 and 2013, respectively. These gains and losses are included in “Other operating results, net” in the income statements.

Crops future contract fair values are computed with reference to quoted market prices on future exchanges.

Other price risk:

The Group is exposed to equity securities price risk because of investments held in entities that are publicly traded (principally TGLT, preferred shares and warrants of Condor, shares and warrants of IDBD, and others), which are classified on the consolidated statement of financial position at “fair value through profit or loss”. The Group regularly reviews the prices evolution of these equity securities in order to identify significant movements.

As of June 30, 2015 and 2014 equity investments of the Group amounts to Ps. 1,179.4 million and Ps. 617.4 million, respectively.


F-97

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


4.
Financial risk management (Continued)

The Group estimates that, other factors being constant, a 10% decrease in quoted prices of equity securities and in derivative financial instruments portfolio at year-end would generate a loss before income tax for the year ended June 30, 2015 of Ps. 186:
Increase in loss before income tax
(in millions of Ps.)
CompanyJune 30, 2015
IDBD127.9
Condor39.0
TGLT7.2
Avenida10.2
Others1.7
Total186

An increase of 10% on these prices would have an equal and opposite effect in the statement of income.

This sensitivity analysis provides only a limited point-in-time view of the price risk sensitivity of certain of the Group’s equity securities. The actual impact of the price changes on the equity securities may differ significantly from the impact shown in the sensitivity analysis.

(b)  Credit risk management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit limits have been established to ensure that the Group deals only with approved counterparties and that counterparty concentration risk is addressed and the risk of loss is mitigated. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Group.

The Group is subject to credit risk arising from deposits with banks and financial institutions, investments of surplus cash balances, the use of derivative financial instruments and from outstanding receivables. Credit risk is managed on a country-by-country basis. Each local entity is responsible for managing and analyzing the credit risk.

The Group’s policy is to manage credit exposure to deposits, short-term investments and other financial instruments by maintaining diversified funding sources in various financial institutions. All the institutions that operate with the Group are well known because of their experience in the market and high quality credit. The Group places its cash and cash equivalents, investments, and other financial instruments with various high credit quality financial institutions, thus mitigating the amount of credit exposure to any one institution. The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents and short-term investments in the statement of financial position.
F-98

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk and commodities prices. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to each counter party. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty’s obligations exceed the obligations that the Group has with that counterparty. The credit risk associated with derivative financial instruments is representing by the carrying value of the assets positions of these instruments.

The Group’s policy is to manage credit risks associated with trade and other receivables within defined trading limits. All Group’s significant counterparties have internal trading limits. The Group’s customers are distinguished between those customers arising out of the investment and development properties activities of the Group from those arising out of its agricultural and agro-industrial operations. These two groups of customers are monitored separately due to their distinct characteristics.

Investment and development properties activities

Trade receivables from investment and development property activities are primarily derived from leases and services from shopping centers, office and other rental properties; receivables from the sale of trading properties and investment properties (primarily undeveloped land and non-retail rental properties). The Group has a large customer base and is not dependent on any single customer.

Trade receivables related to leases and services provided by the Group represent a diversified tenant base and account for 38% and 28% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. The Group has specific policies to ensure that rental contracts are transacted with counterparties with appropriate credit quality. The majority of the Group’s shopping center, office and other rental properties’ tenants are well recognized retailers, diversified companies, professional organizations, and others. Owing to the long-term nature and diversity of its tenancy arrangements, the credit risk of this type of trade receivables is considered to be low. Generally, the Group has not experienced any significant losses resulting from the non-performance of any counterpart to the lease contracts and, as a result, the allowance for doubtful account balance is low. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Group. If customers are independently rated, these ratings are used. If there is no independent rating, risk control assesses the credit quality of the customer, taking into account its past experience, financial position, actual experience and other factors. Based on the Group’s analysis, the Group determines the size of the deposit that is required from the tenant at inception. Management does not expect any losses from non-performance by these counterparties. See Note 18 for details.

F-99

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

On the other hand, property receivables related to the sale of trading properties represent 26% and 13% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. Payments on these receivables have generally been received when due. These receivables are generally secured by mortgages on the properties. Therefore, the credit risk on outstanding amounts is considered very low.

Agricultural and agro-industrial activities

Trade receivables from agriculture and agro-industrial activities are primarily derived from the sale of commodities, raw milk, cattle, and sugarcane; receivables from feed lot operations and raw meat products; receivables from the lease of farmland properties; receivables from the sale of farmland properties; and, other receivables from ancillary activities. Trade receivables from agriculture and agro-industrial activities represent 23% and 20% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. In contrast with the investment and development properties activities of the Group, the Group’s agribusiness is conducted through several international subsidiaries. The Group has subsidiaries in Argentina, Brazil and Bolivia. However, Argentina and Brazil together concentrate more than 89% and 93% of the Group’s grain production for the years ended June 30, 2015 and 2014, respectively. Each country has its own established market for the respective grain production. Generally, the entire country’s grain production is sold in the domestic market to well-known multinational exporters such as Molinos, Cargill or Bunge, and/or local exporters. Prices for grains are also generally based on the market prices quoted in the domestic markets which normally take as reference the prices in international grain exchanges such as the Chicago Board of Trade.

For the year ended June 30, 2015, 27% of sales of the combined sales of Argentina and Brazil were sold to well-known exporters, while for the year ended on June 30, 2014, 10% of sales of crops in Brazil were sold to two well-known exporters. The Group performs credit evaluations of its customers and generally does not require collateral. Although sales are highly concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of these customers.

For the years ended June 30, 2015 and 2014, the grain production in Bolivia has not been significant representing only 9% and 5% of the total Group’s crop sales, respectively.


F-100

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

The Group concentrates its cattle production in Argentina where it is entirely sold in the domestic market. The main buyers are slaughterhouses and supermarkets and are well dispersed. Prices in the beef cattle market in Argentina are basically fixed by local supply and demand. The principal market is the Liniers Meat Market in Buenos Aires, which provides a standard in price formation for the rest of the domestic markets. Live animals are sold by auction on a daily basis in the market, whereas prices are negotiated by kilogram of live weight and are mainly determined by local supply and demand. Some supermarkets and meat packers establish their prices by kilogram of processed meat; in these cases, processing yields influences the final price.

The Group’s milk production is also based in Argentina. The Group has historically sold its entire milk production to Mastellone Hnos S.A., which is the largest dairy company in Argentina. Sales to Mastellone amounted to Ps. 71.9 and Ps. 50.8 million for the years ended June 30, 2015 and 2014, respectively, representing 3% and 2.8% of the Group’s agricultural consolidated revenue for those years, respectively, and 1% of the Group’s total revenues in both years. Although sales are concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of Mastellone. As milk is a perishable product there is no ability for the Group to mitigate pricing risk through inventory management. The Group negotiates the prices of raw milk on a monthly basis in accordance with domestic supply and demand. Prices for milk are based on a number of factors including fat and protein content, bacteria levels and temperature. However, dairy prices have historically tended to have reasonable correlation with prices of agricultural inputs such as feed and fertilizer, and the Group monitors these relationships in order to adapt its tactics to suit.

The Group’s sugarcane production is based in Brazil and to a lesser extent in Bolivia. Brazil concentrates more than 95.5% of the Group’s total sugar production. Currently, the Group has one farm in Brazil dedicated to sugarcane production and the entire output is sold to a third-party, ETH Bioenergia S.A. (“ETH”), under an exclusive agreement dated March 2008. ETH is the largest ethanol producer in Brazil. Under the agreement, ETH is contractually obligated to purchase the entire production of two crop cycles of sugarcane comprising six agricultural years with five cuts, with the possibility of extending them for another full agricultural cycle upon prior agreement of the parties. The duration of each cycle may be extended if the parties wish to do so. Currently, the Group is selling to ETH at market price. Sales to ETH amounted to Ps. 178.4 million and Ps. 106 million for the years ended June 30, 2015 and 2014, respectively, representing el 7.5% and 6% of the Group’s agricultural consolidated revenue for those years, respectively. Although sales are concentrated, the Group does not believe that significant credit risk exists at the reporting period due to the high credit rating of ETH.


F-101

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

The management does not expect any significant losses resulting from the non-performance by these counterparties.

The maximum exposure to Group’s credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group’s overall exposure of credit risk arising from trade receivables is set out in Note 18.

(c)  Liquidity risk management

The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements, and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage liquidity risks could have a material impact on the Group’s cash flow and statement of financial position. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding its existing and prospective debt requirements by maintaining diversified funding sources.

The Group monitors its current and projected financial position using several key internally generated reports: cash flow; debt maturity; and interest rate exposure. The Group also undertakes sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key profitability, liquidity and balance sheet ratios.

The Group’s debt and derivative positions are continually reviewed to meet current and expected debt requirements. The Group maintains a balance between longer-term and shorter-term financings. Short-term financing is principally raised through bank facilities and overdraft positions. Medium- to longer-term financing comprises public and private bond issues, including private placements. Financing risk is spread by using a variety of types of debt. The maturity profile is managed in accordance with Group’s needs, by spreading the repayment dates and extending facilities, as appropriate.
F-102


4.
Financial risk management (Continued)
The tables below show financial liabilities, including Group’s derivative financial liabilities groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows and as a result, they do not reconcile to the amounts disclosed on the statement of financial position. However, undiscounted cash flows in respect of balances due within 12 months generally equal their carrying amounts in the statement of financial position, as the impact of discounting is not significant. The tables include both interest and principal flows.
Where the interest payable is not fixed, the amount disclosed has been determined by reference to the existing conditions at the reporting date.

At June 30, 2015 Less than 1 year  Between 1 and 2 years  Between 2 and 3 years  Between 3 and 4 years  More than 4 years  Total 
Trade and other payables                                                   943,713   11,001   4,698   2,582   -   961,994 
Borrowings (Excluding finance leases liabilities) (i)  2,215,239   3,296,084   616,654   717,850   2,118,068   8,963,895 
Finance leases                                                   11,785   7,291   3,859   2,552   -   25,487 
Derivative financial instruments  270,499   269,949   -   -   -   540,448 
Total                                                   3,441,236   3,584,325   625,211   722,984   2,118,068   10,491,824 

At June 30, 2014 Less than 1 year  Between 1 and 2 years  Between 2 and 3 years  Between 3 and 4 years  More than 4 years  Total 
Trade and other payables                                                   914,782   67,232   47,809   16,646   47,322   1,093,791 
Borrowings (Excluding finance leases liabilities) (i)  3,555,212   882,910   2,677,153   1,004,124   2,067,023   
(ii)10,186,422
 
Finance leases  2,130   678   531   -   -   3,339 
Derivative financial instruments  53,419   144,808   176,039   -   -   374,266 
Total                                                   4,525,543   1,095,628   2,901,532   1,020,770   2,114,345   11,657,818 

(i)  Includes accrued and prospecting interests.
(ii)  Includes Ps. 603,021 included in Liabilities directly associated with assets classified as held for sale (Note 44).

(d)  Capital risk management

The capital structure of the Group consists of shareholders’ equity and net borrowings. The type and maturity of the Group’s borrowings are analyzed further in Note 25. The Group’s equity is analyzed into its various components in the statement of changes in equity.

Capital is managed so as to promote the long-term success of the business and to maintain sustainable returns for shareholders.


F-103

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

The Group seeks to manage its capital requirements to maximize value through the mix of debt and equity funding, while ensuring that Group entities continue to operate as going concerns, comply with applicable capital requirements and maintain strong credit ratings.

The Group assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its broader strategic plan. The Group continuously reviews its capital structure to ensure that (i) sufficient funds and financing facilities are available to implement the Group’s property development and business acquisition strategies, (ii) adequate financing facilities for unforeseen contingencies are maintained, and (iii) distributions to shareholders are maintained within the Group’s dividend distribution policy. The Group also protects its equity in assets by taking out insurance.

The Group’s strategy is to maintain key financing metrics namely, net debt to total equity ratio (gearing) and loan-to-value ratio (LTV) to ensure that asset level performance is translated into enhanced returns for shareholders whilst maintaining an appropriate risk reward balance to accommodate changing financial and operating market cycles.

The following table details the key metrics in relation to managing its capital structure of the Group. The levels of these metrics are within the ranges established by the Group’s strategy.

  
June 30,
2015
  
June 30,
2014
 
Gearing ratio (i)  74.46%  71.90%
LTV ratio (ii)  12.18%  14.33%

(i)  Calculated as total debt divided by total capital (including equity plus total debt).
(ii)  Calculated as total debt divided by total property at fair value (including trading properties, properties, plant and equipment, investment properties, farmland rights to receive units under barter agreements).


F-104

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

(e)  Other non-financial risks

Nature risk:

The Group’s revenue arising from agricultural activities depends significantly on the ability to manage biological assets and agricultural produce. The ability to manage biological assets and agricultural produce may be affected by unfavorable local weather conditions and natural disasters. Weather conditions such as floods, droughts, hail, windstorms and natural disasters such as fire, disease, insect infestation and pests are examples of such unpredictable events. The Group manages this risk by locating its farmlands in different geographical areas. The Group has not taken out insurance for this kind of risks. The occurrence of severe weather conditions or natural disasters may affect the growth of our biological assets, which in turn may have a material adverse effect on the Group’s ability to harvest agricultural produce in sufficient quantities and in a timely manner.

Property risk:

There are several risks affecting the Group’s property investments. The composition of the Group’s property portfolio including asset concentration and lot size may impact liquidity and relative property performance. The Group has a large multi-asset portfolio and monitors its concentration and average investment property lot size.

A change in trends and economic conditions causes shifts in customer demands for properties with impact on new lettings, renewal of existing leases and reduced rental growth. Also changes increase risk of tenant insolvencies. The Group conducts several actions to mitigate some of these risks whenever possible. The variety of asset types and geographical spread as well as a diversified tenant base, with monitoring of tenant concentration, helps mitigating these risks.

The development, administration and profitability of shopping centers are impacted by various factors including: the accessibility and the attractiveness of the area where the shopping center is located, the intrinsic attractiveness of the shopping center, the flow of people, the level of sales of each shopping center rental unit, the increasing competition from internet sales, the amount of rent collected from each shopping center rental unit and the fluctuations in occupancy levels in the shopping centers. In the event that there is an increase in operational costs, caused by inflation or other factors, it could have a material adverse effect on the Group if its tenants are unable to pay their higher rent obligations due to the increase in expenses. Argentine Law N° 24,808 provides that tenants may rescind commercial lease agreements after the initial six months upon not less than sixty days written notice, subject to penalties of only one-and-a-half month rent if the tenant rescinds during the first year of the lease, and one-month rent if the tenant rescinds during the second year of the lease. The exercise of such rescission rights could materially and adversely affect the Group.


F-105

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



4.
Financial risk management (Continued)

Risks associated with development properties activities include the following:  the potential abandonment of development opportunities; construction costs exceeding original estimates, possibly making a project uneconomical; occupancy rates and rents at newly completed projects may be insufficient to make the project profitable. On the other hand, the Group’s inability to obtain financing on favorable terms for the development of the project; construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs; and the Group’s inability to obtain, or the delays in obtaining, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations; preconstruction buyers may default on their purchase contracts or units in new buildings may remain unsold upon completion of constructions; prices for residential units may be insufficient to cover development cost. The Group also takes several actions to monitor these risks and respond appropriately whenever it is under its control. The Group has in-house property market research capability and development teams that monitor development risks closely. The Group generally adopts conservative assumptions on leasing and other variables and monitors the level of committed future capital expenditure on development programs relative to the level of undrawn facilities.

The Group’s hotel properties face specific risks as well. The success of the Group’s hotel properties will depend, in large part, upon the Group’s ability to compete in areas such as access, location, quality of accommodations, room rate structure, quality and scope of food and beverage facilities and other services and amenities. The Group’s hotels may face additional competition if other companies decide to build new hotels or improve their existing hotels such that they are more attractive to potential guests. In addition, their profitability depends on (i) the Group’s ability to form successful relationships with international operators to run the hotels; (ii) changes in travel patterns, including seasonal changes; and (iii) taxes and governmental regulations which influence or determine wages, prices, interest rates, construction procedures and costs.

5.  Critical accounting estimates, assumptions and judgments

The Group’s significant accounting policies are stated in Note 2. Not all of these significant accounting policies require management to make subjective or complex judgments or estimates. The following section is intended to provide an understanding of the policies that management considers critical because of the level of complexity, judgment or estimation involved in their application and their impact on the consolidated financial statements. These judgments involve assumptions or estimates in respect of future events. Actual results may differ from these estimates.


F-106

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.  
Critical accounting estimates, assumptions and judgments (Continued)

(a) Business combinations – purchase price allocation

The acquisition of subsidiaries is accounted for using the acquisition method. Accounting for business combinations requires the determination of the fair value of to the various assets and liabilities of the acquired business. The Group uses all available information to make these fair value determinations, and for major acquisitions, may hire an independent appraisal firm to assist in making fair value estimates. In some instances, assumptions with respect to the timing and amount of future revenues and expenses associated with an asset might have to be used in determining its fair value. These assumptions may differ materially from those initial estimates, and if the timing is delayed significantly or if the net cash flows decline significantly, the asset could become impaired.

(b) Impairment testing of goodwill and other non-current assets

As of the end of each fiscal year, the Group reviews the carrying amounts of its property, plant and equipment, investment property and finite-life intangible assets to determine whether there is any indicator that those assets have suffered an impairment loss. The indicators that must be taken into account in the analysis are, among other points, physical damage or significant changes to the manner in which the asset is used, worse than expected economic performance or a drop in revenues. Where the asset does not generate cash flows that are independent from others assets, the Group estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs.

Goodwill and Intangible assets that are not amortized are tested for impairment on an annual basis, or more frequently if there is an indicator of impairment. For the purposes of the impairment testing, goodwill is to be allocated since acquisition among each of the CGU or groups of cash generating units that are expected to benefit from the synergies of the respective business combinations, regardless of the allocation of other assets or liabilities owned by the acquired entity to these cash-generating units or groups of cash-generating units.

If the recoverable amount of an asset or CGU is lower than its carrying amount, the carrying value of the asset or CGU is thus written down to its recoverable value. The impairment losses are recorded immediately in the income statements.

Given the nature of its assets and activities, most of the Group´s individual assets do not generate cash flows that are independent of those from CGU. Therefore, the Group estimates the recoverable amount of the CGU for the purposes of the impairment test.



F-107

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


5.  
Critical accounting estimates, assumptions and judgments (Continued)

Generally, each shopping center, office building and undeveloped property is deemed to be separate CGU. As regards, farmlands used for agricultural activities, when farmland is used for single activities (i.e. crops), it is considered as one CGU, but when farmlands are used for more than one activity (i.e. crops and cattle), the farmland is further subdivided into two or more CGUs, as appropriate, for purposes of impairment testing.

There are no indicators of impairment in goodwill and other assets during the year ended June 30, 2014. As of June 30, 2015, the circumstances mentioned in Note 7 referred to Arcos del Gourmet S.A. were deemed to be potential proof of impairment and, therefore, the Company carried out relevant analysis on consolidated net assets in this transaction. To such end, the Company has determined the recoverable value of such assets using the discounted cash flow valuation method upon weighing various scenarios. The main inputs used in the model include projected operating income and a discount rate in line with the business. Each revenue and cost scenario was assigned an occurrence probability rate based on information available at the time of conducting the analysis. The Company concluded that it is not necessary to record any impairment of its related assets.

The following table shows the amounts of goodwill and non-current assets other than goodwill of the CGUs where goodwill was allocated at the date of acquisition for each of June 30, 2015 and 2014:

CGUCountrySegmentMethod of valuation  06.30.15   06.30.14 
AbastoArgentinaShopping Centers(i)  3,307   3,307 
Alto PalermoArgentinaShopping Centers(i)  3,609   3,608 
Arcos del Gourmet S.A.ArgentinaShopping Centers(i)  30,260   20,873 
Bouchard 551ArgentinaOffices and other rental properties(i)  2,878   2,878 
Santa María del PlataArgentinaSales and development(i)  4,535   4,535 
Torre Bank BostonArgentinaOffices and other rental properties(i)  4,873   4,873 
ConilArgentinaSales and development(i)  -   344 
JatobáBrazilAgriculture(i)  2,708   2,721 
ChaparralBrazilAgriculture(i)  2,035   2,046 
CremaqBrazilAgriculture(i)  -   2,415 
AraucariaBrazilAgriculture(i)  3,667   3,250 
      57,872   50,850 
Closing value of non-current assets other tan goodwill (ii)  1,725,644   1,918,578 
Total assets allocated to CGUs  1,783,516   1,969,428 

(i)  The following table details the models used for each segment.
(ii)  Non-current assets include investment properties (primarily shopping centers and offices), properties, plant and equipment; intangible assets and net working capital.



F-108

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.  
Critical accounting estimates, assumptions and judgments (Continued)

The Group carried out the impairment test on these CGU on the basis of its value in use and determined that no impairment should be recognized on the value of these assets for any of the reported years.

For the CGU included in segments “International”, “Offices and others” and “Shopping centers” ” the Group uses the fair value of investment property estimated by independent appraisers. The involvement of an independent appraiser is required according to CNV Resolution N° 576/10.

For purposes of calculating the fair value for impairment tests and/or to disclose it in a note to the financial statements the Group uses various valuation techniques: discounted cash flows, capitalization method and market comparables, depending on the type of ownership involved, as indicated below.

Under the cash flows model, or discounted cash flows independent appraisers estimate the amount of net future cash flows based on the specific features of each property (including but not limited to location, sales, occupation and turnout, useful lives, among others), existing agreements, market information and future forecasts as of the valuation date. Net income forecasts and revenues growth rates are among the most important assumptions used in the valuation. This estimate also considers the discount rates that reflect the market assessments regarding uncertainties in terms of the cash flow amount and timing. Any inaccuracy in the most sensitive assumptions used by the appraisers may result in differences in the fair value of the Group’s properties.

The Group uses the capitalization method ("cap rate") for valuation of its investment properties at fair value. The methodology involves designing simulation models whereby the current annual operating income flaw of a given asset is considered to be a stabilized low in perpetuity, and is divided by a capitalization rate derived from market comparables; the rate is adjusted for any difference in the major features (either size, location and condition of asset) to determine its fair value. The Group considers that the new methodology reflects more reliably the fair market value of its shopping centers for it is based on the current annual net operating income of various assets and uses market information to determine the capitalization rate; as such, it is a more transparent method internationally recognized in the industry. Additionally, it is the same methodology used to value the shopping center segments in other companies, hence, it is more useful to make comparisons against such valuations.


F-109

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

As of June 30, 2015 and 2014 fair value of investment was computed using a weighted average capitalization rate of 12% and 10% (a 10% to 15% range was considered for the year 2015 and 9% to 12% for the year 2014).

Generally, an increase in the annual flow of operating income will lead to an increase in the fair value of investment properties. An increase in the capitalization rate will lead to a decline in the fair value of investment properties.

For those assets that are not currently operating under a concession contract, the discounted cash flow valuation is used.

Under the model of sales comparison approach (or comparable market data), the sale price of comparable property located nearby is adjusted by the differences in the most significant features of such property, such as, size and condition. The most relevant data included in this method is the price per square meter.

The following table details the models used for each segment:

CGU  06.30.15   06.30.14 
Operating Shopping Center Properties Capitalization  Capitalization 
Shopping Center Properties (Concession) Discounted cash flows  Discounted cash flows 
Offices and other rental properties Comparable market data  Comparable market data 
International  -  Discounted cash flows 
Sales and developments Comparable market data  Comparable market data 
Agriculture Comparable market data  Comparable market data 

Finally, for the CGUs included in the “Agriculture” business segment, the fair value of farmland is also estimated using the comparative sales method. In these cases, farmland is valued based on its production value, that is, its capacity to produce grains and/or raise cattle, as well as other factors, such as the weather or the geographic location. Farmland is classified in accordance with factors such as texture and quality, yield, topography, rain levels and soil drainage. Based on the factors listed before, different land classifications are assigned to each rural property in order to ascertain its value. Soil classifications quantify factors that contribute to the agricultural capacity of such soil, and range from the most productive to the least productive soil for agricultural activity. A price is assigned per hectare to each type of soil. This price per hectare is based on a quantitative and qualitative analysis which takes into consideration the current yield and productivity of that soil, the potential productivity of the soil based on its best use, the projected gross margin derived from the use of the soil, the rental value obtained from the use of the soil, if applicable, and the existence of comparable farmland of similar characteristics in the same topographic area. The results obtained as a result of the description above are compared to actual sale prices, if available, and the market current conditions, in order to ensure that such values are correct, consistent and fair.


F-110

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.  
Critical accounting estimates, assumptions and judgments (Continued)

Management believes these assumptions are conservative and that any reasonable change in them would not increase the book value of the CGUs so as to exceed its recoverable value.

(c) Biological assets and agricultural produce at the point of harvest

The Group measures biological assets that have attained significant biological growth and agricultural produce at the point of harvest at fair value less costs to sell. Biological assets include mainly unharvested crops, beef and dairy cattle, sheep and sugarcane plantations. The agricultural produce includes harvested crop, raw meat, raw milk, wool and others.

Crops and oilseeds

The Group’s crops generally include crops and oilseeds (corn, wheat, soybean and sunflower) as well as peanut. The Group measures biological assets that have attained significant biological growth at fair value less costs to sell. The Group measures biological assets that have not attained significant biological growth or when the impact of biological transformation on price is not expected to be material, at cost less any impairment losses, which approximates fair value.

The following table shows the stages and average periods where the Group´s crops have a significant biological growth, based on agronomical studies and other inputs:

Argentina

CropsTotal days (planting/harvest) 
Average days
(planting/harvest)
 Significant Biological GrowthTotal days (planting/significant growth) Average days (planting/significant growth) 
WheatFrom 150 to 180  165 7 (milk grain stage)From 110 to 140  125 
CornFrom 150 to 180  165 R3 (milk grain stage)From 80 to 110  95 
SoybeansFrom 120 to 160  140 R5 (Start of seed filling at node)From 75 to 90  82.5 
SunflowersFrom 120 to 150  135 R6 (end of flowering stage)From 80 to 100  90 
PeanutFrom 180 to 270  240 R5 (Start of seed filling at node)From 90 to 100  95 
CottonFrom 130 to 180  155 3 (end of flowering stage)From 90 to 120  105 


F-111

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


5.
Critical accounting estimates, assumptions and judgments (Continued)

Bolivia

CropsTotal days (planting/harvest) 
Average days
(planting/harvest)
 Significant Biological GrowthTotal days (planting/significant growth) Average days (planting/significant growth) 
WheatFrom 100 to 112  106 7 (milk grain stage)From 80 to 90  85 
CornFrom 130 to 140  130 R3 (milk grain stage)From 88 to 96  92 
SorghumFrom 110 to 130  120 7 (milk grain stage)From 80 to 90  85 
SoybeansFrom 110 to 120  117 R5 (start of seed filling)From 75 to 85  80 
SunflowersFrom 105 to 115  110 R6 (end of flowering stage)From 75 to 85  80 

Brazil

CropsTotal days (planting/harvest) 
Average days
(planting/harvest)
 Significant Biological GrowthTotal days (planting/significant growth) Average days (planting/significant growth) 
CornFrom 125 to 150  137.5 R3 (milk grain stage)From 88 to 96  92 
SoybeansFrom 100 to 140  120 R5 (start of seed filling)From 75 to 90  82.5 

The Group’s fiscal year begins on July 1 and ends the following June 30 of the following year. However, production is based on the harvest year of each one of these crops. The harvest year varies according to the crop, the type or variety of hybrid and the climate where they are grown. The planting period for a given plant may start earlier on one farm than on another, causing differences in their respective harvesting periods.

The following table shows the production process for each of Group’s most significant crops and oilseeds, reflecting the average periods at which each stage of production occurs:

Argentina

CropsPlantingHarvestingSell
SoybeansBetween September and FebruaryBetween March and JuneFrom March onwards
CornBetween August and FebruaryBetween March and SeptemberFrom March onwards
WheatBetween May and JulyBetween October and JanuaryFrom October onwards
SunflowersBetween August and DecemberBetween December and MayFrom December onwards
PeanutBetween September and OctoberBetween April and JulyFrom April  onwards
CottonBetween November and DecemberBetween July and AugustFrom July onwards



F-112

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

Bolivia

CropsPlantingHarvestingSell
Summer SoybeansBetween November and DecemberBetween March and MayFrom April to June
Winter SoybeansBetween June and JulyBetween October and NovemberFrom October to December
Winter cornAprilSeptemberFrom September to December
Winter sorghumMarchJulyFrom August to December
WheatBetween April and MayBetween August and SeptemberFrom August to December
SunflowersAprilBetween August and SeptemberFrom August to December
Corn / Summer SorghumBetween October and NovemberBetween March and AprilFrom April to June/July

Brazil

CropsPlantingHarvestingSell
SoybeansBetween October and DecemberBetween February and MayFrom February onwards
CornBetween October and NovemberBetween March and MayFrom March  onwards
Corn (2)Between February and MarchBetween June and JulyFrom June onwards

Sugarcane

The Group’s sugarcane production is based in Brazil and to a lesser extent in Bolivia. This crop’s production requires specific weather conditions (tropical and subtropical climates) because it is a perennial and long-term crop with an average life cycle of five years. Each sugarcane planting generally yields five harvests. Once the production life cycle is over, crop renewal is brought about. Sugarcane planting is done between January and April each year, while harvesting and subsequent sale take place between April and November each year. The Group recognizes these crops at a fair value net of costs of sales from the moment of planting.

The following table shows the production process for each of Group’s sugarcane, reflecting the average periods at which each stage of production occurs.

Bolivia

CropsPlantingHarvestingSell
SugarcaneBetween April and JuneBetween July and NovemberFrom July onwards

Brazil

CropsPlantingHarvestingSell
SugarcaneBetween January and AprilBetween April and NovemberFrom April and November


F-113

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

Other biological assets:

The mares and sheep are measured at fair value less costs to sell at birth or acquisition date, accordingly.

Fair value of biological assets:

When an active market exists for biological assets, the Group uses the quoted market price in the principal market as a basis to determine the fair value of its biological. Live cattle is measured at fair value less selling costs, based on market quoted at an auction involving cattle of the same age, breed and genetic merit adjusted, if applicable, to reflect any difference. When there is no active market or market-determined prices are not available, (for example, unharvested crops with significant growth), the Group determines the fair value of a biological asset in its present location and condition based on the present value of expected net cash flows from the biological asset discount (“DCF”). The DCF model requires the input of highly subjective assumptions including observable and unobservable data. Generally the estimation of the fair value of biological assets is based on models or inputs that are not observable in the market and the use of unobservable inputs is significant to the overall valuation of the assets. Key assumptions utilized in the DCF method include future market prices, estimated yields at the point of harvest and estimated future costs of harvesting and other costs.

Market prices are generally determined by reference to observable data in the principal market for the agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated based on several factors including the location of the farmland and soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of the Group’s control including but not limited to extreme or unusual weather conditions, plagues and other crop diseases.

The key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used may result in a significant increase or decrease to the fair value of biological assets recognized at any given time. Cash flows are projected based on estimated production. Estimates of production in themselves are dependent on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact on estimated production, and could therefore affect estimates of future cash flows used in the assessment of fair value. (The valuation models and their assumptions are reviewed periodically, and, if necessary, adjusted).


F-114

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

As of June 30 of each year, the Group’s biological assets that are subject to a valuation model include unharvested crops and sugarcane plantations. The sensitivity analysis included below is divided among countries due to the existing differences between the different markets in which it operates.

Argentina

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated market prices, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops of Ps. 16.6 million, Ps. 26.2 million and Ps. 7.4 million, respectively. An increase of 10% in estimated market prices, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

As of June 30, 2015, 2014 and 2013, an increase of 10% in estimated costs, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops of Ps. 11.4 million, Ps. 14 million and Ps. 3.6 million, respectively. A decrease of 10% in estimated costs, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated yield, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops of Ps. 8.4 million, 18.5 million and Ps. 5.8 million, respectively. An increase of 10% in estimated yields, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

Brazil

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated market prices, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops and sugarcane plantations of Ps. 11.7 million, Ps. 6.7 million and Ps. 21.6 million, respectively. An increase of 1% in estimated market prices, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops and sugarcane plantations.


F-115

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

As of June 30, 2015, 2014 and 2013, an increase of 10% in estimated costs, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops of Ps. 31.0 million, Ps. 24.8 million and Ps. 15.6 million, respectively. A decrease of 1% in estimated costs, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated yields, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops and sugarcane plantations of Ps. 21.3 million, Ps. 23.5 million and Ps. 15.6 million, respectively. An increase of 1% in estimated yield, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

Bolivia

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated market prices, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops and sugarcane plantations of Ps. 7.8 million, Ps. 6.0 million and Ps. 5.4 million, respectively. An increase of 10% in estimated market prices, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

As of June 30, 2015, 2014 and 2013, an increase of 10% in estimated costs, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops and sugarcane plantations of Ps. 5.1 million, Ps. 3.7 million and Ps. 3.0 million, respectively. A decrease of 10% in estimated market price, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.

As of June 30, 2015, 2014 and 2013, a decrease of 10% in estimated yield, with all other variables held constant, would result in a decrease in the fair value less cost to sell of the unharvested crops and sugarcane plantations of Ps. 4.6 million, Ps. 3.7 million and Ps. 3.4 million, respectively. An increase of 10% in estimated yield, with all other variables held constant, would result in a same and opposed effect at the fair value less costs to sell of unharvested crops.


F-116

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

(d) Trading properties

Trading properties include land and work in progress in respect of development sites with a view to sale. Trading properties are carried at the lower between cost and net realizable value. On each development, judgment is required to assess whether the cost of land and any associated construction work in progress is in excess of its net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs to completion and estimated selling costs.

The estimation of the net realizable value of the Group’s trading properties under development, is inherently subjective due to a number of factors, including their complexity, unusually large size, the substantial expenditure required and long timescales to completion. In addition, as a result of these timescales to completion, the plans associated with these developments could be subject to significant variation. As a result, the net realizable values of the Group’s trading properties are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate.

If actual results differ from the assumptions upon which the external valuer has based its valuation, this may have an impact on the net realizable value of the Group’s trading properties, which would in turn have an effect on the Group’s financial condition.

(e) Fair value of derivatives and other financial instruments

Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at statement of financial position.

(f) Allowance for doubtful accounts

As described on Note 2.18, the Group makes some estimation in order to calculate the provision for doubtful accounts. If the amount estimated differs to the present value, actual write-offs would be more/less than expected.


F-117

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



5.
Critical accounting estimates, assumptions and judgments (Continued)

(g) Income taxes

The Group is subject to income taxes in different jurisdictions. Significant judgment is required in determining the overall provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

The Group assesses the realizability of deferred tax assets, by considering whether it is probable that some portion or all of the deferred tax assets will not be realized. In order to make this assessment, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. See Note 28 for details.

6.  Segment information

IFRS 8 requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”). Such function is carried out by the Group’s Executive Committee in deciding how to allocate resources and in assessing performance, without prejudice of the powers and responsibilities of the management body, that is to say, the Board of Directors. CODM evaluates the business based on the differences in the nature of its products, operations and risks. The amount reported for each segment item is the measure reported to the CODM for these purposes. In turn, the Board of Directors’ management is assessed by the Shareholders’ Meeting, which is the governance body.

Operating segments identified are disclosed as reportable segments if they meet any of the following quantitative thresholds:

·  The operating segment’s reported revenue, including both sales to external customers and inter-segment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments;


F-118

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

·  The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of:

o  the combined reported profit of all operating segments that do not report a loss; and

o  the combined reported loss of all operating segments that report a loss.

·  Its assets are 10% or more of the combined assets of all operating segments.

As well as this, the operating segments that do not meet any of the quantitative thresholds can be considered as reportable segments if the management estimates that this information could be useful for the users of the financial statements.

If, after determining reportable segments in accordance with the preceding quantitative thresholds, the total external revenue attributable to those segments amounts to less than 75% of the total Group’s consolidated external revenue, additional segments are identified as reportable segments, even if they do not meet the thresholds described above, until at least 75% of the Group’s consolidated external revenue is included in reportable segments. Once the 75% of the Group’s consolidated external revenue is included in reportable segments, the remaining operating segments may be aggregated in the "All other segments" column.

Segment information has been prepared and classified according to different types of businesses in which the Group conducts its activities. The Group operates in two businesses areas, namely, Agricultural business and Investment and Development Properties business.

The Group’s Agricultural business is further comprised of eight reportable segments: (the reporting segments of crops, cattle, dairy, sugarcane, agricultural rentals and services and other segments are included within “Agriculture” activities):

·  
The “Crops” Segment consists of planting, harvesting and sale of crops as wheat, corn, soybeans, cotton, and sunflowers. The Group is focused on the long-term performance of the land and seeks to maximize the use of the land through crop rotation; the use of technology and techniques. In this way, the type and quantity of harvested crops change in each agricultural campaign.


F-119

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)
·  
The “Cattle” Segment consists of breeding, purchasing and/ or fattening of free-range beef cattle for sale to meat processors and local livestock auction markets.
·  
The “Dairy” Segment consists of breeding and/ or purchasing dairy cows for the production of raw milk for sale to local milk and milk-related products producers.
·  
The “Sugarcane” Segment consists of planting, harvesting and sale of sugarcane.
·  
The “Agriculture Rentals and Services” Segment consists of services (for example: irrigation) and leasing of the Group’s farms to third parties.
·  
The “Land transformation and sales” Segment comprises gains from the disposal and development of farmlands activities.

·  
The “Agro-industrial” Segment consists of feedlot farming and the slaughtering and processing in the meat refrigerating plant. Feedlot farming is distinctive and requires specific care and diets which differ from those provided to free-range cattle. This activity represents a separate operating segment due to the distinctive characteristics of the cattle feedlot system and the industrialized meat processing in the packing plant.
·  
The "Other Segments" column consists of the aggregation of the remaining operating segments, which do not meet the quantitative thresholds for disclosure includes the brokerage and sale of inputs activities.

The Group’s Urban Properties and Investments business is further comprised of six operative segments:

·The “Shopping centers Properties” Segment includes results from the commercial exploitation and development of shopping centers. Such results originate mainly from the lease and the delivery of services related to the lease of commercial facilities and other spaces in the Group’s shopping centers.

·The “Office” Segment includes the operating results of the Group’s lease of office space and other rental properties and service revenues related to this activity.

·The “Development and sale of properties” Segment includes the operating results of the sales of undeveloped parcels of land and/or trading properties, as the results related with its development and maintenance. Also included in this segment are the results of the sales of real property intended for rent, sales of hotels and other properties included in the International segment.


F-120

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

·The “Hotels” Segment includes the operating results of the Group’s hotels principally comprised of room, catering and restaurant revenues.

·The “International” Segment includes the return on investments in subsidiaries and/or associates that mainly operate in the United States in relation to the lease of office buildings and hotels in that country and the return on investment in IDBD at fair value.

·The "Financial operations and others" Segment primarily includes the financial activities carried out by the Group's associates, Banco Hipotecario S.A. and Tarshop S.A. and consumer finance residual financial operations of Apsamedia S.A. (currently merged with IRSA CP). The e-commerce activities conducted through the associate Avenida Inc. are also included until the first quarter of the current fiscal year. This investment began to be considered a financial asset as from the second quarter of this fiscal year.

For ease of presentation, the following table present summarized information for the two lines of business of the Group, i.e. agriculture and Urban Properties and Investments activities. The following tables represent the reportable segments of each of the Group’s lines of business.


F-121

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

Below is a summarized analysis of the lines of business of the Group for the years ended June 30, 2015, 2014 and 2013:

  Year ended June 30, 2015 
  
Agricultural business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues                                                                                                           2,361,010   2,547,062   4,908,072 
Costs                                                                                                           (3,385,675)  (633,467)  (4,019,142)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,347,447   -   1,347,447 
Changes in the net realizable value of agricultural produce after harvest  (34,471)  -   (34,471)
Gross Profit                                                                                                           288,311   1,913,595   2,201,906 
Gain from disposal of investment properties                                                                                                           -   1,150,230   1,150,230 
Gain from disposal of farmlands                                                                                                           569,521   -   569,521 
General and administrative expenses                                                                                                           (246,470)  (378,125)  (624,595)
Selling expenses                                                                                                           (284,830)  (195,866)  (480,696)
Other operating results, net                                                                                                           (18,123)  28,679   10,556 
Profit from operations   308,409   2,518,513   2,826,922 
Share of profit / (loss) of associates and joint ventures                                                                                                           846   (1,036,256)  (1,035,410)
Segment Profit   309,255   1,482,257   1,791,512 
Investment properties                                                                                                           77,202   3,493,645   3,570,847 
Property, plant and equipment                                                                                                           2,078,497   256,891   2,335,388 
Trading properties                                                                                                           -   136,084   136,084 
Goodwill                                                                                                           8,395   24,440   32,835 
Units to be received under barters                                                                                                           -   90,486   90,486 
Biological assets                                                                                                           586,847   -   586,847 
Inventories                                                                                                           495,919   23,134   519,053 
Interests in associates and joint ventures                                                                                                           33,343   2,381,670   2,415,013 
Total segment assets                                                                                                           3,280,203   6,406,350   9,686,553 


F-122

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

  Year ended June 30, 2014 
  
Agricultural business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues                                                                                                           1,812,108   2,155,760   3,967,868 
Costs                                                                                                           (2,617,972)  (648,279)  (3,266,251)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,172,739   -   1,172,739 
Changes in the net realizable value of agricultural produce after harvest  (17,447)  -   (17,447)
Gross Profit                                                                                                           349,428   1,507,481   1,856,909 
Gain from disposal of investment properties                                                                                                           -   230,918   230,918 
Gain from disposal of farmlands                                                                                                           91,356   -   91,356 
General and administrative expenses                                                                                                           (239,630)  (300,066)  (539,696)
Selling expenses                                                                                                           (208,932)  (150,109)  (359,041)
Other operating results, net                                                                                                           (29,540)  (47,922)  (77,462)
(Loss) / Profit from operations   (37,318)  1,240,302   1,202,984 
Share of profit / (loss) of associates and joint ventures                                                                                                           11,479   (436,766)  (425,287)
Segment (Loss) / Profit   (25,839)  803,536   777,697 
Investment properties                                                                                                           51,432   3,540,437   3,591,869 
Property, plant and equipment                                                                                                           2,417,078   237,860   2,654,938 
Trading properties                                                                                                           -   143,059   143,059 
Goodwill                                                                                                           10,428   24,784   35,212 
Units to be received under barters                                                                                                           -   85,077   85,077 
Assets held for sale                                                                                                           -   1,357,866   1,357,866 
Biological assets                                                                                                           651,582   -   651,582 
Inventories                                                                                                           432,634   17,220   449,854 
Interests in associates and joint ventures                                                                                                           37,226   1,966,019   2,003,245 
Total segment assets                                                                                                           3,600,380   7,372,322   10,972,702 


F-123

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

  Year ended June 30, 2013 
  
Agricultural
business
(I)
  
Urban properties and investments
(II)
  Total 
Revenues                                                                                                           1,355,430   1,728,248   3,083,678 
Costs                                                                                                           (2,045,779)  (601,236)  (2,647,015)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  888,493   -   888,493 
Changes in the net realizable value of agricultural produce after harvest  11,756   -   11,756 
Gross Profit                                                                                                           209,900   1,127,012   1,336,912 
Gain from disposal of investment properties                                                                                                           -   177,999   177,999 
Gain from disposal of farmlands                                                                                                           149,584   -   149,584 
General and administrative expenses                                                                                                           (153,675)  (198,773)  (352,448)
Selling expenses                                                                                                           (173,976)  (117,230)  (291,206)
Other operating results, net                                                                                                           3,345   92,425   95,770 
Profit from operations   35,178   1,081,433   1,116,611 
Share of profit / (loss) of associates and joint ventures                                                                                                           9,191   (20,864)  (11,673)
Segment Profit   44,369   1,060,569   1,104,938 
             
Investment properties                                                                                                           25,317   4,306,984   4,332,301 
Property, plant and equipment                                                                                                           1,675,420   231,734   1,907,154 
Trading properties                                                                                                           -   129,677   129,677 
Goodwill                                                                                                           6,438   75,852   82,290 
Units to be received under barters                                                                                                           -   93,225   93,225 
Biological assets                                                                                                           402,594   -   402,594 
Inventories                                                                                                           239,010   16,428   255,438 
Interests in associates and joint ventures                                                                                                           31,223   1,154,830   1,186,053 
Total segment assets                                                                                                           2,380,002   6,008,730   8,388,732 


F-124

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

(I)  Agriculture line of business:

The following tables present the reportable segments of the agriculture line of business of the Group for the years ended June 30, 2015, 2014 and 2013:

  June 30, 2015 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business (i) 
Revenues (i)
  986,717   143,562   71,940   197,828   37,175   1,437,222   -   806,018   117,770   2,361,010 
Costs                                                                        (1,795,443)  (224,556)  (133,259)  (368,172)  (19,201)  (2,540,631)  (9,002)  (739,201)  (96,841)  (3,385,675)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  918,319   166,734   74,919   187,475   -   1,347,447   -   -   -   1,347,447 
Changes in the net realizable value of agricultural produce after harvest  (34,474)  3   -   -   -   (34,471)  -   -   -   (34,471)
Gross Profit / (Loss)  75,119   85,743   13,600   17,131   17,974   209,567   (9,002)  66,817   20,929   288,311 
Gain from disposal of farmlands    -   -   -   -   -   -   569,521   -   -   569,521 
General and administrative expenses                        (159,036)  (25,753)  (4,920)  (19,821)  (2,140)  (211,670)  (2,106)  (25,334)  (7,360)  (246,470)
Selling expenses                  (160,378)  (20,109)  (3,667)  (7,770)  (717)  (192,641)  (2,383)  (77,146)  (12,660)  (284,830)
Other operating results, net      (8,636)  (3,158)  (773)  (1,669)  (336)  (14,572)  (4,601)  (288)  1,338   (18,123)
Profit / (Loss) from Operations   (252,931)  36,723   4,240   (12,129)  14,781   (209,316)  551,429   (35,951)  2,247   308,409 
Share of profit of associates              845   1   -   -   -   846   -   -   -   846 
Segment Profit / (Loss)   (252,086)  36,724   4,240   (12,129)  14,781   (208,470)  551,429   (35,951)  2,247   309,255 
                                         
Investment properties               -   -   -   -   77,202   77,202   -   -   -   77,202 
Property, plant and equipment                   1,420,781   187,100   21,951   293,386   28,681   1,951,899   53,522   18,102   54,974   2,078,497 
Goodwill                                                                        5,352   -   -   2,400   -   7,752   -   -   643   8,395 
Biological assets      57,813   375,357   40,555   113,122   -   586,847   -   -   -   586,847 
Inventories                                                                        307,853   58,529   1,010   2,418   -   369,810   -   23,415   102,694   495,919 
Interests in associates       30,530   20   -   -   -   30,550   -   -   2,793   33,343 
Total segment assets (ii)    1,822,329   621,006   63,516   411,326   105,883   3,024,060   53,522   41,517   161,104   3,280,203 

(i)  From all of the Group’s revenues corresponding to agricultural business, Ps. 1,668.86 million is originated in Argentina and Ps. 692.15 million in other countries, principally Brazil for Ps. 553.97 million.
(ii)  From all of the Group’s assets included in the segment corresponding to agricultural business, Ps. 1,378.99 million is located in Argentina and Ps. 1,902.36 million in other countries, principally Brazil for Ps. 1,187.37 million.


F-125

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

  June 30, 2014 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business (i) 
Revenues (i)
  836,822   90,315   53,935   123,851   29,142   1,134,065   -   554,084   123,959   1,812,108 
Costs                                                                        (1,540,681)  (160,660)  (104,334)  (206,751)  (17,374)  (2,029,800)  (8,228)  (479,689)  (100,255)  (2,617,972)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  868,351   145,321   62,840   96,227   -   1,172,739   -   -   -   1,172,739 
Changes in the net realizable value of agricultural produce after harvest  (17,624)  177   -   -   -   (17,447)  -   -       (17,447)
Gross Profit / (Loss)           146,868   75,153   12,441   13,327   11,768   259,557   (8,228)  74,395   23,704   349,428 
Gain from disposal of farmlands                    -   -   -   -   -   -   91,356   -   -   91,356 
General and administrative expenses     (147,193)  (27,183)  (5,746)  (28,261)  (2,669)  (211,052)  (1,130)  (16,880)  (10,568)  (239,630)
Selling expenses                    (117,829)  (13,854)  (2,249)  (4,871)  (779)  (139,582)  (3,873)  (54,751)  (10,726)  (208,932)
Other operating results, net                                (29,355)  (1,999)  (417)  104   (222)  (31,889)  (82)  (868)  3,299   (29,540)
Profit / (Loss) from Operations   (147,509)  32,117   4,029   (19,701)  8,098   (122,966)  78,043   1,896   5,709   (37,318)
Share of profit of associates                                 11,029   7   -   -   -   11,036   -   -   443   11,479 
Segment Profit / (Loss)   (136,480)  32,124   4,029   (19,701)  8,098   (111,930)  78,043   1,896   6,152   (25,839)
                                         
Investment properties                         -   -   -   -   51,432   51,432   -   -   -   51,432 
Property, plant and equipment                   1,701,388   158,507   19,451   423,902   9,794   2,313,042   51,534   18,930   33,572   2,417,078 
Goodwill                                                                        6,745   -   -   3,025   -   9,770   -   -   658   10,428 
Biological assets                      154,630   312,068   37,263   142,873   -   646,834   -   65   4,683   651,582 
Inventories                                                                        302,052   28,881   651   1,702   -   333,286   -   25,878   73,470   432,634 
Interests in associates                           34,395   23   -   -   -   34,418   -   -   2,808   37,226 
Total segment assets (ii)  2,199,210   499,479   57,365   571,502   61,226   3,388,782   51,534   44,873   115,191   3,600,380 

(i)  From all of the Group’s revenues corresponding to agricultural business, Ps. 1,277.62 million is originated in Argentina and Ps. 534.49 million in other countries, principally Brazil for Ps. 415.02 million.
(ii)  From all of the Group’s assets included in the segment corresponding to agricultural business, Ps. 1,252.06 million is located in Argentina and Ps. 2,348.32 million in other countries, principally Brazil for Ps. 1,727.36 million.


F-126

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

  June 30, 2013 
  Agriculture             
  Crops  Cattle  Dairy  Sugarcane  Agricultural Rental and services  
Agricultural
Subtotal
  
Land
Transformation
and Sales
  Agro-industrial  
Other
segments
  Total Agricultural business (i) 
Revenues (i)
  750,376   82,939   38,818   160,259   30,834   1,063,226   -   208,921   83,283   1,355,430 
Costs                                                                    (1,227,832)  (147,290)  (74,826)  (302,206)  (12,052)  (1,764,206)  (5,675)  (204,681)  (71,217)  (2,045,779)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  572,081   79,336   40,741   197,317   -   889,475   -   -   (982)  888,493 
Changes in the net realizable value of agricultural produce after harvest  11,801   (45)  -   -   -   11,756   -   -   -   11,756 
Gross Profit / (Loss)  106,426   14,940   4,733   55,370   18,782   200,251   (5,675)  4,240   11,084   209,900 
Gain from disposal of farmlands      -   -   -   -   -   -   149,584   -   -   149,584 
General and administrative expenses         (89,585)  (13,719)  (3,125)  (24,163)  (4,416)  (135,008)  (572)  (10,986)  (7,109)  (153,675)
Selling expenses            (115,923)  (11,482)  (1,842)  (4,006)  (1,711)  (134,964)  (10,628)  (21,507)  (6,877)  (173,976)
Other operating results, net    (11,014)  (3,545)  (803)  (27)  (1,135)  (16,524)  (147)  (1,305)  21,321   3,345 
Profit / (Loss) from Operations   (110,096)  (13,806)  (1,037)  27,174   11,520   (86,245)  132,562   (29,558)  18,419   35,178 
Share of profit of associates                      8,117   -   -   -   -   8,117   -   16   1,058   9,191 
Segment Profit / (Loss)   (101,979)  (13,806)  (1,037)  27,174   11,520   (78,128)  132,562   (29,542)  19,477   44,369 
                                         
Investment properties            -   -   -   -   25,317   25,317   -   -   -   25,317 
Property, plant and equipment             1,115,211   136,824   21,440   303,283   456   1,577,214   58,026   20,287   19,893   1,675,420 
Goodwill                                                                    4,443   -   -   1,995   -   6,438   -   -   -   6,438 
Biological assets    56,395   197,136   28,134   111,063   -   392,728   -   66   9,800   402,594 
Inventories                                                                    154,730   23,184   433   939   -   179,286   -   10,419   49,305   239,010 
Interests in associates           28,858   -   -   -   -   28,858   -   -   2,365   31,223 
Total segment assets (ii)  1,359,637   357,144   50,007   417,280   25,773   2,209,841   58,026   30,772   81,363   2,380,002 

(i)  From all of the Group’s revenues corresponding to agricultural business, Ps. 803.9 million is originated in Argentina and Ps. 551.6 million in other countries, principally Brazil for Ps. 453.2 million.
(ii)  From all of the Group’s assets included in the segment corresponding to agricultural business, Ps. 883.1 million is located in Argentina and Ps. 1,496.9 million in other countries, principally Brazil for Ps. 1,190.1 million.


F-127

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)

6.
Segment information (Continued)

(ii)  Urban properties and investments

The following tables present the reportable segments of the Urban Properties and Investments line of business of the Group for the years ended June 30, 2015, 2014 and 2013:

  June 30, 2015 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  
Financial operations
and others
  Total Urban Properties and Investments 
Revenues (i)  1,778,310   332,728   13,707   396,297   25,873   147   2,547,062 
Costs  (291,183)  (36,368)  (19,457)  (278,672)  (7,121)  (666)  (633,467)
Gross Profit / (Loss)  1,487,127   296,360   (5,750)  117,625   18,752   (519)  1,913,595 
Gain from disposal of investment properties  -   -   1,150,230   -   -   -   1,150,230 
General and administrative expenses  (136,151)  (58,971)  (49,690)  (77,567)  (55,746)  -   (378,125)
Selling expenses  (112,825)  (21,130)  (9,146)  (52,386)  -   (379)  (195,866)
Other operating results, net  (48,810)  (117,610)  13,093   (461)  184,886   (2,419)  28,679 
Profit / (Loss) from Operations  1,189,341   98,649   1,098,737   (12,789)  147,892   (3,317)  2,518,513 
Share of profit / (loss) of associates and joint ventures  -   (2,570)  (1,712)  1,254   (1,191,116)  157,888   (1,036,256)
Segment Profit / (Loss)  1,189,341   96,079   1,097,025   (11,535)  (1,043,224)  154,571   1,482,257 
                             
Investment properties  2,320,845   978,125   187,824   -   -   6,851   3,493,645 
Property, plant and equipment  48,345   30,599   1,242   175,386   1,319   -   256,891 
Trading properties  1,484   -   134,600   -   -   -   136,084 
Goodwill  13,719   6,180   4,541   -   -   -   24,440 
Units to be received under barters  -   -   90,486   -   -   -   90,486 
Inventories  15,711   -   497   6,926   -   -   23,134 
Investments in associates and joint ventures  -   20,746   46,555   -   909,911   1,404,458   2,381,670 
Total segment assets (ii)  2,400,104   1,035,650   465,745   182,312   911,230   1,411,309   6,406,350 

(i)  From all of the Group’s revenues corresponding to urban properties and investment business, Ps. 2,522 million is originated in Argentina and Ps. 26 million in United States.
(ii)  From all of the Group’s assets included in urban properties and investment business, Ps. 5,389 million is located in Argentina and Ps. 1,639 million in other countries, principally in Israel for Ps. 907 and Uruguay for Ps. 106 million, respectively.


F-128

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

  June 30, 2014 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  
Financial operations
and others
  Total Urban Properties and Investments 
Revenues (i)  1,383,008   271,159   85,531   331,562   83,926   574   2,155,760 
Costs  (296,688)  (45,367)  (34,963)  (216,768)  (53,510)  (983)  (648,279)
Gross Profit / (Loss)  1,086,320   225,792   50,568   114,794   30,416   (409)  1,507,481 
Gain from disposal of investment properties  (82)  -   231,000   -   -   -   230,918 
General and administrative expenses  (101,538)  (41,945)  (37,466)  (59,585)  (59,476)  (56)  (300,066)
Selling expenses  (73,427)  (20,751)  (13,706)  (42,335)  -   110   (150,109)
Other operating results, net  (46,568)  (3,060)  8,137   (2,680)  (895)  (2,856)  (47,922)
Profit / (Loss) from Operations  864,705   160,036   238,533   10,194   (29,955)  (3,211)  1,240,302 
Share of profit / (loss) of associates and joint ventures  -   (895)  6,368   789   (616,313)  173,285   (436,766)
Segment Profit / (Loss)  864,705   159,141   244,901   10,983   (646,268)  170,074   803,536 
                             
Investment properties  2,275,053   834,480   423,442   -   -   7,462   3,540,437 
Property, plant and equipment  20,455   36,415   3,744   175,745   1,501   -   237,860 
Trading properties  1,484   -   141,575   -   -   -   143,059 
Goodwill  8,582   11,661   4,541   -   -   -   24,784 
Units to be received under barters  -   -   85,077   -   -   -   85,077 
Assets held for sale (iii)  -   -   -   -   1,357,866   -   1,357,866 
Inventories  10,625   -   584   6,011   -   -   17,220 
Investments in associates and joint ventures  -   23,208   38,289   22,129   628,658   1,253,735   1,966,019 
Total segment assets (ii)  2,316,199   905,764   697,252   203,885   1,988,025   1,261,197   7,372,322 

(i)  From all of the Group’s revenues corresponding to urban properties and investment business, Ps. 2,072 million is originated in Argentina and Ps. 84 million in United States.
(ii)  From all of the Group’s assets included in urban properties and investment business, Ps. 5,273 million is located in Argentina and Ps. 2,099 million in other countries, principally in United States for Ps. 1,988 million.
(iii)  See Note 44 for details.


F-129

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

  June 30, 2013 
  Shopping Center Properties  Offices  Sales and developments  Hotels  International  Financial operation and others  Total Urban Properties and Investments 
Revenues (i)  1,103,044   217,171   141,996   225,836   38,998   1,203   1,728,248 
Costs                                                                        (245,528)  (46,975)  (106,558)  (169,071)  (31,587)  (1,517)  (601,236)
Gross Profit / (Loss)  857,516   170,196   35,438   56,765   7,411   (314)  1,127,012 
Gain from disposal of investment properties  -   -   177,999   -   -   -   177,999 
General and administrative expenses      (67,597)  (34,984)  (32,901)  (49,883)  (13,158)  (250)  (198,773)
Selling expenses           (58,907)  (11,360)  (16,456)  (28,919)  -   (1,588)  (117,230)
Other operating results, net   (45,020)  (247)  6,342   (369)  135,082   (3,363)  92,425 
Profit / (Loss) from Operations                      685,992   123,605   170,422   (22,406)  129,335   (5,515)  1,081,433 
Share of profit / (loss) of associates and joint ventures  -   (2,514)  1,569   83   (82,552)  62,550   (20,864)
Segment Profit / (Loss)          685,992   121,091   171,991   (22,323)  46,783   57,035   1,060,569 
                             
Investment properties          2,249,180   857,782   447,363   -   744,587   8,072   4,306,984 
Property, plant and equipment                  17,385   29,830   3,972   180,348   199   -   231,734 
Trading properties               1,484   106   128,087   -   -   -   129,677 
Goodwill                                                                        8,582   11,661   4,540   -   51,069   -   75,852 
Units to be received under barters              -   -   93,225   -   -   -   93,225 
Inventories                                                                        10,003   -   463   5,962   -   -   16,428 
Investments in associates and joint ventures  -   23,385   32,759   21,339   802   1,076,545   1,154,830 
Total segment assets (ii)  2,286,634   922,764   710,409   207,649   796,657   1,084,617   6,008,730 

(i)  From all of the Group’s revenues corresponding to urban properties and investment business, Ps. 1,689 million is originated in Argentina and Ps. 39 million in United States, respectively.
(ii)  From all of the Group’s assets included in the urban properties and investment business, Ps. 5,131 million is located in Argentina and Ps. 877 million in other countries, principally in United States for Ps. 797 million.


F-130

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

Concerning agricultural business, cattle, dairy cattle and agroindustrial activities are mainly concentrated in Argentina. The crop activities of the Group are primarily concentrated in Argentina, Brazil, Bolivia and Paraguay, while sugar cane production is developed in Brazil and Bolivia.

The shopping center properties of the Group are all located in Argentina, the country of domicile of the Group. Substantially, offices and other rental properties of the Group are located in Argentina. Properties of the Group located in the United States, are disclosed in column "International". Hotels of the Group are located in Argentina and the United States. The trading properties of the Group are also located in Argentina and Uruguay.

During the fiscal years ended as of June 30, 2015, 2014 and 2013, the “Office and other rental properties” segment revenues include Ps. 52,693, Ps. 44,067 and Ps. 34,229, which represent 16% of the segment total revenues in the three fiscal years and correspond to a particular tenant.

In the last quarter of the fiscal year, the Group has changed the presentation of the income statement which is reviewed by the CODM for purposes of assigning resources and assessing performance for the fiscal year for a better alignment with the current business vision and the metrics used to such end. These amendments affected the shopping centers and office segments. The information examined by the CODM does not include the amounts pertaining to income from building administration expenses and collective promotion funds (“FPC”, as per its Spanish acronym) from the income statement, and so does it exclude total recovered costs, as they are not analyzed to assess the operating performance of the segment. The CODM examines the net amount from these items (total surplus or deficit between building administration expenses and collective promotion funds and recoverable expenses). These costs and income are presented now for reconciliation of all segments and their respective consolidating operating income. The amounts corresponding to prior fiscal years have been retroactively adjusted to reflect these changes in segment information.

In addition, in the last quarter of the fiscal year, the Group has modified how it presents the gain/loss on the sale of investment property in segment information, which is revised by CODM. The information revised by CODM includes the gain/loss on the sale of investment properties within sales and development segment, regardless of the segment where the property would have been originally located. These modifications affected the segments of sales and development and international. Considering that in the comparative periods presented there were not sales of investment properties in the international segment, it was not necessary to retroactively adjust the amounts pertaining to prior fiscal years. 


F-131

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

The CODM regularly reviews the following categories of assets: investment properties; property, plant and equipment; trading properties; goodwill; rights to receive future units under barter agreements; inventories; biological assets; investments in associates; and the investment in the Entertainment Holding S.A. joint venture. The aggregate of these assets are disclosed in these financial statements as “operating segment assets”. The measurement principles for the operating segment assets are based on the IFRS principles adopted in the preparation of the consolidated financial statements, except for the Group’s share of assets of the joint ventures Cresca S.A., CYRSA S.A., Nuevo Puerto Santa Fe S.A., Puerto Retiro S.A., Baicom Networks S.A., and Quality Invest S.A., which are all reported to the CODM under the proportionate consolidation method. Under this method, each of the operating segment assets reported to the CODM includes the proportionate share of the Group in the same operating assets of these joint ventures. As an example, the investment properties amount reported to the CODM includes (i) the investment property balance as per the statement of financial position plus (ii) the Group’s share of the investment properties of these joint ventures. Under IFRS 11, the investment properties of these joint ventures are included together with all other of the joint ventures’ net assets in the single line item titled “Investments in associates and joint ventures” in the statement of financial position.

The CODM evaluates performance of business segments based on segment profit, defined as profit or loss from operations before financing and taxes. The measurement principles for the Group’s segment reporting structure are based on the IFRS principles adopted in the Consolidated Financial Statements, except for the Group’s share of profit or loss of joint ventures.

At the time of assessing the performance of business segments and deciding upon the allocation of resources, the Executive Committee uses information on operating income assets and liabilities of each such segment In the Consolidated Financial Statements, the transactions and balances between related parties which may affect more than one segment are eliminated.

Goods and services exchanged between segments are calculated on the basis of market prices. Intercompany transactions between segments, if any, are eliminated.



F-132

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)
The following tables present a reconciliation between the total results of segment operations and the results of operations as per the income statements. The adjustments relate to the presentation of the results of operations of joint ventures accounted for under the equity method under IFRS.

  June 30, 2015 
  
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Expenses and collective promotion fund  Total Income Statements 
Revenues  4,908,072   (53,473)  (90,002)  887,208   5,651,805 
Costs  (4,019,142)  62,335   88,375   (901,283)  (4,769,715)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,347,447   (23,295)  -   -   1,324,152 
Changes in the net realizable value of agricultural produce after harvest  (34,471)  -   -   -   (34,471)
Gross Profit / (Loss)  2,201,906   (14,433)  (1,627)  (14,075)  2,171,771 
Gain from disposal of investment properties  1,150,230   -   -   -   1,150,230 
Gain from disposal of farmlands  569,521   (19,059)  -   -   550,462 
General and administrative expenses  (624,595)  4,173   2,602   -   (617,820)
Selling expenses  (480,696)  6,217   321   -   (474,158)
Other operating results, net  10,556   2,949   (1,296)  -   12,209 
Profit from Operations before share of Profit / (Loss) of Associates and Joint Ventures  2,826,922   (20,153)  -   (14,075)  2,792,694 
Share of profit / (loss) of associates and joint ventures  (1,035,410)  10,438   -   -   (1,024,972)
Profit from operations before Financing and Taxes  1,791,512   (9,715)  -   (14,075)  1,767,722 


F-133

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


6.
Segment information (Continued)

  June 30, 2014 
  
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Expenses and collective promotion fund  
Total
Income Statements
 
Revenues  3,967,868   (62,085)  (38,074)  736,302   4,604,011 
Costs  (3,266,251)  58,857   36,505   (743,703)  (3,914,592)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  1,172,739   (20,086)  -   -   1,152,653 
Changes in the net realizable value of agricultural produce after harvest  (17,447)  -   -   -   (17,447)
Gross Profit / (Loss)  1,856,909   (23,314)  (1,569)  (7,401)  1,824,625 
Gain from disposal of investment properties  230,918   -   -   -   230,918 
Gain from disposal of farmlands  91,356   -   -   -   91,356 
General and administrative expenses  (539,696)  3,423   2,334   -   (533,939)
Selling expenses  (359,041)  5,949   366   -   (352,726)
Other operating results, net  (77,462)  3,585   (1,131)  -   (75,008)
Profit / (Loss) from Operations before share of Profit / (Loss) of Associates and Joint Ventures  1,202,984   (10,357)  -   (7,401)  1,185,226 
Share of (loss) / profit of associates and joint ventures  (425,287)  16,636   -   -   (408,651)
Profit / (Loss) from operations before Financing and Taxes  777,697   6,279   -   (7,401)  776,575 

  June 30, 2013 
  
Total
segment information
  Adjustment for share of profit / (loss) of joint ventures  Adjustment to income for elimination of inter-segment transactions  Expenses and collective promotion fund  Total Income Statements 
Revenues  3,083,678   (137,889)  (11,528)  594,290   3,528,551 
Costs  (2,647,015)  116,004   10,296   (599,780)  (3,120,495)
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  888,493   (1,749)  -   -   886,744 
Changes in the net realizable value of agricultural produce after harvest  11,756   -   -   -   11,756 
Gross Profit / (Loss)                                                        1,336,912   (23,634)  (1,232)  (5,490)  1,306,556 
Gain from disposal of investment properties  177,999   -   -   -   177,999 
Gain from disposal of farmlands  149,584   -   -   -   149,584 
General and administrative expenses  (352,448)  4,291   1,774   -   (346,383)
Selling expenses  (291,206)  11,631   112   -   (279,463)
Other operating results, net  95,770   2,952   (654)  -   98,068 
Profit / (Loss) from Operations before share of Profit / (Loss) of Associates and Joint Ventures  1,116,611   (4,760)  -   (5,490)  1,106,361 
Share of (loss) / profit of associates and joint ventures  (11,673)  1,855   -   -   (9,818)
Profit / (Loss) from operations before Financing and Taxes  1,104,938   (2,905)  -   (5,490)  1,096,543 


F-134

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



6.
Segment information (Continued)

Total segment assets are allocated based on the operations of the segment and the physical location of the asset. According to the analysis above, segment assets include the proportionate share of the assets of joint ventures. The statement of financial position under IFRS shows the net investment in these joint ventures as a single item.

The following tables present a reconciliation between total segment assets as per segment information and total assets as per the statement of financial position. Adjustments are mainly related to the filing of certain classes of assets in segment information and to the proportional consolidation of joint ventures mentioned previously.

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Total Operating Assets as per Segment Information  9,686,553   10,972,702   8,388,732 
Less:            
Proportionate share in reportable assets per segment of certain joint ventures (*)  (478,107)  (442,360)  (256,962)
Plus:            
Investments in joint ventures (**)  357,673   372,034   300,809 
Other non-reportable assets  5,709,324   4,881,312   3,978,146 
Total Consolidated Assets as per Statement of financial position  15,275,443   15,783,688   12,410,725 

(*) The following amounts related to the proportionate share of operating segment assets of certain of The Group´s  joint ventures are reported as part of the total operating segment assets by segment:

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Investment properties  95,888   137,253   160,900 
Property, plant and equipment  358,193   272,982   65,700 
Trading properties  3,130   5,908   20,160 
Goodwill  5,223   5,235   5,238 
Biological assets  7,970   10,899   1,902 
Inventories  7,703   10,083   3,062 
Total proportionate share in assets per segment of joint ventures  478,107   442,360   256,962 

(**)Represents the equity-accounted amount of those joint ventures, which were proportionate-consolidated for segment information purposes


F-135

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



7.  Information about subsidiaries

The Group conducts its business through several operating and holding subsidiaries. See breakdown of Group, their percentage of ownership interest, materiality criteria and other relevant information on the Group’s subsidiaries in Note 2.3.a).

Restrictions, commitments and other matters in respect of subsidiaries

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s subsidiaries under this law have not reached the legal limits of these reserves. Dividends distribution of Group’s subsidiaries is on the basis of their separate financial statement.

IRSA

IRSA’s dividends are paid when and if declared by its board of directors and approved by its shareholders’ meeting. In accordance with IRSA’s dividend policy, the amount of dividends that could be declared in each fiscal year shall not exceed the higher of (i) 20% of the aggregate gross revenue from leases and services of its Office and other Rental Properties segment for its most recent fiscal year; and (ii) 20% of the net income as per IRSA’s consolidated income statements for its most recent fiscal year.

However, the amount of dividends payable is subject to the payment restrictions imposed by IRSA’s borrowing agreements (i.e. IRSA NCN due 2017 and IRSA NCN due 2020).

IRSA CP

Distrito Arcos

Injunction order:

In December 2013, the Judicial Branch confirmed an injunction order that suspended the opening of the shopping center on the grounds that it did not have certain governmental permits in the context of two legal proceedings, where a final decision has been rendered for the company.

The plaintiff filed a petition for the continuation of the preliminary injunction by means of an extraordinary appeal of unconstitutionality which was by the lower and appellate courts; consequently, it filed an appeal with the Supreme Court of Justice of the Autonomous City of Buenos Aires, which so far has not rendered a decision.


F-136

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



7.
Information about subsidiaries (Continued)

Nowadays, the Shopping Center Distrito Arcos is open to the public and operating normally.

Concession Status:

The National State issued Executive Order 1723/2012 whereby several plots of land located in prior rail yards of Palermo, Liniers and Caballito rail stations ceased to be used for rail purposes, in order to be used for development of integral urbanization projects.

In this respect and as part of several measures related to other licensed persons and/or concessionaires, we have notified in the file of proceedings of the corresponding Resolution 170/2014 revoking the Contract for Reformulation of the Concession of Rights of use and Development N° AF000261 issued by the Agencia de Administración de Bienes del Estado (State Assets Administration Office, or AABE as per its Spanish acronym).

It should further be pointed out that such measure:

(i) has not been adopted due to non-compliance of our controlled company;

(ii) to date has not involved the interruption of the commercial development or operation of the shopping center, which continues to operate under normal conditions;

Notwithstanding the foregoing, Arcos del Gourmet S.A. has filed the relevant administrative remedies (appeal) and has also filed a judicial action requesting that the revocation of such concession be overruled.

Furthermore, it has started a so-called “juicio de consignación”, that is an action where the plaintiff deposits with the court sums of money that the defendant refuses to accept. Under this legal action, the company has deposited in due time and form all rental payments under the Contract for Reformulation of the Concession of Rights of Use and Development, which the Company considers to have been unduly revoked.




F-137

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



7.
Information about subsidiaries (Continued)

Rigby

Rigby has received a statement of proposed audit changes from New York State relating to New York State Real Property Transfer Tax concerning a transfer of shareholdings between shareholders in November 2012 in the amount of US$ 0.4 million including penalties and interes of US$ 0.1 millon. In addition, Rigby has been contacted by New York City regarding a potential adjustment for New York City Real Property Transfer Tax. However, Rigby has not received an assessment from the New York City Deparment of Finance, so it is not clear the nature of the New York City inquiry. IRSA International and Cam Communications II LP (members of Rigby) would be jointly liable under law. Under the agreements in place, however, Rigby might also be liable due to the indemnity granted to Rigby Madison. Rigby had sufficient grounds to believe that it would be resolved in its favor, therefore, no provision had been made in the financial statement for any liabilities that could have aroused. On September 8th, 2015 Rigby has been notified of a favorable resolution by New York State.

Sociedad Anónima Carnes Pampeanas S.A.

As of June 30, 2015, the working capital and shareholders’ equity of Carnes Pampeanas were negative, and they were included in the presumption established in section N° 94 (subsection 5) and section N° 206 of Act N° 19,550. Shareholders agreed to make the capital contributions necessary to meet the Company’s liabilities, clean up the balance sheet and absorb accumulated losses, as described in Note 45.

Information on subsidiaries with material non-controlling interests

As mentioned in Note 2.3.a), the following non-controlling interest are considered significant to the Group:

  
Equity attributable to non-controlling interest
(in millions)
 
Subsidiary June 30, 2015  June 30, 2014 
IRSA                                         1,061.5   1,254.3 
Brasilagro                                         1,256.8   1,225.0 

The non-controlling interest for the remaining subsidiaries aggregate Ps. 11.7 million and Ps. 9.6 million as of June 30, 2015 and 2014, respectively. None of these subsidiaries have non-controlling interests which are individually considered material to the Group.


F-138

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



7.
Information about subsidiaries (Continued)

Set out below is the summarized financial information for the subsidiaries that have non-controlling interests that are considered material to the Group:

Summarized statements of financial position

  IRSA  Brasilagro 
   06.30.15   06.30.14   06.30.15   06.30.14 
Assets                
Non-current assets                                              7,725,053   6,851,085   1,545,596   2,049,257 
Current assets                                              1,904,320   2,959,021   1,319,751   879,255 
Total assets                                              9,629,373   9,810,106   2,865,347   2,928,512 
Liabilities                
Non-current liabilities                                              4,683,493   4,834,086   183,160   239,790 
Current liabilities                                              2,687,522   2,419,424   595,441   655,174 
Total liabilities                                              7,371,015   7,253,510   778,601   894,964 
Net assets                                              2,258,358   2,556,596   2,086,746   2,033,548 

Summarized income statements and statements of comprehensive income

  IRSA  Brasilagro 
  
June 30,
 2015
  
June 30,
2014
  
June 30,
2013
  
June 30,
 2015
  
June 30,
2014
  
June 30,
2013
 
 
hjyyRevenues  3,402,629   2,845,176   2,187,180   553,966   415,022   453,191 
Profit / (loss) before income tax  558,335   (895,884)  430,055   573,834   (103,791)  56,506 
Income tax  (488,266)  64,267   (132,847)  (31,737)  54,518   9,044 
Profit / (loss) for the year  70,069   (831,617)  297,208   542,097   (49,273)  65,550 
Other comprehensive (loss) / income  (108,097)  442,844   56,799   -   -   335,625 
Total comprehensive income  (38,028)   (388,773)  354,007   542,097   (49,273)  401,175 
Profit / (loss) attributable to non-controlling interest  127,429   49,559   66,081   -   -   - 
Dividends paid to non-controlling interest  -   88,110   62,190   -   -   - 



F-139

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



7.
Information about subsidiaries (Continued)

Summarized cash flows

  IRSA  Brasilagro 
  
June 30,
 2015
  
June 30,
2014
  
June 30,
2013
  
June 30,
 2015
  
June 30,
2014
  
June 30,
2013
 
Cash flow from operating activities                  
Net cash generated from (used in) operating activities  833,888   1,021,979   863,373   (48,890)  67,243   (209,447)
Cash flow from investing activities                        
Net cash used in (generated from) investing activities  261,333   (917,120)  (45,892)  39,134   (34,078)  243,280 
Cash flow from financing activities                        
Net cash (generated from) used in financing activities  (1,389,685)  (596,767)  (306,268)  (66,513)  4,947   5,225 
Net (Decrease) Increase in cash and cash equivalents  (294,464)  (491,908)  511,213   (76,269)  38,112   39,058 
Cash and cash equivalents at beginning of year  609,907   796,902   259,169   320,349   197,113   151,063 
Foreign exchange gain on cash and cash equivalents  59,737   304,913   26,520   (22,513)  85,124   6,992 
Cash and cash equivalents at end of year  375,180   609,907   796,902   221,567   320,349   197,113 

The information above is the corresponding to balances and transactions before inter-company eliminations.

8.  Interests in joint ventures

General information

The accounting policy used by the Group to value its interest in joint ventures, materiality criteria and other relevant information concerning these investments are described in Note 2.3 (e).



F-140

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


8.
Interests in joint ventures (Continued)

The table below lists the Group’s investments and the values of interests in joint ventures for the fiscal years ended June 30, 2015, 2014 and 2013:
        Value of Group's interest in equity  Group's interest in
 comprehensive income
  % of ownership interest          
        June 30,  June 30,  June 30,  Last financial statement issued 
 
Name of the entity
Place of business / Country of incorporation 
Main activity
 
Nature
of the
relationship
  
Common shares 1 vote
   
2015
   
2014
   
2015
   
2014
   
2013
   
2015
   
2014
   
2013
  Share capital (nominal value)  Income (loss) for the year    Shareholders’ Equity 
Quality Invest S.A. (1)ArgentinaReal Estate(2)  70,314,342   74,485   65,927   2,055   1,181   (3,056)  50%  50%  50%  140,629   4,129   146,932 
Nuevo Puerto Santa Fe S.A.ArgentinaCommercial real estate(3)  138,750   28,803   26,869   4,559   4,874   2,729   50%  50%  50%  27,750   9,468   47,351 
Canteras Natal Crespo S.A.ArgentinaReal Estate(4)  -   -   -   -   -   (870)  -   -   -   -   -   - 
Cyrsa S.A. (1)ArgentinaReal Estate(5)  119,608,531   17,655   154,982   4,522   22,602   15,898   50%  50%  50%  239,217   14,306   35,064 
Puerto Retiro S.A. (1)ArgentinaReal Estate(6)  23,067,250   57,696   56,809   (881)  (1,828)  (1,434)  50%  50%  50%  46,135   (1,763)  33,073 
Baicom Networks S.A.ArgentinaReal Estate(7)  4,701,455   2,850   3,566   (714)  (475)  (580)  50%  50%  50%  9,403   (1,431)  5,148 
Cresca S.A. (1)ParaguayAgricultural(10)  138,154   176,184   63,881   25,212   1,997   (7,978)  50%  50%  50%  67,979   (2,051)  185,095 
Entertainment Holdings S.A.ArgentinaInvestment(8)  22,395,574   20,736   23,268   (2,632)  (838)  (2,516)  50%  50%  50%  44,791   1,187   41,348 
Entretenimiento Universal S.A.Argentina
Event organization
and others
(9)  300   10   (59)  80   (47)  -   50%  50%  -   12   2,457   764 
          378,419   395,243   32,201   27,466   2,193                         

(1)  It is deemed material to the Group.
(2)  Quality Invest S.A. (“Quality”) is a joint venture between the Group and Efesul S.A. and is a company engaged in the operation of the San Martín premises (formerly owned by Nobleza Piccardo S.A.I.C. y F.).
(3)  Nuevo Puerto Santa Fe S.A. (“NPSF”) is a joint venture of the Group and Grainco S.A, Argentina society. Investment in NPSF includes the right to use and operate a shopping center in the port of the city of Santa Fe, Province of Santa Fe (“La Ribera Shopping”). (Note 3).
(4)  On June 28, 2013 IRSA sold, assigned and transferred to Euromayor S.A. de Inversiones the 100% of its interest in Canteras Natal Crespo S.A. This represents the 50% of Canteras Natal Crespo S.A.’s share capital (see Note 3).
(5)  Cyrsa S.A. (“Cyrsa”) is a joint venture between the Group and Cyrela Brazil Realty S.A. Empreendimentos e Participaçoes, a Brazilian corporation, engaged in developing a residential apartment complex known as "Horizons" in the Northern part of Greater Buenos Aires.
(6)  Puerto Retiro S.A. ("Puerto Retiro") is a joint venture of the Group and Havord Corporation N.V. Puerto Retiro owns a land reserve.
(7)  Baicom Networks S.A. (“Baicom”) is a joint venture between the Group and Héctor Masoero, Octopus S.A. and Rafael Garfunkel. Baicom owns a land reserve.
(8)  Entertainment Holdings S.A. is an investment company which principal assets is an indirect interest of 25% in La Rural S.A. (“LRSA”), engaged in the operation of the exhibition grounds in Buenos Aires. See Note 3.
(9)  Entretenimiento Universal S.A. is a company engaged in event organization, shows and food services. See Note 3.
(10)  Cresca S.A. is a joint venture between the Company and Carlos Casado S.A. with agriculture operations in Paraguay.



F-141

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


8.
Interests in joint ventures (Continued)

The shares in these joint ventures are not publicly traded, so they have no listed market price available.

Changes in the Group’s investments in joint ventures for the year ended June 30, 2015 and 2014 are as follows:

  
June 30,
2015
  
June 30,
2014
 
Beginning of the year  395,243   324,194 
Capital contribution                                                                                95,449   43,583 
Capital reduction (iii)  (110,860)  - 
Cash dividends (i)  (33,614)  - 
Share of profit / (loss)  5,356   15,742 
Exchange differences  26,845   11,724 
End of the year (ii)  378,419   395,243 

(i)  During the year ended June 30, 2015, the Group cashed dividends from Cyrsa S.A. for an amount of Ps. 31.0 million and from Nuevo Puerto Santa Fe S.A. for an amount of Ps. 2.6 million.
(ii)  Includes a balance of Ps. (59) reflecting investments in companies with negative equity as of June 30, 2014 which is included in “Provisions” (see Note 24).
(iii)  During the year ended June 30, 2015, Cyrsa S.A. carried out a distribution to IRSA due to capital reduction in the amount of Ps. 110.9 million.

Restrictions, commitments and other matters in respect of joint ventures

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s joint ventures have not reached the legal capped amounts.

Quality Invest

In March 2011, Quality subscribed an agreement of purchase for the property of an industrial plant owned by Nobleza Piccardo S.A.I.C. y F. (hereinafter “Nobleza”) located in San Martin, Province of Buenos Aires. The facilities have the necessary features and scales for multiple uses. The purchase price was agreed on USD 33.0 million. At the same time, Quality subscribed a lease agreement with Nobleza, by means of which Nobleza will rent the property for a maximum term of 3 years. On March 2, 2015, an Agreement Letter has been signed for the completion of lease agreement and restitution of San Martín plant. On April 2011, Quality requested the National Antitrust Commission to issue an advisory opinion on the obligation to notify the operation or not. Later, the Court of Appeals confirmed the CNDC’s decision regarding the obligation to serve notice and consequently, therefore, on February 23, 2012 local Form F1 was filed, which as of the date of these consolidated financial statements is still in process.


F-142

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



8.
Interests in joint ventures (Continued)

As authorized by the relevant Ordinance, on January 20, 2015 Quality Invest S.A. entered into an Urbanization Agreement with the Municipality of San Martín which governs several regulatory aspects and sets forth a binding assignment of meters in exchange for cash contributions subject to formalization of certain administrative milestones included in the rezoning process. The Agreement contemplates a monetary compensation to the City Council totaling Ps. 40.0 million, payable in two installments of Ps. 20.0 million each. The first of such installments was actually paid on June 30, 2015, while the second, will be paid within 60 days after the registration of the plan of subdivision parcel in the Department of Geodesy of the Province of Buenos Aires.

Entertainment Holdings S.A.

As noted in Note 3, IRSA CP acquired shares of common stock, representing 50% of Entertainment Holdings S.A. (“EHSA”)’s capital stock and votes and as a consequence IRSA CP holds a jointly indirect interest in LRSA of 25% which operates the fairground Predio Ferial de Buenos Aires.

In connection with the Fairground, as publicly known, in December 2012 the Executive Branch issued Executive Order 2552/12 that annulled an executive order dated 1991 which approved the sale of the Fairground to the SRA; the effect of this new order was to revoke the sale transaction. Subsequent to December 21, 2012, the Executive Branch notified the SRA of said executive order and further ordered that the property be returned to the Federal Government within 30 subsequent days. Then, the SRA issued a press release publicly disclosing the initiation of legal actions. Furthermore, as it has become publicly known, on August 21, 2013, the Supreme Court of Justice rejected the appeal filed by the National State against the interim measure timely requested by the SRA.

Neither has IRSA CP been served notice formally nor is it a party involved in the legal actions brought by the SRA.

Given the potential dimension of the dispute, as it has been known to the public, we estimate that if Executive Order 2552/2012 was found to be unconstitutional, such order shall have no legal effects either in EHSA or in the acquisition by IRSA CP of an equity interest in EHSA. However, if the opposite happen, that is, a court order declaring the nullity of Executive Order 2699/91 could have a real impact on acquired assets. In this scenario, the judicial decision may  render the purchase of the Plot of Land by SRA null and void , and all acts executed by SRA in relation to the Plot of Land, including the right of use currently held by the entity where EHSA has an indirect equity interest, through vehicle entities, would also become null and void.

On June 1, 2015, a ruling was issued in case 4573/2012 Sociedad Rural Argentina vs. National State – Executive Power on Declaratory Action, whereby the injunction staying the effects of Executive Order 2552/12 was lifted.



F-143

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



8.
Interests in joint ventures (Continued)

On June 2, 2015 the Sociedad Rural Argentina filed a writ of appeals against the ruling indicated above and on that same date the appeal was admitted with staying effects. While a decision on the appeal filed with the Court of Appeals is pending, the motion to lift the injunction filed by the National State will have no effect.

The Court of Appeals may sustain the ruling that has been appealed and then lift the injunction requested by Sociedad Rural Argentina or else revoke the ruling that was appealed and sustain the injunction until a final decision has been rendered.

Notwithstanding the above, to the date we are not aware of any judicial measure petitioned by the owner of the Plot of Land and/or the National Government, or the corresponding appeals or rulings, may have affected the actual use of the Plot of Land.

There are no contingent liabilities relating to the Group’s interest in joint ventures, and there are no contingent liabilities of the joint ventures themselves, different to the mentioned above.

Puerto Retiro S.A.

On April 18, 2000, Puerto Retiro S.A. was notified of a filing made by the National Government, through the Ministry of Defense, to extend the petition in bankruptcy of Inversora Dársena Norte S.A. (Indarsa) to Puerto Retiro. At the request of plaintiff, the bankruptcy court for the Buenos Aires District issued an order restraining the ability of Puerto Retiro to sell or dispose in any manner the land.
Indarsa had acquired 90% of the capital stock of Tandanor to a formerly estate owned company in 1991. Tandanor is mainly engaged in ship repairs, which activity was carried out in premises with a surface of 19 hectares located near La Boca and where Syncrolift is currently installed.
Indarsa did not comply with the payment of the outstanding price for the acquisition of the stock of Tandanor, and therefore the Ministry of Defense requested the bankruptcy of Indarsa, pursuing to extend the bankruptcy to Puerto Retiro.

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



F-144

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



8.
Interests in joint ventures (Continued)

Notice has been served upon the commercial court that the criminal cause of action was declared extinguished by operation of the statutes of limitation and that the accused were acquitted. However, this ruling was revoked by the Criminal Cassation Court; an extraordinary remedy was filed, which was denied. Then a grievance remedy was filed with the Argentine Supreme Court, which has not yet decided on the dispute.

The Management and legal advisors of Puerto Retiro estimate that there are legal and technical arguments sufficient to consider that the request for bankruptcy will be denied by the court. However, given the current status of the case, we cannot predict its outcome.

In addition, Tandanor filed a civil action against Puerto Retiro and other accused parties in the criminal case for violation of section 174 subsection 5, under section 173 subsection 7 of Criminal Code. The claim expects that upon invalidation of executive order that approved the bid of Dársena Norte plot of land, Tandanor be reimbursed any other sum of money that it claims to have lost due to the alleged fraudulent purchase-sale transaction of the real property disputed in the case.

Puerto Retiro filed an answer to the complaint in due course in relation to the civil action, and filed some affirmative defenses.  Tandanor requested the intervention of the National State as third party in the proceedings, which was admitted by the Court. In March 2015 both the National State and the plaintiffs answered the motion for affirmative defenses filed by the defendant. To date, no decision has been made regarding such defenses. Until the court rules on the admissibility of such affirmative defenses, we cannot predict the outcome; yet, there are some technical legal arguments that support the company’s position.




F-145

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


8.
Interests in joint ventures (Continued)

Information about significant joint ventures

Set out below is the summarized financial information for each joint venture of the Group, which is considered material as of June 30, 2015 and 2014:

Summarized statements of financial position

  June 30, 2015 
  Cresca  Cyrsa  
Puerto
Retiro
  
Quality
Invest S.A.
  Total 
Assets               
Total non-current assets  543,570   42,512   45,941   150,042   782,065 
Current                    
Cash and cash equivalents  1,380   4,506   -   1   5,887 
Other current assets                                            69,204   12,941   597   4,476   87,218 
Total current assets                                            70,584   17,447   597   4,477   93,105 
Total assets                                            614,154   59,959   46,538   154,519   875,170 
Liabilities                    
Non-current                    
Financial liabilities (i)                                            187,675   1,104   9,133   1,195   199,107 
Other liabilities                                            17,281   -   126   368   17,775 
Total non-current liabilities  204,956   1,104   9,259   1,563   216,882 
Current                    
Financial liabilities (i)                                            35,887   1,529   3,823   2,045   43,284 
Other liabilities                                            18,166   22,262   383   3,978   44,789 
Total current liabilities  54,053   23,791   4,206   6,023   88,073 
Total liabilities                                            259,009   24,895   13,465   7,586   304,955 
Net assets                                            355,145   35,064   33,073   146,933   570,215 

  June 30, 2014 
  Cresca  Cyrsa  
Puerto
Retiro
  
Quality
Invest S.A.
  Total 
Assets               
Total non-current assets  204,877   286,950   45,484   132,806   670,117 
Current                    
Cash and cash equivalents  3,183   4,144   -   1,572   8,899 
Other current assets                                            151,295   44,814   215   902   197,226 
Total current assets                                            154,478   48,958   215   2,474   206,125 
Total assets                                            359,355   335,908   45,699   135,280   876,242 
Liabilities                    
Non-current                    
Financial liabilities (i)                                            188,771   -   9,006   1,378   199,155 
Other liabilities                                            20,799   -   78   299   21,176 
Total non-current liabilities  209,570   -   9,084   1,677   220,331 
Current                    
Financial liabilities (i)                                            18,705   -   4,655   63   23,423 
Other liabilities                                            543   31,449   662   3,737   36,391 
Total current liabilities  19,248   31,449   5,317   3,800   59,814 
Total liabilities                                            228,818   31,449   14,401   5,477   280,145 
Net assets                                            130,537   304,459   31,298   129,803   596,097 
(i)  Excluding trade and other payables and provisions.


F-146

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


8.  
Interests in joint ventures (Continued)

Summarized statement of comprehensive income

  Cresca  Cyrsa  Puerto Retiro  Quality Invest S.A.  Total 
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
 
Revenues                                52,249   42,879   10,806   46,185   2,199   52   15,920   16,476   81,174   105,592 
Interest income                                6,806   -   25,052   66,290   63   134   283   178   32,204   66,602 
Income tax                                (4,108)  (3,786)  (9,829)  (25,275)  (34)  (187)  182   1,796   (13,789)  (27,452)
(Loss) / Profit for the year  (3,244)  (19,266)  14,306   45,206   (1,763)  (3,657)  4,129   2,383   13,428   24,666 
Other comprehensive income / (loss)  -   -   -   -   -   -   -   -       - 
Total comprehensive (loss) / income for the year  (3,244)  (19,266)  14,306   45,206   (1,763)  (3,657)  4,129   2,383   13,428   24,666 
Dividends received  -   -   30,990   -   -   -   -   -   30,990   - 

The information above reflects the amounts presented in the financial statements of the joint ventures (and not the Group’s share of those amounts) adjusted for differences in accounting policies and fair value adjustments made at the time of the acquisition.

Reconciliation of the summarized financial information presented with regard to the carrying amount of the Group’s interest in material joint ventures is as follows:

  Cresca  Cyrsa  Puerto Retiro  Quality Invest S.A.  Total 
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
  
June 30,
2015
  
June 30,
 2014
 
Net assets at beginning of the year  130,559   43,288   304,459   259,253   31,298   31,393   129,803   126,420   596,119   460,354 
(Loss) / Profit for the year  (1,622)  (19,266)  14,306   45,206   (1,763)  (3,657)  4,129   2,383   15,050   24,666 
Capital reduction                                 -   -   (221,721)  -   -   -   -   -   (221,721)  - 
Release of reserves  -   -   (15,335)  -   -   -   -   -   (15,335)  - 
Dividend distribution  -   -   (46,645)  -   -   -   -   -   (46,645)  - 
Loss absorption                                 -   -   -   -   3,538   -   -   -   3,538   - 
Exchange gain                                 52,048   26,013   -   -   -   -   -   -   52,048   26,013 
Irrevocable contributions  174,160   80,502   -   -   -   3,562   13,001   1,000   187,161   85,064 
Net assets at end of the year  355,145   130,537   35,064   304,459   33,073   31,298   146,933   129,803   570,215   596,097 
Ownership interest  50.00%  50.00%  50.00%  50.00%  50.00%  50.00%  50.00%  50.00%  50.00%  50.00%
Investments in joint ventures  177,573   65,270   17,532   152,229   16,537   15,649   73,467   64,902   285,109   298,050 
Fair value adjustment on acquisition of joint venture  (1,389)  (1,389)  123   2,753   41,159   41,160   1,018   1,025   40,911   43,549 
Closing net book amount  176,184   63,881   17,655   154,982   57,696   56,809   74,485   65,927   326,020   341,599 



F-147

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


9.  Interests in associates

General information

The accounting policy used by the Group to value its interest in associates, materiality criteria and other relevant information concerning these investments are described in Note 2.3 (d).


F-148

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


9.
Interests in associates (Continued)

The table below lists the Group’s investments and the values of interests in associates for the fiscal years ended June 30, 2015 and 2014:

         Value of Group's interest in equity  Group's interest in comprehensive income  % of ownership interest    
         June 30,  June 30,  June 30,  Last financial statement issued 
Name of the entityPlace of business / Country of incorporation
Main
activity
 
Nature
of the
relationship
 
Common shares
1 vote
  2015  2014  2015  2014  2013  2015  2014  2013  
Share capital
(nominal value)
  Income / (Loss) for the year  Shareholders’ Equity 
TarshopArgentinaConsumer financing  (1)  26,759,288   32,401   18,861   (8,476)  (16,348)  2,601   20%  20%  20%  243,796   (46,377)  181,271 
New Lipstick LLCUnited StatesReal State  (2)  N/A   (344,627)  (176,923)  (169,226)  (154,499)  (88,706)  49.73%  49.80%  49.87%  -    (*) (33,111)  (*) (105,449)
RigbyUnited StatesReal State  (3)  N/A   -   -   -   -   4,414   -   -   -   -   -   - 
Lipstick Management LLCUnited StatesManagement company  (4)  N/A   2,827   1,739   1,020   900   447   49%  49%  49%  -   (*) (188  (*) (630)
Manibil S.A.ArgentinaReal Estate  (6)  30,397,880   46,556   38,289   918   6,369   2,329   49%  49%  49%  77,037   1,871   94,992 
Banco de Crédito & Securitización S.A.ArgentinaFinancing  (7)  3,984,375   15,814   13,610   2,205   3,709   1,198   6.38%  6.38%  6.38%  62,500   34,587   248,070 
Banco Hipotecario S.A.ArgentinaFinancing     446,515,208   1,356,242   1,210,168   144,750   187,865   58,744   29.99%  29.77%  29.77%  1,500,000   465,157   4,397,569 
Bitania 26 S.AArgentinaReal Estate  (8)  -   -   22,129   1,254   789   84   -   49%  49%  -   -   - 
Agro-Uranga S.A.ArgentinaAgricultural  (9)  893,069   30,550   34,418   846   11,036   8,117   35.72%  35.72%  35.72%  8,512   2,425   54,226 
Agromanagers S.A.ArgentinaInvestment  (10)  981,029   2,793   2,808   -   443   476   46.84%  46.84%  46.84%  2,094   -   4,262 
Condor Hospitality TrustUnited StatesHotel  (11)  1,261,723   (18,304)  31,577   (49,881)  15,517   -   26.91%  26.91%  -   -   -   4,262 
IDB Development Corporation Ltd.IsraelInvestment  (12)  324,445,664   907,083   595,342   (918,365)  (507,363)  -   48.90%  26.65%  -   -   -   - 
Avenida Inc. S.A.United StatesInvestment  (13)  -   -   11,096   19,388   (1,944)  -   -   24.79%  -   -   -   - 
            2,031,335   1,803,114   (975,567)  (453,526)  (10,296)                        

(1)  Tarshop S.A. (“Tarshop”) is primarily engaged in credit card and loan origination activities.
(2)  New Lipstick LLC (“New Lipstick”) net equity comprises a rental office building in New York City known as the “Lipstick Building” with related debt.
(3)  Rigby 183 LLC (“Rigby”) owns a rental office building located at 183 Madison Avenue, New York, NY. Since December 31, 2012, Rigby began to be reported on a consolidated basis and ceased to be an associate. The building is classified as held for sale as of June 30, 2014. See Note 44.
(4)  Lipstick Management LLC is engaged in managing the Lipstick Building, an office building for rent located in New York City.
(5)  BHSA is a full-service commercial bank offering a wide variety of banking activities and related financial services to individuals, small- and medium-sized companies and large corporations.
(6)  Manibil S.A. is engaged in the development and sale of real estate investment projects in the City of Buenos Aires and its surrounding areas.
  (7)Banco de Crédito & Securitización S.A. (“BACS”) is a second-tier commercial bank established in 2000 in order to foster asset securitization. The bank also offers products, such as, export financing and pre-financing and purchase of mortgage-backed and personal assets. Its product and service offering is mainly distributed through a network of financial entities. BACS is controlled by BHSA. In addition, the Group directly holds an additional 6.38% interest.
  (8)The main asset of Bitania 26 S.A. (“Bitania”) is a hotel located in the City of Rosario known as Esplendor Savoy Rosario.
  (9)Agrouranga S.A. (“Agro-Uranga”) is engaged in agricultural activities.
 (10)The main asset of Agromanagers S.A. (“Agromanagers”) consists of a shareholding in Brasilagro.
 (11)Condor Hospitality Trust Inc. is an investment Company engaged in hotels in United States. (See Note 3).
 (12)The Group acquired IDB on May 7, 2014. IDBD is one of the Israeli biggest and most diversified investment groups. The Group has valued its interest in IDBD at fair value through profit or loss according to an exemption under IAS 28. See Notes 2.3 (d) and 3 for further information. Since interest in IDBD is valued at fair value, participation in financial statements and other comprehensive income statements of IDBD is not shown in the table above.
 (13)
Avenida Inc. is principally engaged in investing activities. As of June 30, 2015, holds 100% of Avenida Compras S.A., a Company engaged in e-commerce activity. As of June 30, 2015, the Group no longer has significant influence in the company (see Note 3).
(*)The amounts are presented in thousands of US dollars.


F-149

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

Group's interest in IDBD is carried at fair value. The remaining material associates are private companies and there is no quoted market price available for their shares.

Changes in the Group’s investment in associates for the years ended June 30, 2015 and 2014 are as follows:

  
June 30,
2015
  
June 30,
2014
 
Beginning of the year  1,803,114   1,123,577 
Acquisition of associates  1,254,306   1,131,806 
Capital contribution  30,937   16,716 
Share in (losses) / profit  (29,328)  92,568 
Exchange differences  54,761   (29,133)
Disposal of associates  (33,769)  - 
Reclassification to financial instruments  (30,089)  - 
Cash dividends (i)  (17,597)  (15,459)
Unrealized loss from investments at fair value  (1,001,000)  (516,961)
End of the year (ii)  2,031,335   1,803,114 

(i)  As of June 30, 2015, the Group cashed dividends from Agro-Uranga S.A. and BHSA in the amount of Ps. 4.7 million and Ps. 12.9 million, respectively. During the fiscal year 2014, the Group cash dividends from Agro-Uranga S.A., Manibil S.A. and BHSA in the amount of Ps. 5.5 million, Ps. 9.2 million and Ps. 0.8 million, respectively.
(ii)  Includes a balance of Ps. (362,931) and Ps. (39,091) reflecting interests in companies with negative equity as of June 30, 2015 and 2014, respectively, which is reclassified to “Provisions” (see Note 24).

Commitments and restrictions in respect of associates

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s associates under this law have not reached the legal limits of these reserves.

Tarshop S.A.

Over the past two fiscal years, the BCRA modified certain aspects of the regulatory framework carried out by Tarshop S.A. Based on these changes, our Associate is going through a business reformulation process.

In addition, during October 2014 Banco Hipotecario S.A and IRSA CP approved a gradual capitalization plan to be carried out by shareholders pro rata their holdings; the first tranche of such capitalization has already been made for a total amount of Ps. 110.0 million.


F-150

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

Non-competition agreement for the sale of the equity interest

Due to the sale assignment and transfer of the 80% of the equity interest in Tarshop to BHSA, made during the fiscal year ended June 30, 2011, the Group committed itself to not competing for 5 years in the credit card and/or consumer loan business in which Tarshop has a presence.

New Lipstick

New Lipstick has a pledge over the shares of its operating subsidiary Metropolitan 885 Third Avenue Leasehold LLC (“Metropolitan”). Metropolitan owns the building known as Lipstick Building in Manhattan.

IDBD
       Under the Agreement, Dolphin and ETH agreed to participate on a joint and several basis in the capital increases resolved by IDBD’s Board of Directors in order to carry out its business plan for 2014 and 2015, for at least NIS 300 million in 2014 and NIS 500 million in 2015. As of June 30, 2015, Dolphin has contributed NIS 668.6 million in aggregate and ETH has contributed NIS 203.5 million in IDBD. In this way, Dolphin has completed its committed contributions, while IDBD is claiming from ETH, and jointly and severally to Dolphin, to pay the balance committed by ETH for an aggregate of NIS 196.5 million (equivalent to approximately US$ 52.1 million at the exchange rate prevailing as of June 30, 2015).
Moreover, as part of the Arrangement, Dolphin and ETH committed jointly and severally to make Tender Offers for the purchase of IDBD’s shares for a total amount of NIS 512.09 million (equivalent to approximately US$ 135.7 million at the exchange rate prevailing as of June 30, 2015), as follows: (i) by December 31, 2015 at least NIS 249.8 million for a price per share of NIS7.798 (value as of June 30, 2015, subject to adjustment) and (ii) by December 31, 2016, for at least NIS 512.09 million, less the offer made in 2015, for a price per share of NIS 8.188 (value as of June 30, 2015, subject to adjustment). As security for the performance of the tender offers, a total of 34,130,119 shares in IDBD were pledged as of June 30, 2015. In addition, as of June 30, 2015, 49,695,135 shares, 23,950,072 Series 4 warrants, 22,752,569 Series 5 warrants and 20,357,561 Series 6 warrants of IDBD held by Dolphin were deposited in the same escrow account in which the pledged shares are deposited, and are expected to be transferred to an account which is not an escrow account. As of the date of issuance of these financial statements, the Tender Offer has not been consummated.

F-151

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)
On May 12, 2014, IDBD’s shares became listed on the TASE. Consequently, all the shares (including the pledged shares) were deposited in escrow with Bank Leumi Le-Israel as security in compliance with the lock-up provisions set forth in Chapter D of the TASE Regulations, which provide that initially listed shares may not be disposed of for a term of 18 months and allow the release of 2.5% per month beginning on the fourth month since the initial listing date. Consequently, pursuant to the TASE´s regulations as of June 30, 2015 39,237,461 shares and 243,394 Series 3 warrants remained deposited as set forth above (including part of the pledged shares).
On December 29, 2014, Dolphin agreed to inject funds in IDBD, directly or through another company controlled by Eduardo S. Elsztain, for at least NIS 256 million and up to NIS 400 million, as follows: (i) NIS 256 million through the exercise of the New Rights arising from the Rights Offering by Dolphin; (ii) an additional investment (the “Additional Investment”) for an amount equivalent to (a) the Maximum Immediate Consideration (as such term is defined in note 3 to these financial statements), less (b) the amount received by IDBD under the Rights Offering, excluding the exercise of the new warrants, but in no case for an amount higher than NIS 144 million. The Additional Investment will be made by Dolphin or a vehicle controlled by Eduardo Sergio Elsztain exercising additional rights to be acquired by them or, if such rights are not acquired, by participating in another rights offering to be made by IDBD. On February 10, 2015, Dolphin subscribed a total of NIS 391.5 million, with a remaining contribution commitment of NIS 8.5 million.
In addition, as set forth in Note 3 to these financial statements, Dolphin committed to (i) exercise the Series 4 warrants for a total amount of NIS 150 million if so requested by IDBD’s Board of Directors within 6 to 12 months of the Rights Offering date; and (ii) exercise the remaining Series 4, 5 and 6 warrants received under the Rights Offering, subject to the satisfaction of two conditions simultaneously: (a) that IDBD and its lenders reach an agreement to amend certain covenants; and (b) that a control permit over Clal is given by the Capital Markets, Insurance and Savings Commissioner of Israel.
F-152

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

    On May 6, 2015, Dolphin submitted to IDBD’s Board of Directors the following binding and irrevocable proposal. Following is a summary of the terms of the proposal:
        (i)Appointment of Eduardo Sergio Elsztain as single Chairmen of IDBD’s Board of Directors;
(ii)          Dolphin’s commitment (directly or through any vehicle controlled by Eduardo Sergio Elsztain) to accelerate its obligation to exercise the Series 4 warrants for NIS 150 million, and thus IDBD will have the possibility to require their exercise since May 20, 2015 instead of on July 19, 2015, provided that before May 20, 2015 (later it was clarified that this date would be no later than June 2, 2015) IDBD receives a written irrevocable commitment from the representatives of the bondholders to the effect that until July 20, 2015 they will not call a bondholders meeting (unless they are required to do so under the applicable laws) that includes in its agenda any of the following items:

(a)appointment of advisors (financial, legal or otherwise);
(b)appointment of a committee representing IDBD’s bondholders (as defined below);
(c)File legal actions against IDBD; and
(d)Request of an early or immediate payment of any indebtedness of IDBD.


F-153

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.           Interests in associates (Continued)

(iii)IDBD’s Board of Directors should set up a committee composed of two members of IDBD’s monitoring committee and two members of IDBD’s board appointed by Dolphin, which shall have the following duties, subject to the applicable law (later it was clarified that such committee shall not have the authority to make any decisions but rather only to make recommendations to the Board of Directors):

(a)Manage, discuss, negotiate and conclude negotiations with the representatives of IDBD’s bondholders regarding their requests;
(b)Negotiate with IDBD’s financial creditors a new set of covenants for IDBD’s financial indebtedness; and
(c)Devise a business and financial plan for IDBD.

(iv)Dolphin (directly or through any vehicle controlled by Eduardo Sergio Elsztain), promises to submit offers to purchase IDBD in the public phase of the public offering at an amount of up to NIS 100 million at a price per share which is no less than the opening price in the public phase of the public offering and, subject to the following conditions, inter alia:

(a)That IDBD makes a public offering of its shares under terms acceptable to the market and approved by IDBD’s Board of Directors, for an amount of at least NIS 100 million and not to exceed NIS 125 million, and that the offering is made between October 1, 2015 and November 15, 2015.

(b)The commitment assumed by Dolphin would automatically expire upon the occurrence of any of the following events before the day of the public auction under the public offering: (i) if any of IDBD’s creditors or any of the representatives of IDBD’s bondholders files legal actions against IDBD, including a request for early or immediate repayment or acceleration of any portion of IDBD’s debt; (ii) if a meeting of any of IDBD’s bondholders is called including in its agenda any of the matters set forth in paragraph (ii); (iii) if IDBD receives capital contributions for a total amount of NIS 100 million in any manner, whether through a rights offering, the exercise of warrants, a private or public placement, and if such contributions are made by Dolphin directly or through any vehicle controlled by Eduardo Sergio Elsztain (apart from the capital contributions creditable against the remaining NIS 8.5 million obligation under Dolphin’s irrevocable proposal dated December 29, 2014), or by any other individual or legal entity, or the investor public, and at any event when the aggregate amount of such capital contributions under paragraph 5 (d) (iii) of the proposal so submitted is lower than NIS 100 million, Dolphin’s commitment under Section 5 (iv. a) above would be reduced accordingly; or (iv) if a material adverse event or change occurs in IDBD or its control structure or in any of its material affiliates.
On May 7, IDBD’s Board of Directors approved the proposal and Eduardo Sergio Elsztain was appointed sole Chairman of IDBD’s Board of Directors.


F-154

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.           Interests in associates (Continued)
On June 3, 2015, pursuant to the original Dolphin proposal of December 29, 2014, as amended by paragraph (ii) of the proposal dated May 6, 2015, Dolphin exercised 44.2 million Series 4 warrants, while IFISA exercised the remaining Series 4 warrants required to complete the total NIS 150 million commitment. Therefore, the commitment was satisfied as of June 30, 2015.
On May 27, 2015, Dolphin submitted to the Arrangement Trustees an alternative proposal to the Tender Offers to be made (the “Tender Offer Alternative Proposal”) which mainly provided as follows:
     -       Replacement of the obligation to make Tender Offers in the market for a total of NIS 512 million pursuant to the Arrangement for Dolphin’s obligation to inject in IDBD NIS 512 million in two installments of NIS 256 million against the issuance of Bonds by the company.

  -       The NIS 512 million injected by Dolphin would be against IDBD Bonds for a principal amount of 512 million.

  -       Following the first injection of NIS 256 million, the shares currently pledged in favor of ETH would be assigned to Dolphin, plus 2.1 million additional shares in IDBD owned by ETH.

- After completion of the injection of NIS 512 million, all the shares to be acquired under the Tender Offer would be assigned to Dolphin. In addition, Dolphin would buy all shares and warrants of all remaining series of IDBD for a total amount of NIS 30 million and would inject NIS 20 million in IDBD against the issuance of Bonds for a principal amount of NIS 20 million in favor of the holders of the shares and warrants so purchased.

-       The bonds to be purchased by Dolphin would have the following features (the “Bonds”):

•       The principal amount would be repayable in six annual, equal installments, on December 15, 2022 through 2027.
•       They would have a dividend coupon attached, accruing interest at 4% per annum, payable on a yearly basis.
•       They would be indexed (principal amount and interest) according to the Israeli Price Index.
•       They would not be secured by any collateral and would not have any preference over IDBD’s existing bonds.

-       ETH would be able to participate on a joint and several basis in 50% of this Tender Offer Alternative Proposal.
The Tender Offer Alternative Proposal was rejected by the Arrangement Trustees and therefore, it is ineffective as of the date of these financial statements.



F-155

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


9.           Interests in associates (Continued)
On June 29, 2015, Dolphin submitted an irrevocable proposal to IDBD and DIC (the “Proposal to IDBD and DIC”) which offered that, subject to its approval by the Boards of Directors of both companies, DIC would start as soon as possible a rights offering for up to approximately NIS 500 million (“DIC’s Rights Offering”) (equivalent to US$ 132.5 million at the exchange rate prevailing as of June 30, 2015). Under DIC’s Rights Offering, each shareholder of DIC  would receive, for no consideration, DIC’s right units consisting of 4 series of warrants issued by DIC (which would be registered for trading in the TASE), each of which would be exercisable for one common share of DIC (“DIC’s Warrants”), with the following features:

-       DIC’s Warrants would be divided into 4 series, and the exercise price of each of such series would be approximately NIS 125 million, as follows:

•       The first series of warrants would be exercisable until December 21, 2015, for a price to be determined based on acceptable market conditions and after consultation with capital market experts, but in no case for a higher price than NIS 6.53 (“DIC’s 1 Warrants”).
•       The second series of warrants would be exercisable until December 21, 2016, for an exercise price equivalent to 110% of DIC’s 1 Warrants’ exercise price.
•       The third series of warrants would be exercisable until December 21, 2017, for an exercise price of: (i) 110% of DIC’s 1 Warrants’ exercise price, in the event they are exercised before December 21, 2016; or (ii) 120% of DIC’s 1 Warrants’ exercise price if they are exercised between December 21, 2016 and December 21, 2017.
•       The fourth series of warrants would be exercisable until December 21, 2018, for an exercise price of: (i) 110% of DIC’s 1 Warrants’ exercise price, in the event they are exercised before December 21, 2016; or (ii) 130% of DIC’s 1 Warrants’ exercise price if they are exercised between December 21, 2016 and December 21, 2018.

-       As part of DIC’s Rights Offering, IDBD would promise to exercise all DIC’s 1 Warrants issued in favor of IDBD, for a total amount of approximately NIS 92.5 million (“IDBD’s Investment Amount”) by December 21, 2015, provided that the following conditions have been satisfied as of such date:

•       IDBD should have the written consent of IDBD’s main lenders for IDBD to exercise DIC’s 1 Warrants issued in its favor under DIC’s Rights Offering.
•       IDBD should have conducted and completed a Rights Public Offering (as such term is defined below), under which it should have raised an amount of at least NIS 200 million.
•       IDBD should have received the written consent of its main lenders in order for any amount injected as capital in IDBD after the date of such proposal in excess of NIS 100 million and up to NIS 350 million, to be used at any time for injection from IDBD into DIC, through any capital injection method.
•       IDBD´s obligation expires upon the occurrence of any of the events which result in the expiration of Dolphin´s commitment pursuant to the proposal (as described below) or in case of a material adverse event or change occurs in IDBD or its control structure or in any of its material affiliates.



F-156

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


9.
Interests in associates (Continued)


      In turn, Dolphin proposes the following to IDBD:

-       IDBD’s public offering amount under Dolphin’s proposal dated May 6 would be increased by at least NIS 100 million and up to NIS 125 million (the “Rights Public Offering under the Proposal to IDBD and DIC”). In other words, the total amount would be increased from a minimum of NIS 100 million to a minimum of NIS 200 million, and the maximum amount would be increased from a maximum of NIS 125 million to a maximum of NIS 250 million (the “Total Increased Amount”).
-       Therefore, Dolphin’s obligation to participate in the Rights Public Offering under the Proposal to IDBD and DIC would be increased (compared to the proposal dated May 6, 2015) by an amount equal to the difference between the Total Increased Amount and the total amount of commitments received, always provided that such amount were not higher than NIS 200 million (the “Capital Contribution Amount”).
-       The approval of this proposal would constitute IDBD’s confirmation and approval that all of Dolphin’s commitments under this proposal would imply the full and complete settlement of its remaining obligations to inject NIS 8.5 million in IDBD, pursuant to Dolphin’s irrevocable proposal dated December 29, 2014 (provided however that Dolphin shall participate in an amount exceeding NIS 8.5 million).

-       The amount mention in section 5(d)(iii) of the May 6 proposal shall be NIS 200 million. Dolphin’s commitment would automatically expire upon the occurrence of any of the following events: (i) if any of DIC’s creditors or any of the trustees of DIC’s bonds filed any legal action against DIC, including a request for the early repayment or acceleration of any portion of DIC’s debt; and/or (ii) if any meeting of DIC’s bondholders included in its agenda any or many of the following matters: (a) appointment of advisers (financial, legal or otherwise); (b) appointment of a committee of representatives of DIC’s bondholders; (c) filing of any legal action against DIC; and/or (d) requests for early or immediate repayment of any portion of DIC’s debt, or any similar discussion.
The Proposal to IDBD and DIC was binding and irrevocable, and it was valid up to July 13, 2015 (later extended to July 16, 2015)and expired on such date if the Boards of Directors of IDBD and DIC did not accept it and approve it unconditionally (in this regard, see note on subsequent events). The Proposal to IDBD and DIC was approved by IDBD’s Board of Directors on July 16, 2015.
On July 9 and 16, 2015, Dolphin submitted clarifications on the Proposal to IDBD and DIC. For further information, see note on subsequent events in these financial statements.

F-157


9.
Interests in associates (Continued)

Class Action Claim

In June 2015, an application for the court to approve the commencement of a class action (the “Class Action”) was filed by four individuals who were among the creditors of IDBH that were entitled to participate in IDBH’s approved Arrangement and the Rights Offerings made in 2014 and 2015.
The Class action was filed before the applicable courts of Israel against IDBD, Dolphin, Eduardo Sergio Elsztain, ETH and Mordechay Ben Moshe (in their capacities as controlling shareholders of IDBD) and against the members of IDBD’s Board of Directors who were in office between 2014 and 2015. The amount of the claim is NIS 1,048 million (equivalent to US$ 277.6 million as of June 30, 2015).
As concerns the legal action, pursuant to the applicable laws the proceedings are divided into two stages: (i) the preliminary stage, in which the plaintiff pleads the court to allow the complaint as a class action; and (ii) the certification stage, in which the plaintiff shall prove by producing reasonable evidence that it satisfies the minimum requirements for the class action to qualify as such pursuant to the applicable laws. If such requirements are met and the case is admitted as a class action, the substantive proceedings will start.
At present, the Class Action is at the certification stage.
Pursuant to the applicable laws the defendants have a 90-day term to file its defense (such term does not include the period from July 21 to September 5, 2015, when the Israeli courts are on recess).
Based on the Israeli legal counsel, it is more likely than not that the Class Action will be dismissed against Dolphin.
In the application for Class Action, the plaintiffs argued that IDBD’s controlling shareholders and its Board of Directors acted in concert to frustrate the sale of Clal’s shares to JT Capital Fund (“JT”) and privileged their own interests, causing them material damages as under the terms of the Arrangement they would have been entitled to receive a larger payment had the above mentioned sale been consummated.
In addition, they sustain that the Rights Offerings made in 2014 and 2015 discriminated against the minority shareholders and were carried out without obtaining the required consents (given the personal interest of the controlling shareholders), resulting in the dilution of plaintiffs’ rights’ economic value.


F-158

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


9.
Interests in associates (Continued)

BHSA

In accordance with the regulations of the “BCRA”, there are certain restrictions on the distribution of profits by BHSA.

As of June 30, 2015, BHSA has a remainder of 36.6 million Class C shares Ps. 1 par value received in 2009 as a result of certain financial transactions. The General Shareholders’ Meeting decided to allocate 35.1 million of such shares, to an employee compensation plan pursuant to Section 67 of Law 26,831. The remaining 1.5 million shares belong to third party holders of Stock Appreciation Rights, who had failed to produce the documentation required for redemption purposes. As of June 30, 2015, excluding said treasury stock, the Group’s interest in BHSA amounts to 29.99% (or to 30.74%, including said treasury stock).

Information about significant associates

Set out below are the summarized financial information for each associate considered to be material to the Group as of June 30, 2015 and 2014:

Summarized statements of financial position
  BHSA 
  
June 30,
2015
  
June 30,
2014
 
Assets      
Total Non-current assets                                                                                   10,233,808   8,794,304 
Current        
Cash and cash equivalents                                                                                   3,312,594   3,111,615 
Other assets                                                                                   21,537,466   15,432,874 
Total current assets                                                                                   24,850,060   18,544,489 
Total Assets                                                                                   35,083,868   27,338,793 
Liabilities        
Non-current        
Financial liabilities (i)                                                                                   3,625,045   4,208,630 
Other liabilities                                                                                   100,132   (129,996)
Total non-current liabilities                                                                                   3,725,177   4,078,634 
Current        
Financial liabilities (i)                                                                                   25,775,030   18,140,073 
Other liabilities                                                                                   1,117,945   1,095,056 
Total current liabilities                                                                                   26,892,975   19,235,129 
Total Liabilities                                                                                   30,618,152   23,313,763 
Net assets                                                                                   4,465,716   4,025,030 
Non-controlling interest                                                                                   68,147   50,662 
Net assets attributable to equity holders of the parent  4,397,569   3,974,368 
(i)  Excluding trade and other payables and provisions.


F-159

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

Summarized statement of comprehensive income

  BHSA 
  
June 30,
2015
  
June 30,
2014
 
Revenues                                                              4,499,581   3,046,657 
Depreciation and amortization                                                              (140,747)  (86,035)
Interest income                                                              4,215,729   3,729,649 
Interest expense                                                              (2,785,449)  (2,059,377)
Allowances for doubtful accounts                                                              (343,471)  (333,025)
Administrative expenses                                                              (3,273,162)  (2,297,449)
Other expenses                                                              (1,211,684)  (1,022,315)
Other earnings, net                                                              (145,254)  (94,463)
Income tax expense                                                              (354,828)  (301,273)
Profit for the year                                                              460,715   582,369 
Other comprehensive income                                                              -   14,760 
Total other comprehensive income for the year  460,715   597,129 
Profit attributable to non-controlling interest  (4,303)  (9,760)
Dividends received                                                              12,873   9,144 

The information above reflects the amounts presented in the financial statements of the associates (and not the Group’s share of those amounts) adjusted for differences in the Group's accounting policies and fair value adjustments made at the time of the acquisition.

Reconciliation between the summarized financial information presented regarding the carrying amount of the Group’s interest in material associates is as follows:

  BHSA 
  
June 30,
2015
  
June 30,
2014
 
Net assets at beginning of the year  3,974,368   3,397,479 
Profit for the year                                                              465,018   592,129 
Other comprehensive income                                                              -   14,760 
Dividend distribution                                                              (41,817)  (30,000)
Net assets at end of the year                                                              4,397,569   3,974,368 
Ownership interest                                                              30.74%  30.51%
Investment in associates                                                              1,351,718   1,212,781 
Goodwill                                                              4,904   30,177 
Fair value adjustment on acquisition of associate  5   (1,457)
Intergroup transactions                                                              (385)  (31,333)
Net book amount at year-end                                                              1,356,242   1,210,168 



F-160

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

The fair value of the Group’s investment in BHSA was estimated based on the present value of future business cash flows. The premises used to calculate the fair value as of June 30, 2015 were the following:

-The Group considered the period 2016-2023 as horizon for the projection of BHSA cash flows. Cash flows were projected based on the business plan filed with BCRA, as indicated by Argentine applicable regulations. Cash flows assume an annual growth based on historic performance of bank, market research and peer information, among others. On the other hand, perpetuity was computed at decreasing rates over the first years after 2023, and is later stabilized in the long term.

-Projected cash flows include interest income resulting from the main source of income of BHSA, including income resulting from mortgage loans, personal loans, credit cards and corporate loans. In addition, cash flows include interest expenses related to client deposits, which volumes were determined based on current demand, percentage of market share and competition as of June 30, 2015. To estimate such projections, a financial model was used where the business plan abovementioned was the starting point.

-The “Private BADLAR” interest rate was projected based on internal data and information gathered from external consultants. The “Private BADLAR” is the average of interest rates paid by financial entities on term deposits of more than 1 million pesos, with maturities of 30 to 35 days. This rate is calculated daily by the BCRA based on a survey that includes interest rate data provided by the main banks and financial institutions in the City of Buenos Aires and Gran Buenos Aires (C.A.B.A. and G.B.A. as per their Spanish acronyms). The “Private BADLAR” is the most representative interest rate in the Argentine financial system.

-The projected exchange rate was estimated in accordance with internal data and external information provided by independent consultants.

-Projected cash flows include the amortization of a revolving loan of BHSA.

-Projections consider capital requirements as per BCRA regulations.


F-161

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

-Projected cash flows are stated in Pesos in real terms, deflated pursuant to inflation projections estimated by BHSA.

-     The discount rate used to discount real dividend flows and calculate the fair value is 15.97%.

Based on the described premises, the Group estimated the fair value of its investment in BHSA as of June 30, 2015 to be Ps. 3,389.7 million.

IDBD
  IDBD (in millions of pesos) 
  
June 30,
 2015
  
June 30,
2014
 
Assets      
Non-current assets      
Investments in associates                                                                                    8,866   9,118 
Other investments and derivative financial instruments  833   5,856 
Property, plant and equipment                                                                                    13,450   12,791 
Investment properties                                                                                    27,299   24,317 
Intangible assets                                                                                    11,419   12,580 
Other non-current assets                                                                                    3,068   3,375 
Total Non-current assets                                                                                    64,935   68,037 
Current assets        
Other investments and derivative financial instruments  5,251   8,354 
Trade receivables                                                                                    6,101   6,878 
Cash and cash equivalents                                                                                    8,375   10,829 
Other current assets                                                                                    10,617   5,762 
Total current assets                                                                                    30,344   31,823 
Total assets                                                                                    95,279   99,860 
Liabilities        
Non-current liabilities        
Obligations                                                                                    41,961   45,756 
Bank loans and other financial liabilities                                                                                    7,553   6,747 
Financial instruments                                                                                    7,274   8,072 
Other non-current liabilities                                                                                    4,896   4,767 
Total Non-current Liabilities                                                                                    61,684   65,342 
Current Liabilities        
Obligations                                                                                    7,002   7,899 
Bank loans and other financial liabilities                                                                                    5,338   6,340 
Trade and other payables                                                                                    6,053   5,923 
Other current liabilities                                                                                    5,816   6,502 
Total current liabilities                                                                                    24,209   26,664 
Total liabilities                                                                                    85,893   92,006 
Net assets                                                                                    9,386   7,854 
Non-controlling interest                                                                                    8,526   8,643 
Net assets of the parent                                                                                    860   (789)


F-162

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



9.
Interests in associates (Continued)

  
IDBD (in millions of pesos)
 
 
  
June 30,
2015
(period of
twelve months)
  
June 30,
2014
(period of
six months)
 
Net cash generated by operating activities                                                                                    2,909   3,346 
Net cash generated by investing activities                                                                                    1,389   4,228 
Net cash used in financing activities                                                                                    (4,505)  (11,805)
Net decrease in cash and cash equivalents                                                                                    (207)  (4,231)
         
Net decrease in cash and cash equivalents from continuing operations  (207)  (6,935)
Net increase in cash and cash equivalents from discontinued operations  -   2,704 
Net decrease in cash and cash equivalents                                                                                    (207)  (4,231)
         
Cash and cash equivalents at beginning of the year  8,480   11,870 
Foreign exchange gain on cash and cash equivalents  107   2,846 
Changes in cash included in assets held for sale  (5)  344 
Cash and cash equivalents at end of the year                                                                                    8,375   10,829 

  
IDBD (in millions of pesos)
 
 
  
June 30,
2015
(period of
twelve months)
  
June 30,
 2014
(period of
six months)
 
Gross profit                                                                                    7,316   9,564 
Profit before income tax                                                                                    945   1,013 
Income tax                                                                                    (232)  (592)
Profit from continuing operations                                                                                    713   421 
Profit from discontinued operations                                                                                    -   144 
Net income for the year                                                                                    713   565 
Other comprehensive (loss) / income                                                                                    (562)  221 
Total comprehensive income for the year                                                                                    151   786 
Profit attributable to non-controlling interest                                                                                    140   833 



F-163

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



10.  Investment properties

Changes in the Group’s investment properties for the year ended June 30, 2015 and 2014 are as follows:

  Shopping Center  Office buildings and other rental properties  Undeveloped parcels of land  
Leased out
farmland
  
Properties
 under development
  Total 
Year ended June 30, 2014                  
Opening net book amount  1,890,531   1,630,509   421,240   42,998   186,123   4,171,401 
Additions                                        61,108   23,988   454   7,069   156,927   249,546 
Reclassification to available for sale  -   (1,098,990)  -   -   -   (1,098,990)
Reclassification to property, plant and equipment  -   (12,231)  -   (3,657)  -   (15,888)
Reclassifications of trading properties  -   251   1,550   -   (803)  998 
Capitalized borrowing costs  -   -   -   -   22,376   22,376 
Disposals                                        (35)  (51,457)  -   (1,080)  (766)  (53,338)
Depreciation charge (i)  (134,325)  (68,529)  -   (2,134)  -   (204,988)
Currency translation adjustment  -   375,261   -   8,238   -   383,499 
Transfers                                        (25,332)  27,056   (1,724)  -   -   - 
Closing net book amount  1,791,947   825,858   421,520   51,434   363,857   3,454,616 
As of June 30, 2014                        
Cost                                        3,166,103   1,077,824   421,520   51,434   363,857   5,080,738 
Accumulated depreciation  (1,374,156)  (251,966)  -   -   -   (1,626,122)
Net book amount                                        1,791,947   825,858   421,520   51,434   363,857   3,454,616 
Year ended June 30, 2015                        
Opening net book amount  1,791,947   825,858   421,520   51,434   363,857   3,454,616 
Additions                                        60,361   5,893   1,569   8,354   173,500   249,677 
Transfers                                        491,047   23,080   25,331   -   (539,458)  - 
Reclassifications to trading properties  (3,107)  -   -   -   -   (3,107)
Reclassification to property, plant and equipment  (140)  (8,305)  -   (11,732)  (8,779)  (28,956)
Reclassification of property, plant and equipment  -   20,224   -   40,521   -   60,745 
Capitalized borrowing costs  -   -   -   -   12,957   12,957 
Disposals                                        (114)  (102,599)  (3,251)  (192)  (2,077)  (108,233)
Depreciation charge (i)  (124,790)  (26,769)  -   (5,237)  -   (156,796)
Currency translation adjustment  -   -   -   (5,944)  -   (5,944)
Closing net book amount  2,215,204   737,382   445,169   77,204   -   3,474,959 
As of June 30, 2015                        
Cost                                        3,736,761   1,028,507   445,169   77,204   -   5,287,641 
Accumulated depreciation  (1,521,557)  (291,125)  -   -   -   (1,812,682)
Net book amount                                        2,215,204   737,382   445,169   77,204   -   3,474,959 

(i)  Depreciation charge of investment property has been charged in “Costs” in the income statements (Note 33).


F-164

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



10.  
Investment properties (Continued)

The following amounts have been recognized in the income statements:

  
June 30,
2015
  
June 30,
2014
  June 30, 2013 
Rental and service income  2,994,947   2,450,399   1,935,275 
Direct operating expenses  1,234,538   1,142,405   915,117 
Development expenses  4,106   1,671   1,884 
Gain from disposal of investment properties  1,150,230   230,918   177,999 

Borrowing costs incurred during the fiscal years ended June 30, 2015, 2014 and 2013 were Ps. 12,957, Ps. 22,376 and Ps. 10,307 respectively, capitalized at the rate of the Group's general borrowings, which amounts to 15%. Those costs correspond to Distrito Arcos, Alto Comahue and Soleil Premium Outlet. Capitalization of financial costs has ceased since the completion of the shopping mall.

Certain of the Group’s investment properties have been mortgaged or otherwise restricted to secure some of the Group’s borrowings and other payables. The net book value of the Group´s investment properties as of June 30, 2015 and 2014 is as follows:

  
June 30,
2015
  
June 30,
2014
 
Soleil Premium Outlet (i)                                                                                     -   88,634 
Córdoba Shopping (ii)                                                                                     61,111   64,951 
Total                                                                                     61,111   153,585 

(i)  On August 22, 2014, IRSA Propiedades Comerciales S.A. paid the remaining balance of the purchase price for the shopping center known as “Soleil Premium Outlet” in the amount of Ps. 105.8 million (US$ 12.6 million plus interest). As a result, the mortgage granted in favor of INC S.A. was fully discharged.
(ii)  A portion of the Córdoba Shopping center property is encumbered with an antichresis right as collateral for a debt amounting to Ps. 11.3 and Ps. 13.2 million as of June 30, 2015 and 2014, respectively. The debt is included in "Trade and other payables" in the statement of financial position.



F-165

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)




10.  
Investment properties (Continued)

As of June 30, 2015 and 2014, the fair value of investment properties amounts to Ps. 22,445.8 million and Ps. 19,554.5 million, respectively. The fair values are based on comparable values of certain qualified external appraisers (Level 2 of fair value hierarchy) except in the case of shopping centers, where fair value is based on the market capitalization valuation (Level 3 of the fair value hierarchy). In the first case, sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price for m2 (square meter). In the second case, the capitalization rates used also take into account specific aspects of each property. See Note 5.(b).


F-166

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



10.
Investment properties (Continued)

     Initial costs  Subsequent costs  Costs at year-end              
Name Encumbrances  Plot of land  Buildings, facilities and improvements (i)  Improvements / Additions / Disposals / Transfers  Plot of land  Buildings, facilities and improvements  Total  Accumulated depreciation  Net book value  Date of construction Date of acquisition Useful life for calculating depreciation 
Shopping Center Properties:                                  
Abasto de Buenos Aires  -   9,754   455,787   10,552   9,754   466,339   476,093   (204,233)  271,860  nov-98 jul-94  17 
Alto Palermo Shopping  -   8,695   583,834   13,608   8,695   597,442   606,137   (384,631)  221,506  oct-90 nov-97  15 
Alto Avellaneda  -   18,089   312,584   22,073   18,089   334,657   352,746   (220,896)  131,850  oct-95 dec-97  12 
Paseo Alcorta  -   8,006   193,528   12,128   8,006   205,656   213,662   (97,712)  115,950  jun-92 jun-97  16 
Alto Noa  -   227   72,044   2,706   227   74,750   74,977   (43,661)  31,316  sep-94 mar-95  14 
Buenos Aires Design  -   -   75,156   9,332   -   84,488   84,488   (71,558)  12,930  nov-93 nov-97  3 
Patio Bullrich  -   9,814   206,956   7,840   9,814   214,796   224,610   (118,362)  106,248  sep-88 oct-98  17 
Alto Rosario  -   25,686   139,262   3,237   25,686   142,499   168,185   (52,277)  115,908  nov-04 nov-04  19 
Mendoza Plaza  -   10,546   174,705   14,210   10,546   188,915   199,461   (96,680)  102,781  jun-94 dec-94  16 
Dot Baires Shopping  -   84,890   328,443   89,632   53,462   449,503   502,965   (120,341)  382,624  may-09 nov-06  26 
Córdoba Shopping Antichresis   5,009   103,629   (352)  5,009   103,277   108,286   (51,835)  56,451  mar-90 dec-06  15 
Distrito Arcos  -   -   -   236,656   -   236,656   236,656   (6,856)  229,800   - nov-09  31 
Alto Comahue  -   1,143   11,139   302,639   1,143   313,778   314,921   (4,962)  309,959   - may-06  22 
Patio Olmos  -   11,532   22,212   -   11,532   22,212   33,744   (6,425)  27,319  may-95 sep-07  17 
Soleil Factory  -   23,267   55,905   36,113   23,267   92,018   115,285   (30,984)  84,301   - jul-10  9 
Ocampo parking spaces  -   3,201   21,137   207   3,201   21,344   24,545   (10,144)  14,401     sep-06  23 
Total Shopping Center Properties      219,859   2,756,321   760,581   188,431   3,548,330   3,736,761   (1,521,557)  2,215,204          


F-167

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)




10.
Investment properties (Continued)

     Initial costs  Subsequent costs  Costs at year-end                
Name Encumbrances  Plot of land  Buildings, facilities and improvements (i)  Improvements / Additions / Disposals / Transfers  Plot of land  Buildings, facilities and improvements  Total  Accumulated depreciation  Net book value  Date of construction  Date of acquisition  Useful life for calculating depreciation 
Office buildings and Other Rental Properties portfolio:                                    
Bouchard 551  -   4,963   10,322   (4,389)  4,963   5,933   10,896   (2,670)  8,226   -  mar-07   29 
Bouchard 710  -   40,167   50,290   129   40,167   50,419   90,586   (8,542)  82,044   -  jun-05   26 
Dique IV  -   3,660   68,921   1,941   3,660   70,862   74,522   (18,256)  56,266  apr-09   -   32 
Intercontinental Plaza  -   2,811   59,155   (4,159)  2,811   54,996   57,807   (9,024)  48,783  jun-96  nov-97   24 
Libertador 498  -   1,088   5,419   874   1,088   6,293   7,381   (2,870)  4,511   -  dec-95   23 
Madero 1020  -   70   350   -   70   350   420   (300)  120   -  dec-95   5 
Maipú 1300  -   4,992   28,468   (1,189)  4,992   27,279   32,271   (13,905)  18,366   -  sep-95   22 
Rivadavia 2768  -   88   751   1   88   752   840   (506)  334  jun-95  sep-91   12 
Suipacha 652  -   2,712   13,290   1,019   2,712   14,309   17,021   (3,310)  13,711  jun-94  nov-91   10 
Torre BankBoston  -   78,362   58,750   -   78,362   58,750   137,112   (2,188)  134,924   -  aug-07   27 
República Building  -   111,070   90,581   96   111,070   90,677   201,747   (6,208)  195,539   -  apr-08   26 
Constitución 1111  -   256   1,084   -   256   1,084   1,340   (656)  684  mar-95  jun-94   21 
La Adela  -   10,155   -   -   10,155   -   10,155   -   10,155   -  jul-14   - 
Edificio Dot  -   13,346   75,482   54,466   44,775   98,519   143,294   (16,929)  126,365   -  nov-06   30 
Anchorena 559  -   3,018   14,851   -   3,018   14,851   17,869   (4,697)  13,172   -  agu-08   - 
Zelaya 310, 3103 and 3105  -   1,723   -   -   1,723   -   1,723   -   1,723   -  jul-05   - 
Abasto offices  -   -   40   14,288   -   14,328   14,328   (3,216)  11,112  mar-13  nov-12   17 
Santa María del Plata  -   12,494   46   30   12,500   70   12,570   (28)  12,542   -  jun-97   - 
Alto Palermo Shopping Annex  -   -   38,201   -   -   38,201   38,201   (5,659)  32,542   -  jun-06   9 
Office buildings and Other Rental Properties portfolio      290,975   516,001   63,107   322,410   547,673   870,083   (98,964)  771,119             



F-168

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



10.
Investment properties (Continued)

     Initial costs  Subsequent costs  Costs at year-end                
Name Encumbrances  Plot of land  Buildings, facilities and improvements (i)  Improvements / Additions / Disposals / Transfers  Plot of land  Buildings, facilities and improvements  Total  Accumulated depreciation  Net book value  Date of construction  Date of acquisition  Useful life for calculating depreciation 
Undeveloped parcels of lands:                                    
DOT Annex  -   25,336   -   -   25,336   -   25,336   -   25,336   -  nov-06   - 
Santa María del Plata  -   158,523   63,836   428   158,951   63,836   222,787   -   222,787   -  jun-97   - 
Catalinas Norte  -   100,862   1,803   6,831   100,862   8,634   109,496   -   109,496   -  dec-09   - 
Luján plot of land  -   41,861   (17,681)  111   41,972   (17,681)  24,291   -   24,291   -  may-12   - 
Caballito - Ferro  -   45,812   3,885   -   45,812   3,885   49,697   -   49,697   -  nov-97   - 
Intercontinental Tower B plot of land  -   1,564   -   -   1,564   -   1,564   -   1,564   -  feb-98   - 
Pilar  -   1,550   658   -   1,550   658   2,208   -   2,208   -  jul-97   - 
Others  -   3,272   2,951   3,567   6,839   2,951   9,790   -   9,790   -   -   - 
Total Undeveloped parcels of land      378,780   55,452   10,937   382,886   62,283   445,169   -   445,169             
Total      889,614   3,327,774   834,625   893,727   4,158,286   5,052,013   (1,620,521)  3,431,492             

(i)  The breakdown of investment properties as of June 30, 2015 includes property, plant and equipment in the amount of 33,737 that reflects offices used by the Company.



F-169

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



11.  Property, plant and equipment

Changes in the Group’s property, plant and equipment for the years ended June 30, 2015 and 2014 are as follows:
  Owner occupied farmland  Hotel buildings and facilities  Other buildings and facilities  Furniture and fixtures  Machinery and equipment  Vehicles  Total 
Year ended June 30, 2014                     
Opening net book amount  1,538,708   180,348   57,239   7,178   52,961   5,020   1,841,454 
Currency translation adjustment  518,869   -   3,363   1,238   13,751   240   537,461 
Additions                                        96,785   9,980   4,633   3,953   15,581   3,247   134,179 
Reclassifications of investment properties  3,657   -   12,231   -   -   -   15,888 
Reclassifications to intangibles assets  -   -   (30)  -   -   -   (30)
Disposals                                        (56,763)  (24)  (133)  (7)  (2,589)  (497)  (60,013)
Depreciation charge (i)  (44,062)  (14,559)  (10,559)  (1,524)  (14,519)  (1,760)  (86,983)
Closing net book amount  2,057,194   175,745   66,744   10,838   65,185   6,250   2,381,956 
At June 30, 2014                            
Cost                                        2,261,176   402,647   141,704   25,144   191,561   12,578   3,034,810 
Accumulated depreciation  (203,982)  (226,902)  (74,960)  (14,306)  (126,376)  (6,328)  (652,854)
Net book amount                                        2,057,194   175,745   66,744   10,838   65,185   6,250   2,381,956 
Year ended June 30, 2015                            
Opening net book amount  2,057,194   175,745   66,744   10,838   65,185   6,250   2,381,956 
Currency translation adjustment  (223,146)  -   (6,364)  (449)  (7,082)  80   (236,961)
Additions                                        153,336   14,737   14,892   3,442   28,980   7,572   222,959 
Reclassifications of investment properties  11,732   -   8,305   3,618   5,301   -   28,956 
Reclassifications to investment properties  (50,341)  -   (10,404)  -   -   -   (60,745)
Disposals                                        (255,345)  (3,508)  (2,125)  (775)  (2,779)  (407)  (264,939)
Depreciation charge (i)  (53,606)  (15,097)  (3,751)  (2,220)  (16,596)  (2,761)  (94,031)
Closing net book amount  1,639,824   171,877   67,297   14,454   73,009   10,734   1,977,195 
At June 30, 2015                            
Cost                                        1,832,645   414,310   146,297   30,753   213,231   19,563   2,656,799 
Accumulated depreciation  (192,821)  (242,433)  (79,000)  (16,299)  (140,222)  (8,829)  (679,604)
Net book amount                                        1,639,824   171,877   67,297   14,454   73,009   10,734   1,977,195 

(i)  As of June 30, 2015 and 2014 depreciation charges of property, plant and equipment were included in “Costs” for an amount of Ps. 87,139 and Ps. 80,150, "General and administrative expenses" for an amount of Ps. 5,663 and Ps. 5,025 and “Selling expenses” for an amount of Ps. 1,229 and Ps. 1,808, respectively in the income statements (Note 33).


F-170

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



11.
Property, plant and equipment (Continued)

Properties under development as of June 30, 2015 and 2014 amount to Ps. 15.6 million and Ps. 17.6 million, respectively, and mainly comprise improvements being made on property included in this item.

During the years ended June 30, 2015, 2014 and 2013, no borrowing costs were capitalized.

Certain properties included in property, plant and equipment have been mortgaged to secure certain Group’s borrowings. The net book value of these Group’s properties as of June 30, 2015 and 2014 is set out below:
  
June 30,
2015
  
June 30,
2014
 
Sheraton Libertador  31,690   35,499 
Cremaq  -   256,445 
Jatobá  182,520   275,461 
Preferencia  85,192   98,881 
Chaparral  259,907   - 
Araucaria  190,606   - 
La Fon Fon  -   32,690 
Meet processing plant  12,608   - 
Total  762,523   698,976 

The Group leases machinery and computer equipment under non-cancellable finance lease agreements. The lease terms are between 2 and 5 years, and ownership of the assets lie within the Group (Note 29). The net book value of these assets, included in “Machinery and equipment” is as follows:

  
June 30,
2015
  
June 30,
2014
 
Cost – Finance leases                                                                                       8,683   6,615 
Accumulated depreciation                                                                                       (6,133)  (4,608)
Net book amount                                                                                       2,550   2,007 

The following is a detailed summary of property, plant and equipment of the Group by type at June 30, 2015:



F-171

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



11.
Property, plant and equipment (Continued)

     Initial costs  Subsequent costs  Costs at year-end           
Name Encumbrances  Plot of land  Buildings, facilities and improvements (i)  Improvements / Additions / Disposals / Transfers  Plot of land  Buildings, facilities and improvements  Total  Accumulated depreciation  Net book value Date of acquisition Useful life for calculating depreciation 
Livestock and farmlands:                               
El Recreo  -   -   1,257   -   -   1,257   1,257   -   1,257 may-95  - 
Los Pozos  -   5,281   89,669   70,046   5,281   159,715   164,996   (12,422)  152,574 may-95  26 
Administración Cactus  -   -   -   5,105   318   4,787   5,105   (3,627)  1,478 jun-14  19 
Agro Riego San Luis  -   9,318   18,360   31,079   9,318   49,439   58,757   (13,829)  44,928 nov-97  12 
Las Vertientes  -   -   1,167   590   -   1,757   1,757   (1,018)  739 mar-98  11 
La Suiza  -   22,361   6,578   17,580   22,361   24,158   46,519   (2,776)  43,743 jun-98  22 
La Esmeralda  -   7,210   4,324   6,750   7,210   11,074   18,284   (1,937)  16,347 jun-98  36 
El Tigre  -   28,225   6,155   3,094   28,225   9,249   37,474   (3,280)  34,194 apr-03  14 
El Invierno  -   9,030   320   -   9,030   320   9,350   (121)  9,229 jun-05  25 
San Pedro  -   40,889   6,994   2,484   40,889   9,478   50,367   (1,406)  48,961 sep-05  44 
Jatoba Mortgage   130,886   67,034   90,720   110,923   177,717   288,640   (61,146)  227,494 oct-06  33 
Araucaria  -   211,589   1,948   (21,573)  185,732   6,232   191,964   (1,358)  190,606 mar-07  25 
8 de Julio  -   10,040   439   703   10,040   1,142   11,182   (139)  11,043 may-07/may-08  24 
Alto Tacuarí  -   100,075   145   10,694   110,330   584   110,914   (198)  110,716 aug-07  33 
Chaparral Mortgage   160,620   37,823   110,287   141,617   167,113   308,730   (48,823)  259,907 nov-07  25 
Nova Buriti  -   64,653   1,069   7,113   71,313   1,522   72,835   (160)  72,675 dec-07  25 
La Esperanza  -   4,307   -   -   4,307   -   4,307   -   4,307 apr-08  34 
Preferencia Mortgage   30,647   18,847   81,753   16,900   114,347   131,247   (24,695)  106,552 sep-08  33 
Avarandado  -   -   -   4,357   -   4,357   4,357   (302)  4,055      


F-172

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


11.
Property, plant and equipment (Continued)

     Initial costs  Subsequent costs  Costs at year-end             
Name Encumbrances  Plot of land  Buildings, facilities and improvements (i)  Improvements / Additions / Disposals / Transfers  Plot of land  Buildings, facilities and improvements  Total  Accumulated depreciation  Net book value  Date of acquisition  Useful life for calculating depreciation 
San Rafael  -   26,303   824   48,414   72,797   2,744   75,541   (547)  74,994  nov-08   35 
Las Londras  -   38,846   706   57,972   89,739   7,785   97,524   (863)  96,661  jan-09   36 
Establecimiento Mendoza  -   6,810   -   -   6,810   -   6,810   -   6,810  mar-11   - 
ANTA  -   -   44,425   55,668   -   100,093   100,093   (12,863)  87,230   -   23 
San Bernardo  -   -   79   114   -   193   193   (18)  175   -   10 
Venado Tuerto  -   -   -   25   -   25   25   (1)  24       34 
El Pinar  -   -   -   19   -   19   19   (1)  18   -   23 
Finca Mendoza  -   32   -   -   32   -   32   -   32   -   - 
Cuatro vientos  -   36,301   146   28,565   58,586   6,426   65,012   (1,618)  63,394  jun-11   38 
La primavera  -   19,245   -   28,022   47,267   -   47,267   (382)  46,885  jun-11   38 
Total  -   962,668   308,309   639,581   1,049,025   861,533   1,910,558   (193,530)  1,717,028         
                                             
Other buildings                                            
Edificio Intercontinental  -   -   819   84   -   903   903   (750)  153         
Total Other buildings  -   -   819   84   -   903   903   (750)  153         
                                             
Hotels:                                            
Llao Llao  -   24,666   92,011   7,196   24,666   99,207   123,873   (39,826)  84,047  jun-97   10 
Hotel Intercontinental  -   17,326   122,714   17,391   17,325   140,106   157,431   (101,291)  56,140  nov-97   10 
Sheraton Libertador Mortgage   3,755   120,670   8,581   3,755   129,251   133,006   (101,316)  31,690  mar-98   9 
Total Hotels      45,747   335,395   33,168   45,746   368,564   414,310   (242,433)  171,877         

(i)  The breakdown of property, plant and equipment as of June 30, 2015, includes investment properties in the amount of Ps. 77,204  that reflects leased farmlands.



F-173

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



12.Trading properties

Changes in the Group’s trading properties for the years ended June 30, 2015 and 2014 are as follows:

  Completed properties  Properties under development  Undeveloped sites  Total 
At June 30, 2013                                                  8,659   88,879   11,979   109,517 
Additions                                                  1,400   2,694   -   4,094 
Currency translation adjustment  -   27,630   -   27,630 
Reclassifications of investment properties and intangible assets  7,897   -   (747)  7,150 
Disposals                                                  (11,225)  (15)  -   (11,240)
At June 30, 2014                                                  6,731   119,188   11,232   137,151 
Additions                                                  -   1,066   -   1,066 
Currency translation adjustment  -   (6,124)  -   (6,124)
Reclassifications of investment properties  -   -   3,107   3,107 
Disposals                                                  (2,246)  -   -   (2,246)
At June 30, 2015                                                  4,485   114,130   14,339   132,954 

As of June 30, 2015 and 2014 properties under construction mainly comprise works in "Zetol” and "Vista al Muelle" for the amounts of Ps. 105.9 and Ps. 111.0 million, respectively.

The Group has contractual obligations not provisioned related to future works committed when certain properties were acquired or real estate projects were approved. As of June 30, 2015 and 2014, contractual obligations mainly correspond to constructions regarding “Zetol” and "Vista al Muelle" projects and amount to Ps. 69 million and Ps. 56 million, respectively. Both projects are expected to be completed in 2023.

Certain of the Group’s trading properties have been mortgaged or restricted to secure some of the Group’s borrowings and other payables. The net book value of the Group’s trading properties as of June 30, 2015 and 2014 is as follows:

  
June 30,
2015
  
June 30,
2014
 
Vista al Muelle                                                                                     43,362   45,368 
Zetol                                                                                     62,568   65,620 
Total                                                                                     105,930   110,988 



F-174

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



12.
Trading properties (Continued)

The following is a detailed summary of the Group’s trading properties by type as of June 30, 2015:

DescriptionEncumbrancesBook valueDate of constructionDate of acquisition
Undeveloped sites:
Coto Air Space-10,429-sep-97
Neuquén Project-803--
Córdoba plot of land-3,107-may-15
Total undeveloped sites14,339
Properties under development:
Vista al Muelle plot of landMortgage43,362-jun-09
Zetol plot of landMortgage62,568-jun-09
Pereiraola-8,200-dec-96
Total Properties under development114,130
Completed properties:
Abril-2,357-jan-95
San Martín de Tours-181-mar-03
Entre Rios 465/9 apartments-1,400-jan-00
Condominio I and II-547-apr-99
Total Completed properties4,485
Total132,954





F-175

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



13.Intangible assets

Changes in the Group’s intangible assets for the years ended June 30, 2015 and 2014 are as follows:

  Goodwill  Compute software  Rights of use  Units to be received under barters  Others  Total 
Year ended June 30, 2014                  
Opening net book amount                                                  77,052   8,189   39,939   93,225   132   218,537 
Currency translation adjustment  29,352   2,955   -   -   -   32,307 
Additions                                                  658   2,947   -   -   10,954   14,559 
Disposals                                                  -   (245)  -   -   -   (245)
Reclassification to trading properties  -   -   -   (8,148)  -   (8,148)
Reclassification to assets held for sale  (77,085)  -   -   -   -   (77,085)
Reclassification of property, plant and equipment  -   30   -   -   -   30 
Amortization charge (i)                                                  -   (4,116)  (752)  -   (80)  (4,948)
Closing net book amount                                                  29,977   9,760   39,187   85,077   11,006   175,007 
At June 30, 2014                        
Cost                                                  29,977   36,680   40,691   85,077   11,861   204,286 
Accumulated amortization                                                  -   (26,920)  (1,504)  -   (855)  (29,279)
Net book amount                                                  29,977   9,760   39,187   85,077   11,006   175,007 
Year ended June 30, 2015                        
Opening net book amount                                                  29,977   9,760   39,187   85,077   11,006   175,007 
Currency translation adjustment  (2,022)  (1,565)  -   -   -   (3,587)
Additions                                                  -   6,391   -   5,409   -   11,800 
Disposals                                                  (343)  (119)  -   -   -   (462)
Amortization charge (i)                                                  -   (4,625)  (1,224)  -   (1,146)  (6,995)
Closing net book amount                                                  27,612   9,842   37,963   90,486   9,860   175,763 
At June 30, 2015                        
Cost                                                  27,612   41,387   40,692   90,486   11,862   212,039 
Accumulated amortization                                                  -   (31,545)  (2,729)  -   (2,002)  (36,276)
Net book amount                                                  27,612   9,842   37,963   90,486   9,860   175,763 

(i)  As of June 30, 2015 and 2014 depreciation charges has been charged in “General and administrative expenses” in the Income statements (Note 33).



F-176

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



14.Biological assets


Changes in the Group’s biological assets for the years ended June 30, 2015 and 2014 are as follows:

  Crops  Sugarcane  Beef cattle  Dairy  Other cattle  Others  Total 
At June 30, 2013  55,879   111,063   195,750   28,134   7,136   2,730   400,692 
Purchases  -   -   37,651   -   172   -   37,823 
Initial recognition and changes in fair value of biological assets (i)  837,037   82,778   143,096   11,445   (661)  1,872   1,075,567 
Decrease due to harvest  (815,080)  (100,791)  -   -   -   -   (915,871)
Decrease due to sales  -   -   (73,897)  (2,316)  (181)  -   (76,394)
Consume  -   -   (501)  -   (57)  81   (477)
Currency translation adjustment  69,520   49,823   -   -   -   -   119,343 
At June 30, 2014  147,356   142,873   302,099   37,263   6,409   4,683   640,683 
Purchases  -   -   14,097   -   873   -   14,970 
Initial recognition and changes in fair value of biological assets (i)  896,520   162,352   161,104   13,142   463   1,796   1,235,377 
Decrease due to harvest  (959,572)  (198,026)  -   -   -   -   (1,157,598)
Decrease due to sales  -   -   (118,041)  (9,850)  (273)  -   (128,164)
Addition from lease agreement  -   22,474   -   -   -   -   22,474 
Consume  -   -   (705)  -   (49)  (1,084)  (1,838)
Currency translation adjustment  (30,476)  (16,551)  -   -   -   -   (47,027)
At June 30, 2015  53,828   113,122   358,554   40,555   7,423   5,395   578,877 

(i)  Biological assets with a production cycle of more than one year (that is, sugarcane and cattle) generated “Initial recognition and changes in fair value of biological assets” amounting to Ps. 337,061 and Ps. 236,658 for the years ended June 30, 2015 and 2014, respectively. For the years ended June 30, 2015 and 2014, amounts of Ps. 15,993 and Ps. 79,351, was attributable to price changes, and amounts of Ps. 143,643 and Ps. 58,315, was attributable to physical changes, respectively.

Biological assets as of June 30, 2015 and 2014 are as follows:

 Classification 
June 30,
2015
  
June 30,
2014
 
Non-current       
Cattle for dairy productionProduction  40,478   37,217 
Breeding cattleProduction  293,709   254,397 
Sugarcane fieldsProduction  113,122   142,873 
Other cattleProduction  6,175   5,683 
Others biological assetsProduction  5,395   4,683 
Non-current biological assets   458,879   444,853 
Current         
Cattle for dairy productionConsumable  77   46 
Cattle for saleConsumable  64,845   47,702 
Crops fieldsConsumable  53,828   147,356 
Other cattleConsumable  1,248   726 
Current biological assets   119,998   195,830 
Total biological assets   578,877   640,683 


F-177

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



14.
Biological assets (Continued)


The fair value less estimated point of sale costs of agricultural produce at the point of harvest amount to Ps. 1,218,242 and Ps. 789,284 for the years ended June 30, 2015 and 2014, respectively.

The following tables present the Group’s biological assets measured at fair value as of June 30, 2015 and 2014 and their allocation to the fair value hierarchy:

  June 30, 2015 
  Level 1  Level 2  Level 3  Total 
Cattle for dairy production  -   40,555   -   40,555 
Breeding cattle and cattle for sale  -   358,554   -   358,554 
Sugarcane fields  -   -   113,122   113,122 
Other cattle  -   7,423   -   7,423 
Others biological assets  5,395   -   -   5,395 
Crops fields  13,477   -   40,351   53,828 
Total                                                              18,872   406,532   153,473   578,877 

 June 30, 2014
 Level 1 Level 2 Level 3 Total
Cattle for dairy production- 37,263 - 37,263
Breeding cattle and cattle for sale- 302,099 - 302,099
Sugarcane fields- - 142,873 142,873
Other cattle- 6,409 - 6,409
Others biological assets4,683 - - 4,683
Crops fields10,736 - 136,620 147,356
Total                                                             15,419 345,771 279,493 640,683

The following table presents the changes in Level 3 financial instruments for the years ended June 30, 2015 and 2014:

  Crops fields with significant biological growth  Sugarcane fields 
At June 30, 2014                                                                                         136,620   142,873 
Initial recognition and changes in the fair value of biological assets (i)  462,116   162,352 
Harvest                                                                                         (557,591)  (198,026)
Addition from lease agreement                                                                                         -   22,474 
Currency translation adjustment                                                                                         (794)  (16,551)
At June 30, 2015                                                                                         40,351   113,122 


F-178

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



14.  
Biological assets (Continued)

When no quoted prices in an active market are available, values are based on recognized valuation methods. The company uses a range of valuation models for the measurement of Level 2 and Level 3 biological assets. The following table presents models and main parameters:

Level 2

DescriptionPricing modelParameters
CattleComparable marketPrice per livestock head/kg and per category

Level 3

DescriptionPricing modelPricing methodParametersRange
CropsDiscounted cash flows-Yields – Operating cost –Selling expenses - Future of sale pricesArgentina:
Discount rateYields 1.65 - 11.72 tn/ha
Future of sale prices: 949 -1,233 Ps. /tn
Selling expenses: 170 - 680 Ps./tn
Operating cost: 756 -4,001 Ps. /ha
Brazil:
Yields 3.42 tn/ha
Future of sale prices: 366.67 Rs./tn
Selling expenses: 57.07 Rs./tn
Operating cost: 125 Rs./ha
SugarcaneDiscounted cash flows-Yields – Operating cost –Selling expenses - Future of sale pricesBrazil:
Discount rateYields 60 - 112.5 tn/ha
Future of sale prices: 66.9-82.7 Rs./tn
Operating cost: 4,536.23 Rs./ha
Bolivia:
Yields 58 - 113 tn/ha
Future of sale prices: 21.87 – 23.89 US$/tn
Selling expenses: 4.05 US$/tn
Operating cost: 275 – 520 US$/tn
Discount rate: 11.62%



F-179

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



14.  
Biological assets (Continued)

During years ended June 30, 2015 and 2014, there have been no transfers between the several tiers used in estimating the fair value of the Group’s biological assets, or reclassifications among their respective categories.

See information on valuation processes used by the entity and on the sensitivity of fair value valuation to changes in material non-observable input data in Note 5.c.

As of June 30, 2015 and 2014, the better and maximum use of biological assets shall not significantly differ from the current use.

15.  Inventories

Breakdown of Group’s inventories as of June 30, 2015 and 2014 are as follows:

  
June 30,
2015
  
June 30,
2014
 
Current      
Crops                                                                                     269,861   241,061 
Materials and inputs                                                                                     154,492   141,495 
Seeds and fodders                                                                                     60,839   28,329 
Hotel supplies                                                                                     6,926   6,011 
Beef                                                                                     19,232   22,875 
Current inventories                                                                                     511,350   439,771 
Total inventories                                                                                     511,350   439,771 

As of June 30, 2015 and 2014 the cost of inventories recognized as expense amounted to Ps. 950,354 and Ps. 1,314,146, respectively and they have been included in “Costs” in the income statements.

16.  Financial instruments by category

The following tables show the carrying amount of financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the Statements of Financial position, as appropriate. Since the line items “Trade and other receivables” and “Trade and other payables” contain both financial instruments and non-financial assets or liabilities (such as prepayments, tax receivables and payables in kind), the reconciliation is shown in the columns headed “Non-financial assets” and “Non-financial liabilities”.


F-180

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


16.
Financial instruments by category (Continued)

Financial assets and financial liabilities as of June 30, 2015 are as follows:

  Financial assets at amortized cost  Financial assets at fair value through profit or loss  Subtotal financial assets  Non-financial assets  Total 
June 30, 2015               
Assets as per statement of financial position               
Investments in associates and joint ventures (Note 9) (i)  -   907,083   907,083   -   907,083 
Trade and other receivables (Note 18)  684,104   56,181   1,740,285   458,865   2,199,150 
Investment in financial assets (Note 19)  100,452   1,026,495   1,126,947   -   1,126,947 
Derivative financial instruments (Note 20)  -   237,156   237,156   -   237,156 
Cash and cash equivalents (excluding bank overdrafts) (Note 21)  521,353   112,340   633,693   -   633,693 
Total                                                  2,305,909   2,339,255   4,645,164   458,865   5,104,029 

  Financial liabilities at amortized cost  Financial liabilities at fair value through profit or loss  Subtotal financial liabilities  Non-financial liabilities  Total 
Liabilities as per statement of financial position               
Trade and other payables (Note 22)  761,390   -   761,390   809,499   1,570,889 
Borrowings (excluding finance lease liabilities) (Note 25)  8,258,448   15,088   8,273,536   -   8,273,536 
Derivative financial instruments (Note 20)  -   532,683   532,683   -   532,683 
Total  9,019,838   547,771   9,567,609   809,499   10,377,108 

(i)  The Group has valued its interest in its associate IDBD at fair value through profit or loss according to IAS 28. Therefore, the Group has included it in the chart in order to show the respective results.


Financial assets and financial liabilities as of June 30, 2014 are as follows:

  Financial assets at amortized cost  Financial assets at fair value through profit or loss  Subtotal financial assets  Non-financial assets  Total 
June 30, 2014               
Assets as per statement of financial position               
Trade and other receivables (Note 18)  1,362,245   66,722   1,428,967   484,790   1,913,757 
Investments in associates and joint ventures (Note 9) (i)  -   595,342   595,342   -   595,342 
Investment in financial assets (Note 19)  -   770,645   770,645   -   770,645 
Derivative financial instruments (Note 20)  -   33,130   33,130   -   33,130 
Cash and cash equivalents (excluding bank overdrafts) (Note 21)  978,397   24,590   1,002,987   -   1,002,987 
Total                                                  2,340,642   1,490,429   3,831,071   484,790   4,315,861 
F-181

(i)  The Group has valued its interest in its associate IDBD at fair value through profit or loss according to IAS 28. Therefore, the Group has included it in the chart in order to show the respective results.


F-182

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)

  Financial liabilities at amortized cost  Financial liabilities at fair value through profit or loss  Subtotal financial liabilities  Non-financial liabilities  Total 
Liabilities as per statement of financial position               
Trade and other payables (Note 22)  568,826   -   568,826   652,114   1,220,940 
Borrowings (excluding finance lease liabilities) (Note 25)  7,900,094   51,443   7,951,537   -   7,951,537 
Derivative financial instruments (Note 20)  -   374,266   374,266   -   374,266 
Total                                                  8,468,920   425,709   8,894,629   652,114   9,546,743 

Liabilities carried at amortized cost also include liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17 “Leases”. The categories disclosed are determined by reference to IFRS 9. Finance leases are excluded from the scope of IFRS 7 “Financial Instruments: Disclosures”. Therefore, finance leases have been shown separately.

Income, expense, gains and losses on financial instruments are included in “Financial results, net” in the income statements, except for those generated by commodities, which are disclosed in “Other operating results, net” can be assigned to the following categories:

  Financial assets/ liabilities at amortized cost  Financial assets / liabilities at fair value through profit or loss  Subtotal Financial assets and liabilities  Non-Financial assets and liabilities  Total 
June 30, 2015               
Interest income  100,094   -   100,094   -   100,094 
Interest expense  (886,710)  -   (886,710)  -   (886,710)
Foreign exchange losses  (562,042)  -   (562,042)  -   (562,042)
Dividends income  16,622   -   16,622   -   16,622 
Capitalized borrowing costs  12,957   -   12,957   -   12,957 
Fair value gain on financial assets at fair value through profit or loss, net  -   187,529   187,529   -   187,529 
Loss from repurchase of Non-convertible Notes  (1,945)  -   (1,945)  -   (1,945)
Loss from derivative financial instruments (except commodities)  -   (83,510)  (83,510)  -   (83,510)
Gain on the revaluation of receivables arising from the sale of farmland  -   52,984   52,984   -   52,984 
Other financial results  (124,140)  -   (124,140)  -   (124,140)
Net result  (1,445,164)  157,003   (1,288,161)  -   (1,288,161)


F-183

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)

  Financial assets / liabilities at amortized cost  Financial assets / liabilities at fair value through profit or loss  Subtotal Financial assets and liabilities  Non-Financial assets and liabilities  Total 
June 30, 2014               
Interest Income  119,291   -   119,291   -   119,291 
Interest expense  (737,913)  -   (737,913)  -   (737,913)
Foreign exchange losses, net  (1,899,521)  -   (1,899,521)  -   (1,899,521)
Dividends income  15,041   -   15,041   -   15,041 
Capitalized borrowing costs  22,376   -   22,376   -   22,376 
Fair value gain on financial assets at fair value through profit or loss, net  -   379,091   379,091   -   379,091 
Loss from repurchase of Non-convertible Notes  (44,688)  -   (44,688)  -   (44,688)
Loss from derivative financial instruments (except commodities)  -   (365,740)  (365,740)  -   (365,740)
Gain on the revaluation of receivables arising from the sale of farmland  -   20,751   20,751   -   20,751 
Other finance results  (83,086)  -   (83,086)  -   (83,086)
Net result  (2,608,500)  34,102   (2,574,398)  -   (2,574,398)

  Financial assets / liabilities at amortized cost  Financial assets / liabilities at fair value through profit or loss  Subtotal Financial assets and liabilities  Non-Financial assets and liabilities  Total 
June 30, 2013               
Interest income  72,813   -   72,813   -   72,813 
Interest expense  (483,772)  -   (483,772)  -   (483,772)
Foreign exchange losses, net  (481,696)  -   (481,696)  -   (481,696)
Dividends income                                                 23,249   -   23,249   -   23,249 
Capitalized borrowing costs  10,307   -   10,307   -   10,307 
Fair value gain of financial assets at fair value through profit or loss, net  -   23,739   23,739   -   23,739 
Loss from derivative financial instruments (except commodities)  -   (7,567)  (7,567)  -   (7,567)
Net loss on the revaluation of receivables arising from the sale of farmland  -   (3,165)  (3,165)  -   (3,165)
Gain from repurchase of Non-convertible Notes  2,057   -   2,057   -   2,057 
Fair value gain on embedded derivatives  -   64   64   -   64 
Other finance results  (64,790)  -   (64,790)  -   (64,790)
Net result  (921,832)  13,071   (908,761)  -   (908,761)


F-184

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)

Determining fair values

IFRS 9 defines the fair value of a financial instrument as the amount for which a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 7. This valuation hierarchy provides for three levels. The initial basis for the allocation is the “economic investment class”. Only if this does not result in an appropriate allocation the Company deviates from such an approach in individual cases. The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking.

In the case of Level 1, valuation is based on non-adjusted quoted prices in active markets for identical financial assets or liabilities that the Group can refer to at the date of the statement of financial position. A market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis. Since a quoted price in an active market is the most reliable indicator of fair value, this should always be used if available. The financial instruments the Group has allocated to this level mainly comprise equity investments, mutual funds, government bonds and corporate bonds for which quoted prices in active markets are available. In the case of securities, the Group allocates them to this level when either a stock market price is available or prices are provided by a price quotation on the basis of actual market transactions.

In the case of Level 2, fair value is determined by using valuation methods based on inputs directly or indirectly observable in the market. If the financial instrument concerned has a fixed contract period, the inputs for valuation must be observable for the whole of this period. The financial instruments the Group has allocated to this level mainly comprise interest rate swaps and foreign currency future contracts.

In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no observable market data are available. The inputs used reflect the Group’s assumptions regarding the factors which market players would consider in their pricing. The Group uses the best available information for this, including internal company data. The financial instruments the Group has allocated to this level mainly comprise equity securities of Condor, shares, other borrowings and commitment to tender offer of shares in IDBD.


F-185

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)


The Group’s Finance Division has a team in place in charge of estimating valuation of financial assets required to be reported in the financial statements, including the fair value of Level 3 instruments. The team directly reports to the Chief Financial Officer (CFO).

The CFO and the valuation team discuss the valuation methods and results upon the acquisition of an asset and, if necessary, on a quarterly basis, in line with the Group’s quarterly reports.

According to the Group’s policy, transfers among the several categories of valuation tiers are recognized when occurred, or when there are changes in the prevailing circumstances requiring the transfer.
As described in Note 3 to the consolidated financial statements as of June 30, 2015 and for the fiscal year then ended, the Group has valued its investment in IDBD at fair value, applying the exception contemplated under IAS 28 (see Note 2 for further details). The investment in IDBD consists of 324 million common shares representing 49% of IDBD’s stock capital and 248 million warrants to purchase common shares.
Up to the third quarter ended March 31, 2015, the Group estimated that the quoted market price of IDBD’s shares in the Tel Aviv Stock Exchange represented the fair value of its investment and therefore, it valued its investment based on such quoted price, classifying this measurement as Level 1 in the fair value hierarchy.
As further described in Note 9 to the consolidated financial statements, as part of the Arrangement, Dolphin promised to make one or more Tender Offers for the purchase of IDBD’s outstanding shares at a fixed price for a total amount of NIS 512.09 million.
On October 20, 2015, a judge of the Tel Aviv-Jaffo court of first instance sustained a request filed by the trustees representing the Creditors under the Arrangement and ruled that the shares held by Dolphin or any other company controlled by Eduardo S. Elsztain would not be eligible to participate in the Tender Offers scheduled for December 2015 and December 2016. Dolphin decided to appeal against the ruling before the Supreme Court of Justice of Israel.
Although IDBD’s capital is composed of a single class of common shares, all entitled to the same rights, the judge’s ruling de facto created two classes of shares with different rights: one class that would be eligible to be tendered and another class, belonging to any company controlled by Eduardo S. Elsztain, that would not be eligible to be tendered. Since IDBD’s share carries a right to be tendered for a fixed price at a predetermined date, the quoted price contains an embedded feature representing the value of the future commitment for the Tender Offers. Upon the judge’s ruling, such value would only be representative for purposes of valuing the interest held in IDBD by parties other than Dolphin or any other company controlled by Eduardo S. Elsztain, i.e. Creditors under the Arrangement representing approximately 127 million shares of IDBD as of June 30, 2015.

F-186


16.  
Financial instruments by category (Continued)
Based on the circumstances described above, the Group considers that the quoted market price of IDBD share would no longer be representative of the fair value of Dolphin’s interest because under the judge’s ruling, Dolphin’s shares would not have the same rights as the ones currently trading in the Tel Aviv stock exchange. As such, the Group considered departing from its Level 1 measurement (quoted market price) and considering a Level 3 measurement by using a valuation model with significant unobservable inputs to estimate the fair value of its investment in IDBD. It is the Group’s policy to recognize transfers to and from different levels in the fair value hierarchy under IFRS 13 as of the date of the event or change in the circumstances that lead to such transfer.
    The Group developed an internal valuation model to determine the fair value of the IDBD shares under these circumstances. This model is principally based and is sensitive to the number of shares eligible to be tendered. In one end of the spectrum, all of the shares outstanding (Dolphin’s, any other company controlled by Eduardo S. Elsztain and the Creditors) may be tendered, and on the opposite end, only the Creditors’ shares are eligible for tendering as per the judge’s ruling. The objective of the methodology is to arrive at a fair value of the IDBD’s share by subtracting from the quoted market price the value of the right to participate in the tender offer embedded in such quoted price. The relative weight of the “right to participate in the tender offer” embedded in IDBD’s quoted market price is sensitive and varies depending on the number of shares deemed eligible for tendering. Each scenario reflects a different number of shares eligible for tendering. A probability of occurrence has been assigned to each scenario based on available evidence. This methodology results in a weighted-probability value representing the fair value of IDBD’s shares recognized in the financial statements. The Company considers this value as a reasonable proxy for the fair value of the IDBD share.

    Based on the opinion of its legal counsel, Dolphin considers that it has a reasonable probability that the Supreme Court of Justice overturns the judge’s ruling. In this regard, the model assigned equal probabilities to either succeeding in or losing the appeal. In the event that Dolphin is not successful in its appeal, the Group considers that the Supreme Court may sustain the first instance’s ruling or may allow a number of shares of IDBD held by Dolphin or any other company controlled by Eduardo S. Elsztain to be tendered.

This is translated into the model as the following scenarios:

Scenario 1: “Win Scenario”

The Group has a 50% chance of succeeding in its appeal before the Supreme Court of Justice and, therefore, all of the shares held by Dolphin and any other company controlled by Eduardo S. Elsztain would be eligible to be tendered. This scenario affirms that the quoted market price of the IDBD’s shares would still be representative of the fair value, because no distinction of classes of shares is made and all continue to have the same rights as before the judge’s ruling.

Scenario 2: “Loss Scenario”

    The Group has a 50% chance of not succeeding in its appeal before the Supreme Court of Justice. This scenario is further divided into various sub-scenarios depending on the number of shares – held by Dolphin or other companies controlled by Eduardo S. Elsztain- that a Supreme Court’s sentence might allow to participate in the Tender Offers. A sentence could determine different amounts of shares eligible for participating in the Tender Offers, and accordingly the Group weighed different probabilities of occurrence to the sub-scenarios based on such amounts.
    This methodology is based on the following assumptions:
·Quoted market price of IDBD share as of June 30, 2015 as published in the TASE: NIS 1.96 per share
·Number of shares eligible to participate in the tender offer under the various scenarios and assigned probability of occurrence; and
·Discount rate to be applied to the fixed-price tender offer obligation of 0.07%

F-187


Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)
The following tables present the Group’s financial assets and financial liabilities that are measured at fair value as of June 30, 2015 and 2014 and their allocation to the different levels of the fair value hierarchy:

  June 30, 2015 
  Level 1  Level 2  Level 3  Total 
Assets            
Financial assets at fair value through profit or loss:            
 - Investment in equity securities in TGLT  71,573   -   -   71,573 
 - Investment in equity securities in Avenida Inc. S.A.  102,316   -   -   102,316 
 - Corporate bonds                                                              1,789   -   -   1,789 
 - Government bonds                                                              101,649       -   101,649 
 - Mutual funds                                                              383,572   -   -   383,572 
 - Other securities in public Companies  16,742   -   -   16,742 
 - Preferred Shares of Condor Hospitality Trust Inc. (formerly Supertel Hospitality Inc. due to change of corporate name)  -   -   348,854   348,854 
Derivative financial instruments:                
 -  Warrants of Condor Hospitality Trust Inc. (formerly Supertel Hospitality Inc. due to change of corporate name)  -   -   7,151   7,151 
- Crops futures                                                              396   -   -   396 
- Commodities options                  ��                                           1,195   -   -   1,195 
 - IDBD Warrants                                                              228,414   -   -   228,414 
- Investments in associates                
 -  IDBD                                                              -   -   907,083   907,083 
Cash and cash equivalents                                                              112,340   -   -   112,340 
Total Assets                                                              1,019,986   -   1,263,088   2,283,074 
Liabilities                
Derivative financial instruments:                
- Foreign-currency contracts                                                              -   10,065   -   10,065 
- Crops futures                                                              11,477   -   -   11,477 
- Commodities options                                                              8,500   -   -   8,500 
- Commitment to tender offer shares in IDBD  -   -   502,641   502,641 
Borrowings                
 - Other borrowings                                                              -   -   15,089   15,089 
Total Liabilities                                                              19,977   10,065   517,730   547,772 



F-188

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


16.  
Financial instruments by category (Continued)

  June 30, 2014 
  Level 1  Level 2  Level 3  Total 
Assets            
Financial assets at fair value through profit or loss:            
 - Investment in equity securities in TGLT  63,546   -   -   63,546 
 - Investment in equity securities in Hersha  53,901   -   -   53,901 
 - Corporate bonds                                                              1,438   -   -   1,438 
 - Government bonds                                                              203,216   -   -   203,216 
 - Mutual funds                                                              222,760   -   -   222,760 
 - Other securities in public Companies  14,614   -   -   14,614 
 -  Preferred Shares of Condor Hospitality Trust Inc. (formerly Supertel Hospitality Inc. due to change of corporate name)  -   -   211,170   211,170 
Derivative financial instruments:                
 - Crops futures                                                              4,750   -   -   4,750 
 - IDBD Rights (i)                                                              10,986   -   -   10,986 
 - Foreign-currency contracts                                                              -   16,305   -   16,305 
 - Interest-rate swaps                                                              -   1,089   -   1,089 
Cash and cash equivalents                                                              24,590   -   -   24,590 
Total Assets                                                              599,801   17,394   211,170   828,365 
Liabilities                
Derivative financial instruments:                
- Foreign-currency future contracts  -   52,666   -   52,666 
- Commodities options                                                              753   -   -   753 
- Commitment to tender offer shares in IDBD  -   -   320,847   320,847 
Total Liabilities                                                              753   52,666   320,847   374,266 

(i)  On July 3 rights for the purchase of additional shares and warrants of IDBD were exercised.

The following table presents the changes in Level 3 financial instruments for the years ended June 30, 2015 and 2014:


  Warrants of Condor Hospitality Trust Inc.  Investment in associate IDBD  Other borrowings  
Preferred Shares
of Condor Hospitality
Trust Inc.
  Commitment to tender offer shares in IDBD  Total 
Balances as of July 1st, 2013  16,949   -   -   139,120   -   156,069 
Currency translation adjustment  -   -   -   -   (5,247)  (5,247)
Total gains or losses for the year 2013  (16,949)  -   -   72,050   (315,600)  (260,499)
Balance as of June 30, 2014  -   -   -   211,170   (320,847)  (109,677)
Transfers to Level 3  -   1,825,449   (86,210)  -   -   1,739,239 
Currency translation adjustment  -   82,634   18,580   -   (45,260)  55,954 
Gain and losses recognized in profit or loss (i)  7,151   (1,001,000)  52,541   137,684   (136,534)  (940,158)
Balance as of June 30, 2015  7,151   907,083   (15,089)  348,854   (502,641)  745,358 
(i)  The gain / (loss) is not realized as of June 30, 2015 and is accounted for under “Other financial results” in the income statements (Note 36)


F-189

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



16.  
Financial instruments by category (Continued)

Upon initial recognition (January 2012), the consideration paid for the Shares and Warrants of Condor was assigned to both instruments based on the relative fair values of those instruments upon acquisition. The fair value of these instruments exceeded the transaction price and were determined using a valuation technique that uses inputs not observable in the market. As a result of the use of this technique, the Group has not recognized a gain at the time of initial recognition in the amount of US$ 7.9 million.

According to Group estimates, all factors being constant, a 10% decline in the price of the underlying assets of Level 3 Shares and Warrants of Condor (data observed in the market) as of June 30, 2015, would reduce pre-tax income by Ps. 39 million.

According to Group estimates, all factors being constant, a 10% decrease in the credit spread (data which is not observable in the market) of shares and warrants of Condor used in the valuation model applied to Level 3 financial instruments as of June 30, 2015, would increase pre-tax income by Ps. 0.15 million. The rate used as of June 30, 2015 was 14.25%.
        According to Group estimates, all things being constant, a 10% decline in the price of IDBD shares, will change the value of our financial assets and liabilities related to this investment, wich are classified as  Level 3 as of June 30, 2015, and would reduce pre-tax income by Ps. 127,9 million.According to Group estimates, all things being constant, assigning 100% probability to scenario 1 (succeeding in the appeal) would increase pre-tax income by Ps. 615.2 million. On the other hand, assigning 100% probability to scenario 2 (not succeeding in the appeal) would reduce pre-tax income by Ps. 615.2 million.

F-190


16.  
Financial instruments by category (Continued)
        When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments, details of which may be obtained from the following table:

DescriptionPricing modelPricing methodParametersRange
Foreign currency-contractsPresent value methodTheoretical priceMoney market curve, interest-rate curve; Foreign exchange curve.-
Commitment to tender offer IDBDBlack-ScholesTheoretical priceUnderlying asset price; share price volatility (historical) and interest-rate curve (NIS rate curve).
Underlying asset price 3.5 to 4.7
Share price volatility
30% to 40%
Money market interest rate 0.7% to 1%
Other BorrowingsWeighted probability of the difference between market price and the Commitment to tender offer of shares in IDBDTheoretical priceUnderlying asset price; share price volatility (historical) and interest-rate curve (NIS rate curve). IRSA 2017 interest-rate and scenario weights.
Underlying asset price 1.55 to 2.35
Share price volatility
60% to 80%
Money market interest rate 0.02% to 0.9%
IDBD SharesWeighted probability of the difference between market price and the Commitment to tender offer of shares in IDBDTheoretical priceUnderlying asset price; share price volatility (historical) and interest-rate curve (NIS rate curve). IRSA 2017 interest-rate and scenario weights.
Underlying asset price 1.55 to 2.35
Share price volatility
60% to 80%
Money market interest rate 0.02% to 0.9%
Call option of Arcos
Discounted cash flow-Projected income and discounted interest rate.-
Interest rate swaps
Cash flowTheoretical priceInterest rate and cash flow forward contract.-
Preferred shares of CondorBinomial treeTheoretical price Underlying asset price (market price), share price volatility (historical) and money market interest-rate curve (Libor rate).
Underlying asset price 1.96 to 2.65
Share price volatility 56% to 76%
Money market interest rate 0.67% to
0.83%
Warrants of CondorBlack-ScholesTheoretical priceUnderlying asset price (market price), share price volatility (historical) and money market interest-rate curve (Libor rate).
Underlying asset price 1.96 to 2.65
Share price volatility 56% to 76%
Money market interest rate 0.67% to
0.83%


F-191

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


17.  Restricted assets

The table below shows presents the restricted assets as of June 30, 2015 and 2014:

  
June 30,
 2015
  
June 30,
2014
 
Non-current      
Mutual funds                                                                                     4,301   50,897 
Total Non-Current                                                                                     4,301   50,897 
Current        
Escrow deposits                                                                                     607,021   - 
Total Current                                                                                     607,021   - 
Total restricted assets                                                                                     611,322   50,897 



F-192

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



18.  Trade and other receivables

The table below shows trade and other receivables as of June 30, 2015 and 2014:

  
June 30,
2015
  
June 30,
2014
 
Non-current      
Leases and services receivable  62,080   55,105 
Receivables from sale of agriculture products  1,154   2,090 
Property sales receivable (i)  104,064   154,582 
Less: allowance for doubtful accounts  (2,208)  (2,208)
Non-current trade receivables  165,090   209,569 
Trade receivables from disposal of joint ventures  3,595   3,213 
Prepayments  11,274   14,332 
VAT receivables  26,745   22,342 
Other tax receivables  73,131   110,238 
Guarantee deposits  17,027   17,150 
Advances for shares purchases  12,134   - 
Others  2,060   1,093 
Non-current other receivables  145,966   168,368 
Related parties (Note 38)  115,721   97,412 
Non-current trade and other receivables  426,777   475,349 
Current        
Consumer financing receivables  14,620   14,861 
Leases and services receivable  356,217   256,123 
Receivables from sale of agriculture products and farmlands leases  253,355   281,711 
Receivables from hotel operations  21,144   33,861 
Deferred checks received  247,030   211,278 
Debtors under legal proceedings  71,343   61,573 
Property sales receivable (i)  88,032   131,573 
Less: allowance for doubtful accounts  (117,514)  (88,088)
Current trade receivables  934,227   902,892 
Contributions to be paid in by non-controlling interests  -   12,840 
Prepayments  144,982   90,754 
VAT receivables  51,593   61,030 
Gross sales tax credit  6,594   4,957 
Other tax receivables  36,316   33,457 
Loans  22,977   12,751 
Expenses and services to recover  3,125   3,024 
Suppliers advances  105,105   144,656 
Guarantee deposits  39,154   49,572 
Dividends receivable  -   11,778 
Others  37,505   24,892 
Less: allowance for doubtful accounts  (185)  (195)
Current other receivables  447,166   449,516 
Related parties (Note 38)  390,980   86,000 
Current trade and other receivables  1,772,373   1,438,408 
Total trade and other receivables  2,199,150   1,913,757 

(i)  Property sales receivables primarily comprise the sale of trading properties, investment properties and farmlands.


F-193

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



18.  
Trade and other receivables (Continued)

As of June 30, 2015, all non-current receivables are due within 4 years from the end of the reporting period.

The fair value of current trade and other receivables approximate their respective carrying amounts due to their short-term nature, as the impact of discounting is not considered significant. Fair values are based on discounted cash flows (Level 2 of fair value hierarchy).

The carrying amounts of the Group’s trade and other receivables denominated in foreign currencies are detailed in Note 41.

Trade receivables are generally presented in the statement of financial position net of allowances for doubtful receivables. Impairment policies and procedures by type of receivables are discussed in detail in Note 2.18.

The evolution of the Group’s provision for impairment of trade receivables are as follows:

  
June 30,
2015
  
June 30,
2014
 
Beginning of the year  90,491   86,902 
Creation  45,968   24,150 
Recovery  (16,800)  (13,689)
Unused amounts reversed  -   (23)
Used during the year  (1,924)  (9,347)
Currency translation adjustment  2,172   2,498 
End of the year  119,907   90,491 

The creation and release of provision for impairment receivables have been included in “Selling expenses” in the income statements (Note 33). Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash.

The Group’s trade receivables comprise several classes. The maximum exposure to credit risk at the reporting date is the carrying value of each class of credit.

The Company has also receivables with related parties. Neither of which are due nor impaired.


F-194

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



18.  
Trade and other receivables (Continued)

Due to the distinct characteristics of each type of receivables, an aging analysis of past due unimpaired and impaired receivables are shown by type and class as of June 30, 2015 and 2014 (includes receivables not past due to reconcile with the amounts in the statements of financial position):
  Expired          
  Up to 3 months  3 to 6 months  Over 6 months  Not past due  Allowance  Total 
Leases and services  39,737   10,437   13,986   562,113   69,846   696,119 
Office leases                                     3,761   3,645   1,801   11,888   9,540   30,635 
Hotel leases and services  854   -   -   16,195   757   17,806 
Consumer financing:                        
Credit card                                 -   -   -   4,635   14,620   19,255 
Disposal of properties  64   63   277   184,388   9,170   193,962 
Agriculture products  42,126   1,191   3,415   198,741   15,789   261,262 
Total as of June 30, 2015  86,542   15,336   19,479   977,960   119,722   1,219,039 
Leases and services  25,767   9,555   11,312   423,334   56,405   526,373 
Office leases                                     5,845   708   8,177   3,272   7,968   25,970 
Hotel leases and services  16,890   -   -   16,583   388   33,861 
Consumer financing:                        
Credit card                                 -   -   -   -   14,861   14,861 
Disposal of properties  11,120   43   218   276,174   2,512   290,067 
Agriculture products  22,673   121   3,621   277,048   8,162   311,625 
Total as of June 30, 2014  82,295   10,427   23,328   996,411   90,296   1,202,757 
Leases and services receivables from investment properties:

Trade receivables related to leases and services provided from shopping centers and offices represent 40% and 31% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. The Group has a large customer base and is not dependent on any single customer. Leases and services receivables that are not due and for which no allowance has been recorded relate to a wide and varied number of customers for whom there is no external credit rating available. Most of these customers have reached a minimum period of six months and have no previous non-compliance records. New customers with less than six months are regularly monitored. At the end of the year, the Group has not experience credit issues with these new customers.

As of June 30, 2015 and 2014 the Group recognized losses from impairment of leases and services receivables for an amount of Ps. 15.4 million and Ps. 12.9 million, respectively.


F-195

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



18.  
Trade and other receivables (Continued)

Consumer financing receivables:

Trade receivables related to the residual consumer activities of the Group represent only 1% and 1% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively

As of June 30, 2015, the Group has recorded the recovery of consumer financing receivables in the amount of Ps. 0.2 million, whereas as of June 30, 2014 the Group provided for recorded net gains (losses) on impairment of consumer financing receivables for an amount of Ps. 0,9 million. The estimation of the credit risk is complex and requires the use of rating and scoring models which are essential to measure default risk. In measuring the consumption credit risks of credit purchases made through credit cards and cash advances, the Group considers two components: (i) the probability of default by client or counterparty, and (ii) the likeable recovery rate of obligations in arrears. The models are reviewed regularly to check their effectiveness with respect to actual performance and, where necessary, to enhance them.

Receivables from the disposal of properties:

Trade receivables related to the disposal of properties represent 17% and 26% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. Payments on these receivables are generally received when due and are generally secured by mortgages on the properties, thus credit risk on outstanding amounts is considered low.

As of June 30, 2015, the Group recorded losses under receivables from the disposal of property in the amount of Ps. 6.7 million, whereas as of June 30, 2014 the Group recorded the recovery of receivables from the disposal of property in the amount of Ps. 0.3 million.

Receivables from the sale of agriculture products:

Trade receivables related to the sale of agriculture products and farmlands leases represent 23% and 26% of the Group’s total trade receivables as of June 30, 2015 and 2014, respectively. The Group has a large customer base and is not dependent on any single customer.

As of June 30, 2015 and 2014, the Company has recognized losses with respect to receivables from the sale of agriculture products for an amount of Ps. 7.6 million and Ps. 8.2 million, respectively.


F-196

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



18.  
Trade and other receivables (Continued)

As of June 30, 2015 and 2014, approximately 73% and 75% of the outstanding unimpaired receivables from the sale of agricultural products (neither past due nor impaired), respectively, relate to sales to 10 and 12 well-known companies with good credit quality standing. These entities or their parents have an available external credit rating. The Group reviews theses external ratings in credit agencies. As of June 30, 2015 and 2014, the remaining percentage of the outstanding unimpaired receivables from the sale of agricultural products is related to sales to a large number of customers whose external rating is not available. However, the total number of clients without an external credit rating is relatively stable. Most customers for which an external credit rating is unavailable are customers with more than six months in the Company and have had no defaults in the past. New customers with less than six months are regularly monitored. To date, the Group has not experience credit issues with these new customers.


F-197

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



19.  Investment in financial assets

The following table shows investments in financial assets as of June 30, 2015 and 2014:

  
June 30,
2015
  
June 30,
2014
 
Non-current      
Financial assets at fair value      
Investment in equity securities in TGLT (i)  71,573   63,546 
Investment in equity securities in Avenida Inc. S.A.  102,316   - 
Investments in equity securities of Condor Hospitality Trust Inc. (formerly Supertel Hospitality Inc. due to change of corporate name)  348,854   211,170 
Non-convertible notes related parties (Note 38)  100,000   - 
Other securities in public companies  102   296 
Total Investment in financial assets non-current  622,845   275,012 
Current        
Financial assets at fair value        
Mutual funds  383,572   222,760 
Investment in equity securities in Hersha (ii)  -   53,901 
Non-convertible notes related parties (Note 38)  452   - 
Corporate bonds  1,789   1,438 
Government bonds  101,649   203,216 
Other securities in public companies  16,640   14,318 
Total Investment in financial assets current  504,102   495,633 
Total Investment in financial assets  1,126,947   770,645 

(i)  On November 4, 2010, the Group, acquired 5,214,662 shares of common stock of TGLT following TGLT initial public offering in the Buenos Aires Stock Exchange for Ps. 47.1 million in cash. TGLT is a residential housing developer with operations in Argentina and Uruguay. Following the initial acquisition, through successive purchases, the Group acquired 1,474,359 additional TGLT shares for an aggregate of Ps. 13.1 million. As of June 30, 2015, the Group’s interest in TGLT amounted to 6,689,021 shares, representing 9.51% of the capital stock.

(ii)  As of June 30, 2014, the balances consist of the Group’s interest in Hersha of 0.498%. Hersha is a Real Estate Investment Trust (REIT) listed in the NYSE, with interests in hotels throughout the United States of America.
Book value of the Group's investments in financial instruments denominated in foreign currencies is detailed in Note 41.

The maximum exposure to credit risk at the reporting date is the carrying value of these assets.



F-198

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



20.  Derivative financial instruments

Group’s derivative financial instruments as of June 30, 2015 and 2014 are as follows:

  
June 30,
2015
  
June 30,
2014
 
Assets      
Non-current      
Commodities options                                                                                     1,195   - 
Foreign-currency contracts                                                                                     -   233 
Warrant IDBD                                                                                     199,256   - 
Warrant Condor Hospitality Trust Inc. (i)                                                                                     7,151   - 
Total non-current                                                                                     207,602   233 
Current        
Crops futures                                                                                     396   4,750 
Warrant IDBD (Note 3)                                                                                     29,158   10,986 
Foreign-currency contracts (Note 38)                                                                                     -   16,072 
Interest-rate swaps                                                                                     -   1,089 
Total Current                                                                                     29,554   32,897 
Total assets                                                                                     237,156   33,130 
         
Liabilities        
Non-current        
Commodities options                                                                                     1,863   - 
Foreign-currency contracts                                                                                     3,030   - 
Commitment to tender offer shares in IDBD (Note 3)  265,056   320,847 
Total non-current                                                                                     269,949   320,847 
Current        
Commodities options                                                                                     6,637   753 
Crops futures                                                                                     11,477   - 
Commitment to tender offer shares in IDBD (Note 3)  237,585   - 
Foreign-currency contracts                                                                                     7,035   52,666 
Total Current                                                                                     262,734   53,419 
Total liabilities                                                                                     532,683   374,266 

(i)The balance represents the fair value of Condor Hospitality Trus Inc.’s warrants, which were acquired in February 2012.

Book value of Group's derivative financial instruments denominated in foreign currencies is detailed in Note 41.

The maximum exposure to credit risk at the reporting date is the carrying value of derivative financial instruments.


F-199

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



21.  Cash flow information

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Cash at bank and on hand  437,337   724,900   769,485 
Short-term bank deposits  84,016   251,822   148,221 
Financial trust  -   1,675   - 
Mutual funds  112,340   24,590   129,880 
Total cash and cash equivalents  633,693   1,002,987   1,047,586 

Following is a detailed description of cash flows generated by the Group’s operations for the years ended as of June 30, 2015, 2014 and 2013:

   
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Profit (Loss) for the year                                                                                    176,211   (1,408,408)  154,263 
Adjustments for:
             
Income tax expense                                                                                 28  303,350   (389,415)  33,519 
Depreciation and amortization                                                                                 10,11,13  257,822   296,919   279,738 
Gain from disposal of investment property                                                                                    (1,150,230)  (230,918)  (177,999)
Gain from disposal of farmlands                                                                                    (550,462)  (91,356)  (149,584)
Loss / (Gain) from disposal of property, plant and equipment35  893   366   (1,379)
(Gain) / Loss on the revaluation of receivables arising from the sale of farmland   (52,984)  (20,751)  3,165 
Disposal of unused intangible assets                                                                                    380   162   - 
Release of investment property and property, plant and equipment   1,963   2,623   5,226 
Dividends income                                                                                    (16,622)  (15,041)  (23,249)
Share-based payments                                                                                    30,823   68,614   10,549 
Unrealized loss / (gain) on derivative financial instruments35, 36  131,006   350,133   (49,468)
Changes in fair value of investments in financial assets36  (187,529)  (379,091)  (23,739)
Interest expense, net                                                                                 36  773,659   596,246   400,652 
Unrealized initial recognition and changes in fair value of biological assets and agricultural produce at the point of harvest.   (105,094)  (405,771)  (176,471)
Changes in the net realizable value of agricultural produce after harvest   34,471   17,447   (11,756)
Provisions                                                                                    90,244   112,653   98,723 
Share of profit of associates and joint ventures8,9  1,024,972   408,651   9,818 
Reversal of currency translation adjustment                                                                                    (188,323)  -   - 
Unrealized foreign exchange, net                                                                                    645,098   1,946,071   517,755 
Loss from repurchase of Non-convertible Notes   1,945   44,688   - 
Gain from purchase of subsidiaries                                                                                    -   -   (136,724)
Gain from disposal of equity interest in subsidiaries, associates and joint ventures   (22,075)  -   (15,433)
Changes in operating assets and liabilities:       -     
Decrease in biological assets                                                                                    114,618   286,554   286,731 
Increase in inventories                                                                                    (131,678)  (196,831)  (56,929)
Decrease in trading properties                                                                                    44   7,145   4,466 
(Decrease) Increase in trade and other receivables   (479,919)  268,270   (265,428)
(Decrease) Increase  in derivative financial instruments   4,225   (6,331)  (32,019)
(Decrease) Increase in trade and other payables   144,786   (169,958)  220,067 
Increase in payroll and social security liabilities   84,939   71,633   19,734 
(Decrease) Increase in provisions                                                                                    (12,112)  (1,230)  7,090 
Net cash generated from operating activities before income tax paid   924,421   1,163,074   931,318 


F-200

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



21.  
Cash flow information (Continued)

The following table shows a detail of significant non-cash transactions occurred in the years ended June 30, 2015, 2014 and 2013:

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Increase in restricted funds from the sale of farmlands  590,490   -   - 
Reimbursement of expired dividends                                                                                           811   2,771   - 
Dividends payable                                                                                           42,772   56,625   4,169 
Decrease of borrowings trough a decrease in investment in associates and joint ventures  136,685   -   - 
Increase of financial assets through a decrease in investment in associates and joint ventures  30,089   -   - 
Increase in investments in associates and joint ventures through a decrease in financial assets  12,744   -   - 
Decrease of investment in associates and joint venture through an increase in trade and other receivables  -   476   - 
Decrease in equity through an increase in trade and other payables  -   -   1,164 
Decrease in equity through an increase in borrowings  -   -   1,640 
Decrease of investment in subsidiaries through an increase in trade and other receivables  -   -   20,869 
Increase of investment in joint ventures through a decrease in trade and other receivables  -   -   13,175 
Increase in property, plant and equipment through an increase in trade and other payables and borrowings  2,326   756   2,480 
Decrease in property, plant and equipment and investment properties through an increase in trade and other receivables  -   23,581   174,847 
Decrease in intangible assets through an increase in assets held for sale  -   77,085   - 
Increase in trading properties through a decrease in intangible assets  -   7,150   - 
Decrease in trading properties through a decrease in trade and other payables  1,135   -   - 
Decrease in investment properties through an increase in property, plant and equipment  -   12,231   - 
Decrease in investment properties through an increase in trade and other receivables  -   -   118,936 
Decrease in investment properties through an increase in intangible assets  -   998   - 
Decrease in investment properties through an increase in assets held for sale  -   1,098,990   - 
Decrease in trade and other receivables through an increase in assets held for sale  -   17,990   - 
Decrease in trade and other receivables through a decrease in borrowings  -   -   12,503 
Decrease in trade and other payables through an increase in liabilities directly associated with assets classified as held for sale  -   170,245   - 
Decrease in borrowings through an increase in liabilities directly associated with assets classified as held for sale  -   603,021   - 
Decrease in deferred income tax liabilities through an increase in liabilities directly associated with assets classified as held for sale  -   33,346   - 
Increase in restricted assets through a decrease in trade and other payables  -   146,394   - 
Stock plan granted                                                                                           (15,718)  -   - 
Distribution of treasury stock                                                                                           (54,876)  -   - 
Options expired                                                                                           106,134   -   - 
Distribution of dividends not yet paid                                                                                           4,594   -   - 
Decrease in derivative financial instruments through an increase in assets held for sale  -   299   - 
Decrease in restricted assets through an increase in assets held for sale  8,742   163,501   - 
Decrease in borrowings trough an increase of investment in associates, subsidiaries and joint ventures  -   23,829   - 
Increase in investments in financial assets through an increase in borrowings  -   -   18,767 


F-201

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



22.  Trade and other payables

The table below shows trade and other payables as of June 30, 2015 and 2014:

  
June 30,
 2015
  
June 30,
 2014
 
Non-current      
Admission rights                                                                                       146,036   113,617 
Sales, rent and services payments received in advance  63,986   51,638 
Guarantee deposits                                                                                       6,236   6,759 
Total non-current trade payables                                                                                       216,258   172,014 
Other tax payables                                                                                       6,404   9,166 
Deferred income                                                                                       7,420   7,914 
Shareholders’ personal tax payable                                                                                       865   1,170 
Tax amnesty plan for payable taxes                                                                                       24,268   15,014 
Others                                                                                       8,793   11,287 
Total non-current other payables                                                                                       47,750   44,551 
Related parties (Note 38)                                                                                       46   195 
Total non-current trade and other payables                                                                                       264,054   216,760 
Current        
Trade payables                                                                                       301,719   289,825 
Accrued invoices                                                                                       222,831   173,193 
Admission rights                                                                                       142,709   111,024 
Sales, rent and services payments received in advance  226,237   244,700 
Guarantee deposits                                                                                       14,302   13,413 
Total current trade payables                                                                                       907,798   832,155 
Withholdings tax                                                                                       6,048   3,020 
VAT payables                                                                                       43,953   28,521 
Gross sales tax payable                                                                                       2,004   1,150 
Other tax payables                                                                                       110,257   59,303 
Deferred revenue                                                                                       24,366   495 
Dividends payable                                                                                       123,888   24,032 
Tax amnesty plan for payable taxes                                                                                       280   306 
Shareholders’ personal tax payable                                                                                       4,666   5,076 
Others                                                                                       30,174   11,117 
Total current other payables                                                                                       345,636   133,020 
Related parties (Note 38)                                                                                       53,401   39,005 
Total current trade and other payables                                                                                       1,306,835   1,004,180 
Total trade and other payables                                                                                       1,570,889   1,220,940 

The fair values of current trade and other payables approximate their respective carrying amounts due to their short-term nature, as the impact of discounting is considered as not significant. Fair values are based on discounted cash flows (Level 2 of fair value hierarchy).

Book value of Group's trade and other payables denominated in foreign currencies are detailed in Note 41.


F-202

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



23.  Payroll and social security liabilities

The table below shows payroll and social security liabilities as of June 30, 2015 and 2014:

  
June 30,
2015
  
June 30,
2014
 
Non-current      
Provision for vacations and bonuses                                                                                     1,594   - 
Social security liabilities                                                                                     2,323   4,598 
Others                                                                                     1,622   443 
Non-current payroll and social security liabilities  5,539   5,041 
Current        
Provision for vacations and bonuses                                                                                     184,316   166,276 
Social security liabilities                                                                                     38,619   28,600 
Salaries payable                                                                                     3,066   2,247 
Share-based payments                                                                                     852   - 
Others                                                                                     3,547   5,423 
Current payroll and social security liabilities                                                                                     230,400   202,546 
Total payroll and social security liabilities                                                                                     235,939   207,587 

24.  Provisions

The Group is subject to several Argentine laws, regulations and business practices. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity.

The table below shows the movements in the Group's provisions for other liabilities categorized by type of provision:

  
Labor
and legal claims
  Tax and social security claims  Investments in associates and joint ventures (i)  Total 
At June 30, 2013                                       47,054   1,691   39,091   87,836 
Additions                                       31,710   478   115,359   147,547 
Used/ recovered during fiscal year  (21,088)  (577)  -   (21,665)
Contributions                                       -   -   (16,667)  (16,667)
Currency translation adjustment  4,947   -   39,199   44,146 
At June 30, 2014                                       62,623   1,592   176,982   241,197 
Additions                                       47,479   285   159,022   206,786 
Used/ recovered during fiscal year  (32,767)  (399)  (59)  (33,225)
Contributions                                       -   -   (1,522)  (1,522)
Currency translation adjustment  175   -   28,508   28,683 
At June 30, 2015                                       77,510   1,478   362,931   441,919 

(i)Corresponds to equity interests in associates and joint ventures with negative equity.


F-203

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



24.  
Provisions (Continued)

The analysis of total provisions is as follows:

  
June 30,
2015
  
June 30,
2014
 
Non-current                                                                                       386,948   220,489 
Current                                                                                       54,971   20,708 
   441,919   241,197 

Included within provisions are certain amounts the Group provided for the following cases which are further detailed below:

Litigation with Exagrind S.A.

Cresud filed a lawsuit through Inversiones Ganaderas S.A. (IGSA) (a former subsidiary merged with the Company) on claims for damages and losses produced by a fire in one of the Company's farms, “San Rafael” farm, which is close to Exagrind’s property, Tali Sumaj, in the Province of Catamarca, Argentina. The fire took place on September 6, 2000. Exagrind claimed an amount of Ps. 2.9 million at that date. The extraordinary appeal to the High Court of Justice of the Province of Catamarca, questioning the resolution that ended the term to respond the case, arguing that at that moment, the period was not completed, was favorably received. Therefore, Cresud finally responded the case and showed proofs. As of the consolidated financial statements date, the parties have been notified that the term to submit allegations has started to run. In March 2007, the court ordered an inhibition of assets which was subsequently lifted. This decision was lifted in June 2007 and Tali Sumaj farm on attachment has been accepted in replacement. Exagrind S.A. requested that the measure be extended with an attachment of bank accounts; this ruling has been challenged and to date the accounts have not been attached. In June, 2010, the Company sold the farm to a third party. Since the litigation is still pending, the bond posted in favor of the buyer remains effective as security for the obligations undertaken The Group has recorded a provision amounting to Ps. 1.5 million, which is included within “Labor, legal and other claims”.

In addition, the Group is involved in several legal proceedings, including tax, labor, civil, administrative and other matters for which the Group has not established provisions based on the information assessed to date. In the opinion of management, the ultimate disposition of any threatened or pending matters, either individually or collectively, will not have a material adverse effect on the consolidated financial position, liquidity and results of operations of the Group. For ease of presentation, the Group has categorized these matters between those arising out of the Group’s agricultural and agro-industrial activities and those arising out of the Group’s investment and development properties business activities:


F-204

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



24.  
Provisions (Continued)

Real Estate Business

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

On November 20, 2006, the Group, through IRSA Propiedades Comerciales S.A., acquired through a public bidding the building known as Ex-Escuela Gobernador Vicente de Olmos located in the city of Córdoba for the amount of Ps. 32,522. As explained in Note 29, this property is affected to a concession contract.

After the title deed was made, the government of the province of Córdoba declared the property to be of public use and subject to partial expropriation in order to be used exclusively for the Libertador San Martin theatre.

IRSA Propiedades Comerciales S.A. has answered a complaint in an action and to challenge the law that declared such public interest on unconstitutional grounds. In the alternative, it has challenged the appraisal made by the plaintiff and, additionally, it has claimed damages not included in the appraisal and resulting immediately and directly from expropriation.

At June 30, 2015, the property is still operated by the Group and is recorded under Investment properties.


F-205

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  Borrowings

Group’s borrowings at June 30, 2015 and 2014 are as follows:
          Book Value 
 Secured/ unsecuredCurrencyFixed/ Floating
Effective
 Interest rate %
 Nominal value (in million)  
June 30,
2015
  
June 30,
2014
 
Non-current             
CRESUD NCN Class XIV due 2018UnsecuredUS$Fixed1.50%  32   290,205   259,192 
CRESUD NCN Class XV due 2015UnsecuredPs.FloatingBadlar + 400 bps  176   -   117,299 
CRESUD NCN Class XVI due 2018UnsecuredUS$Fixed1.50%  109   998,594   896,032 
CRESUD NCN Class XVIII due 2019UnsecuredUS$Fixed4.00%  34   308,022   - 
CRESUD NCN Class XIX due 2016UnsecuredPs.FloatingBadlar + 350 bps  187   185,684   - 
CRESUD NCN Class XX due 2017 (iii)UnsecuredUS$Fixed2.50%  18.2   56,278   - 
IRSA NCN Class I due 2015UnsecuredPs.FloatingBadlar + 395 bps  -   -   209,297 
IRSA NCN Class II due 2017UnsecuredPs.FloatingBadlar + 450 bps  10.8   10,730   10,734 
IRSA NCN Class I due 2017UnsecuredUS$Fixed8.50%  149   1,352,655   1,210,359 
IRSA NCN Class II due 2020UnsecuredUS$Fixed11.50%  139.5   1,202,130   1,070,428 
IRSA Propiedades Comerciales NCN Class I due 2017UnsecuredUS$Fixed7.88%  114.3   1,021,782   839,081 
Syndicated loan (iv)                                          UnsecuredPs.Fixed(iv)  126.5   -   74,964 
Long term loans                                          UnsecuredUS$FloatingLibor + 300 bps or 6% (the higher)  15   117,574   111,363 
Long term loans                                          UnsecuredPs.FloatingRate Survey PF 30-59 days  20   9,911   16,665 
Long term loans                                          UnsecuredPs.Fixed15.01%  24   -   6,804 
Long term loans                                          SecuredRs.Floating4.00 to 7.23 and TJLP + 3.45 to 4.45 Selic  -   155,727   204,012 
Seller financing (v)                                          SecuredUS$Fixed3.50%  6.8   70,959   121,256 
Finance lease obligationsSecuredUS$Fixed
10.75% - 7.14%
to 13.28%
  0.5   1,389   1,187 
Finance lease obligationsUnsecuredRs.Fixed6.92%      12,308   - 
Long term loans (vi)                                          UnsecuredPs.Fixed(vi)  14.3   8,158   13,359 
Long term loans                                          SecuredBol.Floating7% to 10.19%  13.5   3,396   5,799 
Long term loans                                          SecuredRs.FloatingTJLP + 3.00 to 3.10  -   5,028   5,946 
Long term loans                                          SecuredRs.Floating5.50 to 8.70  -   331   3,900 
 Related parties Unsecured Ps.Fixed/ Floating        22,112    137,658  
 Non-current borrowings          5,832,973    5,315,335 




F-206

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


25.  
Borrowings (Continued)

               Book value  
  Secured/ unsecured  Currency  Fixed/ Floating 
Effective
Interest rate %
 
Nominal value
(in million)
  
June 30,
2015
  
June 30,
2014
Current                  
CRESUD NCN Class VIII due 2014 Unsecured  US$  Fixed 7.5%  60   -   499,113 
CRESUD NCN Class XI due 2015 (i) Unsecured  Ps.  Floating Badlar + 375 bps  80.5   -   39,647 
CRESUD NCN Class XII due 2014 Unsecured  Ps.  Floating Badlar + 410 bps  102   -   69,971 
CRESUD NCN Class XIII due 2015 Unsecured  US$  Fixed 1.90%  79   -   644,965 
CRESUD NCN Class XIV due 2018 Unsecured  US$  Fixed 1.50%  32   102   150 
CRESUD NCN Class XV due 2015 Unsecured  Ps.  Floating Badlar + 400 bps  176   120,760   63,883 
CRESUD NCN Class XVI due 2018 Unsecured  US$  Fixed 1.50%  109   4,986   4,222 
CRESUD NCN Class XVII due 2016 Unsecured  Ps.  Floating Badlar + 250 bps  176   172,602   - 
CRESUD NCN Class XVIII due 2019 Unsecured  US$  Fixed 4.00%  34   1,141   - 
CRESUD NCN Class XIX due 2016 Unsecured  Ps.  Fixed 27.50%  187   803   - 
CRESUD NCN Class XX due 2017 (ii) Unsecured  US$  Fixed 2.50%  18.2   812   - 
IRSA NCN Class I due 2017 Unsecured  US$  Fixed 8.50  149   47,318   41,472 
IRSA NCN Class I due 2015 Unsecured  Ps.  Floating Badlar + 395 bps  209.4   214,084   4,325 
IRSA NCN Class II due 2017 Unsecured  Ps.  Floating Badlar + 450 bps  10.8   258   255 
IRSA NCN Class II due 2020 Unsecured  US$  Fixed 11.50%  139.5   62,798   55,494 
IRSA Propiedades Comerciales S.A. NCN Class I due 2017 Unsecured  US$  Fixed 7.88%  114.3   10,677   8,732 
Bank overdrafts                                              Unsecured  Ps.  Fixed 22.54%  19,430   609,153   153,330 
Bank overdrafts (vii) Unsecured  Ps.  Floating -  -   681,553   401,963 
Short term loans (vi) Unsecured  Ps.  Fixed 15.25%  14.43   106,469   2,873 
Short term loans                                               -  Ps.  Fixed -  -   -   9,733 
Short term loans (viii) Unsecured  Ps.  Fixed (viii)  106.4   5,854   12,886 
Short term loans                                              Unsecured  US$  Floating Libor + 300 bps or 6% (the higher)  15   10,204   9,267 
Short term loans                                              Unsecured  Ps.  Floating Rate Survey PF 30-59 days  20   7,576   4,285 
Short term loans                                              Unsecured  Rs.  Floating TJLP + 3.00 to 4.40  -   4,750   11,024 
Short term loans                                              Unsecured  Rs.  Floating 7.51 to 15.12%%  -   74,990   165,121 
Short term loans                                              Unsecured  Ps.  Fixed 15.01%  24   6,875   6,880 
Short term loans                                              Secured  Rs.  Floating 4.00 to 7.23 and TJLP + 3.45 to 4.45 Selic  -   27,744   47,056 
Other short term loans  Unsecured   -   - -  -   15,088   74,344 
Short term loans                                              Secured  Rs.  Floating 5.5 to 8.70  -   2,763   6,699 
Syndicated loans (iv) Unsecured  Ps.  Fixed (iv)  75.6   75,485   101,339 
Seller financing                                              Secured  US$  Fixed 3.5% and 5%  16.4   -   28,670 
Seller financing                                              Secured  Rs.  Floating -  -   85,037   165,521 
Seller financing                                              Secured  Rs.  Floating IGP-M  -   58,064   - 
Short term loans                                              Secured  Rs.  Floating 1.6905 + Exchange rate variation  -   29,001   - 
Finance lease obligations Secured  US$  Fixed 10.75% and 7.5%  0.5   1,880   2,102 
Finance lease obligations Unsecured  Rs.  Fixed 6.92%  -   9,890   - 
Other short term loans Secured  Bol.  Floating 7% and 10.19%  13.5   3,115   2,603 
Related parties (Note 38)                   14,198   1,566 
Current borrowings                     2,466,030   2,639,491 
Total borrowings                     8,299,003   7,954,826 

(i)  Includes an outstanding balance of Ps. 5,068 and Ps. 9,011 with ERSA and PAMSA, respectively, as of 06.30.14.
(ii)  Includes an outstanding balance of Ps. 437 and Ps. 1,871 with ERSA and PAMSA, respectively, as of 06.30.15.
(iii)  Includes an outstanding balance of Ps. 21,048 and Ps. 90,212 with ERSA and PAMSA, respectively, as of 06.30.15.
(iv)  On November 16, 2012 the Company subscribed a syndicated loan for Ps. 118,000. Principal will be payable in 9 quarterly consecutive installments and shall accrue interest at rate of 15.01%. On June 12, 2013 the Company subscribed a new syndicated loan for Ps. 111,000. Principal will be payable in 9 quarterly consecutive installments and shall accrue interest at rate of 15.25%. Both loans have been entered into with various banking institutions, one of which is Banco Hipotecario (Note 37).
(v)  Debt incurred to fund the purchase of Soleil Factory net assets (investment property): Mortgage financing of US$ 20.7 million with a fixed 5 % interest rate due in June 2017. As of the date of these financial statements, the mentioned capital is fully canceled. Debt incurred to the purchase of Zetol S.A.'s shares (trading properties): Mortgage financing of US$ 7 million with a fixed 3.5% interest rate. The balance is payable, by choice of the seller, in money or with the delivery of units in buildings to be built representative of 12% of the total marketable square meters built. Seller financing of plot of land - Vista al Muelle S.A. in Canelones, Uruguay (trading properties).
(vi)  On December 23, 2013 the Company subscribed a new loan with Banco Citibank N.A. for an amount of Ps. 5.9 million and shall accrue interest at a rate of 15.25%. Principal will be repaid in 9 consecutive quarterly installments beginning in December 2014. Additionally, on December 30, 2014 the Company subscribed a new loan with Banco Citibank N.A. for an amount of Ps. 10 million and shall accrue interest at a rate of 26.50%. Principal will be repaid in 9 consecutive quarterly installments beginning in December 2015.
(vii)  As of June 30, 2015 and 2014, bank overdrafts were drawn on several domestic financial institutions. The Company has bank overdrafts of less than three months bearing floating interest rates ranging from 15% to 55% per annum.
(viii)  On December 12, 2012, a loan has been entered into with Banco Provincia de Buenos Aires in the amount of Ps. 29 million. Principal will be repaid in 9 consecutive quarterly installments beginning in December 2013.  Finally, on June 3, 2015, a loan has been entered into with Banco Provincia de Buenos Aires in the amount of Ps. 100 million. Principal will be repaid at due date December 2015. On February 3, 2014 a loan has been entered into for an amount of Ps. 20 million and on December 23, 2014, a loan has been entered into with Banco Provincia for an amount of Ps. 120 million. At the date of issuance of these financial statements are both fully canceled.


F-207

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.Borrowings (Continued)

At June 30, 2015 and 2014, total borrowings include collateralized liabilities (seller financing and loans) of Ps. 444.4 million and Ps. 594.8 million, respectively. These borrowings are mainly collateralized by investment property and properties, plant and equipment of the Group (Notes 10 and 11).

Borrowings also include liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17 “Leases”. Information related to liabilities under finance leases is disclosed in Note 29.

The maturity of the Group's borrowings (excluding obligations under finance leases) and the Group's exposure to fixed and variable interest rates is as follows:

  
June 30,
 2015
  
June 30,
2014
 
Fixed rate:      
Less than one year                                                                                       923,763   1,740,894 
Between 1 and 2 years                                                                                       2,577,736   137,819 
Between 2 and 3 years                                                                                       691,857   871,361 
Between 3 and 4 years                                                                                       670,514   805,440 
Between 4 and 5 years                                                                                       171,309   1,722,431 
More than 5 years                                                                                       1,273,090   1,106,081 
   6,308,269   6,384,026 
Floating rate:        
Less than one year                                                                                       1,329,516   753,708 
Between 1 and 2 years                                                                                       254,301   355,614 
Between 2 and 3 years                                                                                       43,137   175,371 
Between 3 and 4 years                                                                                       39,804   32,880 
Between 4 and 5 years                                                                                       46,731   29,546 
More than 5 years                                                                                       40,485   70,373 
   1,753,974   1,417,492 
Do not accrue interest:        
Less than one year                                                                                       200,981   142,787 
Between 1 and 2 years                                                                                       5,360   426 
Between 2 and 3 years                                                                                       3,803   294 
Between 3 and 4 years                                                                                       1,124   2,520 
Between 4 and 5 years                                                                                       27   3,992 
   211,923   150,019 
   8,273,536   7,951,537 



F-208

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.Borrowings (Continued)

The fair value of current borrowings at fixed-rate and current and non-current borrowings at floating-rate equals their carrying amount, as the impact of discounting is not significant. The fair value of all debts that are not quoted in the market are valued at their technical value, that is, nominal value plus accrued interest.

The fair values of non-current borrowings at fixed-rate (excluding finance leases) are as follows:

  
June 30,
 2015
  
June 30,
2014
 
Cresud Class XIII NCN due 2015                                                                                       -   647,198 
Cresud Class XIV NCN due 2018                                                                                       291,247   260,673 
Cresud Class XX NCN due 2017                                                                                       165,614   - 
Cresud Class XVI NCN due 2018                                                                                       993,220   888,920 
Cresud Class XVIII NCN due 2019                                                                                       306,890   - 
IRSA NCN due 2017                                                                                       1,430,459   1,244,281 
IRSA CP NCN Class I due 2017                                                                                       1,091,287   976,661 
IRSA NCN due 2020                                                                                       1,585,947   1,422,987 
Seller financing                                                                                       -   354,900 
Syndicated loan                                                                                       -   191,185 
Long term loans                                                                                       161,213   501,592 
Related parties loans (Banco Hipotecario)                                                                                       630   - 
Total                                                                                       6,026,507   6,488,397 

The following classes of NCN were outstanding as of each of June 30, 2015 and 2014:

(a)  Class VIII NCN

On September 7, 2011, Cresud issued Class VIII NCN which are denominated in US$ for a nominal amount of US$ 60 million, due 36 months after the issue date and fully repayable at maturity. They bear interest at a fixed rate of 7.5% payable semiannually on September 7 and March 7 each year.

As of June 30, 2015 this class has been fully paid.

(b)  Classes IX, X and XI NCN

On June 21, 2012 Cresud issued three new parts for an amount of Ps. 383.5 million.

Class IX NCN, for a nominal value of Ps. 161.0 million due 18 months after the issue date, accrued interest at a variable rate (Badlar plus 300 basis points). These were paid on a quarterly basis in arrears while amortization was made in three consecutive payments, the first two payments in an amount equal to 33.33% each of the face value, and the last one in an amount equal to 33.34% of the face value, all of which amount to 100% of the face value of Class IX Non-Convertible notes on the 12th, 15th and 18th month as from the issue date.
F-209

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.Borrowings (Continued)

Class X NCN, for a nominal value of US$ 31.5 million (equivalent to Ps. 142 million at issue date), due 24 months after the issue date shall be payable in pesos at the exchange rate prevailing on the payment date. Interest accrued a fixed annual rate of 7.75% annually, and were paid quarterly in arrears, while amortization was made in three consecutive payments, the first two in an amount equal to 33.33% each of the face value, and the last payment in an amount equal to 33.34% of the face value, all of which amount to 100% of the face value of Class X Non-Convertible notes on the 18th, 21th and 24th months as from the issue date.

Class XI NCN, for a nominal value of Ps. 80.5 million due 36 months after the issue date, accrues interest at a variable rate (Badlar plus 375 basis points). These are paid on a quarterly basis in arrears while amortization is made in three consecutive payments, the first two payments in an amount equal to 33.33% each of the face value, and the last one in an amount equal to 33.34% of the face value, all of which amount to 100% of the face value of Class XI Non-Convertible notes on the 24th, 30th and 36th months as from the issue date.

As of June 30, 2015 these classes have been fully paid.

(c)  Class X Tranche 2 NCN

On September 19, 2013, the Company issued Series Five of the Second Tranche of Class X Corporate Notes for a nominal value of US$ 30 million. As a consequence, the aggregate principal amount of Class X Corporate Notes was US$ 61.5 million, taking into consideration the US$ 31.5 million issued on June 21, 2012. The Second Tranche of Class X Corporate Notes is fully exchangeable for Class X Corporate Notes.

As of June 30, 2015 this class has been fully paid.

(d)  Class XII and XIII NCN

On February 22, 2013, the Sixth Series of simple corporate notes was issued in the amount of Ps. 500 million and in two classes.

Class XII Non-Convertible Notes, for a face value of Ps. 102.1 million and falling due 21 months after the issuance date, accrue interest at a variable rate (Badlar plus 410 basis points). Interest are payable quarterly in arrears whereas the principal is amortized in three consecutive equal payments on the 15th, 18th and 21th months following the issue date.

Corporate Notes Class XIII, for a nominal value of US$ 79.4 million (equal to Ps. 397.9 million at issue date) due 27 months following the issue date, accrue interest at an annual fixed rate of 1.90% payable quarterly in arrears, while the amortization is paid in two consecutive installments on the 24th and 27th monthly anniversary of the issue date.

As of June 30, 2015 these classes have been fully paid.


F-210

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

Class XIV NCN

On May 22, 2013, the Company issued Series 7 of Non-Convertible Corporate Notes for a nominal value of US$ 32 million (equivalent to Ps. 167.5 million at issue date), in a single class.

Class XIV Corporate Notes are due 60 months after the date of issuance and accrue interest on a quarterly basis at a 1.5% fixed rate. Interest is payable quarterly in arrears whereas the principal is amortized in two consecutive payments on the 54 and 60 months following the issue date.

(e)  Class XV and XVI NCN

On November 18, 2013, the eighth Series of simple corporate notes was issued in the amount equivalent to Ps. 828 million, in two classes.

Class XV Non-Convertible Notes, for a face value of 176.37 million and falling due 24 months after the issuance date, accrue interest at a variable rate (Badlar plus 399 basis points). Interest is payable quarterly in arrears whereas the principal will be amortized in three consecutive payments on the 18, 21 and 24 months following the issue date.

Class XVI Non-Convertible Notes, for a face value of US$ 109.11 million, with an issuance price of 102.3% (equivalent to Ps. 661.18 million at issue date) and falling due 60 months after the issuance date, accrue interest at fixed annual rate of 1.50%. Interest is payable quarterly in arrears whereas the principal will be amortized in two consecutive equal payments on the 54 and 60 months following the issue date.

(f)   Classes XVII and XVIII NCN

On September 12, 2014, the Ninth Series of simple corporate notes was issued in the equivalent amount of Ps. 455.3 million, in two classes.

Class XVII Non-Convertible Notes, for a face value of 171.8 million and falling due 18 months after the issuance date, will accrue interest at a variable rate (Badlar plus 250 basis points). Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 18 months following the issuance date. The issuance price was 100.0% of the nominal value.

Class XVIII Non-Convertible Notes, for a face value of US$ 33.7 million, with an issuance price of 102.179% of the nominal value resulting US$ 34.4 equivalent to Ps. 289.7 million at issue date and falling due 60 months after the issuance date, will accrue interest at fixed annual rate of 4%. Interest will be payable quarterly in arrears whereas the principal will be amortized in two consecutive payments on the 54 and 60 months following the issuance date.





F-211

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

(g)  Classes XIX and XX NCN

On March 13, 2015, the tenth Series of simple corporate notes was issued in the amount equivalent to Ps. 352.8 million nominal value, in two classes.

Class XIX Non-Convertible Notes, for a face value of Ps. 187.0 million and falling due 18 months after the issuance date, will accrue interest at fixed rate of 27.5% during the first twelve months and will accrue interest at floating rate the remaining six months (Badlar plus 350 basis points). The issuance price was 100% of the nominal value.  Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 18 months following the issuance date.

Class XX Non-Convertible Notes, for a face value of US$ 18.2 million, with an issuance price of 104% of the nominal value resulting US$ 18.9 equivalent to Ps. 165.8 million and falling due 24 months after the issuance date, will accrue interest at fixed annual rate of 2.5%. Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment 24 months following the issuance date.

Classes VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX and XX NCN contain certain customary covenants, events of default and restrictions, as well as limitations on transactions with affiliates, among other compliance requirements. The Company is also required to comply with a financial ratio in connection with incurrence of additional indebtedness: the ratio of short-term borrowings over total assets should be lower than 0.35. Currently, this financial covenant is measured on a quarterly basis as of the end of each period based on the unconsolidated accounts of Cresud. As of the date of issuance of these Financial Statements, there is no evidence of not compliance with ratios above-mentioned.

Repurchase of Non-convertible Notes Class XIII

On November 17, 2014, the Company repurchased 10,000,000 bond of NCN Class XIII, due on May 22, 2015 in the amount of Ps. 85.5 million.

On May 20, 2015, the Company purchased 44,905,380 Class XIII Notes in the amount of Ps. 201.9 million through certain stock transactions carried out in the local market.

As of June 30, 2015 this class has been fully paid.

Repurchase of Non-convertible Notes Class XII

On June 15, 2015, the Company repurchased 50,000,000 bond of NCN Class XIII, in the amount of Ps. 17.65 million.

As of June 30, 2015 this class has been fully paid.




F-212

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

Notes issued by subsidiary undertakings

(a)  IRSA NCN due 2017 and 2020

On February 2, 2007, IRSA issued US$ 150 million at a nominal fixed rate 8.5% NCN. The notes are due February 2017 and principal is paid at maturity. Interest is payable on February and August of each year as from August 2007.

This issue was in the framework of the global issuance program of notes for a nominal value of up to US$ 200 million authorized by Resolution N° 15,529 and 15,537 of the CNV dated December 7 and December 21, 2007. On February 25, 2010, the Board of Directors of IRSA expanded the amount to up to US$ 400 million as mandated by the Ordinary and Extraordinary Meeting of Shareholders held on October 29, 2009.

As part of the expanded program, on July 20, 2010 IRSA issued NCN for an amount of US$ 150 million at a nominal fixed rate of 11.5%. The notes are due July 2020 and principal is paid at maturity. Interest is payable on January 20 and June 20 of each year as from January 20, 2011.

IRSA NCN due 2017 and 2020 contain certain customary covenants and restrictions, including among others, limitations for the incurrence of additional indebtedness, restricted payments, disposal of assets, and entering into certain transactions with related companies.

Under the NCN indentures, IRSA is permitted to incur additional indebtedness provided its coverage of consolidated interest ratio is higher than 1.75. The coverage of consolidated interest ratio is defined as consolidated EBITDA divided by consolidated interest expense, subject to certain adjustments. EBITDA is defined as operating income plus, depreciation and amortization and other consolidated non-cash charges.

Restricted payments include restrictions for payment of dividends and other outflows relating to prepayments of indebtedness or to acquisition of certain investments. These restricted payments could not be made in excess of the sum of:

(i)  50% of IRSA’s cumulative consolidated net income; or 75% of IRSA’s cumulative consolidated net income if the coverage of consolidated interest ratio is at least 3.0 to 1; or 100% of IRSA’s cumulative consolidated net income if the coverage of consolidated interest ratio is at least 4.0 to 1;
(ii)  net cash proceeds from new capital contributions;
(iii)  reduction of the indebtedness of IRSA or its restricted subsidiaries;
(iv)  reduction in investments in debt certificates (other than permitted investments);
(v)  distributions received from unrestricted subsidiaries.



F-213

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

(b)  IRSA CP NCN Class I due 2017

On May 11, 2007, IRSA CP issued two parts of notes for a total amount of US$ 170 million. One of the series (Series I) consists of US$ 120 million notes at a nominal fixed rate of 7.87% due May 2017 while the other (Series II) comprises Ps. 154.0 million (equivalent to US$ 50 million) notes at a nominal fixed rate of 11.0% due in June 2012. Interest on the Series I is payable on May 11 and November 11 of each year as from November 11, 2007; principal due in May 11, 2017. Interest on the Series II was paid on June 11 and December 11 of each year as from December 11, 2007; principal was due in seven equal and consecutive semi-annual installments as from June 11, 2009. As of June 30, 2012, Series II is completely canceled.

These issuances were part of a global issuance program of notes for a nominal value of up to US$ 200 million authorized by Resolution N° 15,614 of the CNV dated April 19, 2007. On October 29, 2009, the Ordinary and IRSA CP's Extraordinary Meeting of Shareholders expanded the amount to up to US$ 400 million.

NCN Series I due 2017 contain certain covenants, events of default and restrictions, as well as limitations on additional indebtedness, transactions with affiliates, mergers and disposal of substantially all assets of the Company. For additional indebtedness IRSA CP is required to comply with the financial ratio “coverage of consolidated interest”, which should be higher than 1.75. The coverage of consolidated interest ratio is defined as consolidated EBITDA divided by consolidated interest expense, subject to certain adjustments. EBITDA is defined as operating income plus, depreciation and amortization and certain other consolidated non-cash charges.

(c)  IRSA NCN due 2013 and 2014

On February 10, 2012, IRSA placed, through public offer, NCN for a total amount of Ps. 300 million. These issuances were part of a global issuance program of notes approved by the Ordinary Meeting of Shareholders on October 31, 2011, and two Series due 2013 (Series III) and 2014 (Series IV) were issued, as described:

·  Class III Corporate Notes at Badlar rate plus 249 basis points for a face value of Ps. 153.2 million, to be matured 18 months after the issuing date and to be amortized in 3 consecutive payments within 12, 15 and 18 months, and interests to be paid in 6 installments, on a quarterly basis, from May 14, 2012. Class III is fully canceled.
·  Class IV Corporate Notes at a fixed rate of 7.45% for a face value of US$ 33.8 million (equal to Ps. 146.9 million), to be matured 24 months after the issuing date, to be subscribed and paid in Argentine Pesos at the applicable exchange rate, to be amortized in 4 equal and consecutive payments within 15, 18, 21 and 24 months, to be paid in 8 installments, on a quarterly basis, from May 14, 2012. Class IV is fully canceled.


F-214

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

(d)  IRSA NCN due 2015 and 2017

On February 26, 2014, Class V and VI were issued for an amount of Ps. 220.2 million. Company's NCN due 2015 and Company's NCN due 2017 both contain certain customary covenants and restrictions, including among others, limitations for the incurrence of additional indebtedness, restricted payments, disposal of assets, and entering into certain transactions with related companies.

Class V Non-Convertible Notes ("Class V"), were issued for an amount of Ps. 209,397,900. The securities were issued at par value and priced at a floating interest rate equal to Badlar rate plus 395 basis points. The principal of Class V will be repaid through a single payment on the maturity date. Class V matures within 18 months from the date of issue. Interest will be paid quarterly. Class V is fully canceled.

Class VI Non-Convertible Notes ("Class VI"), were issued for an amount of Ps. 10,790,322. The securities were issued at par value and priced at a floating interest rate equal to Badlar rate plus 450 basis points. The principal of Class VI will be repaid through a single payment on the maturity date. Class VI matures within 36 months from the date of issue. Interest will be paid quarterly on May 26, 2014, August 26, 2014, November 26, 2014, February 26, 2015, May 26, 2015 and August 26, 2015, November 26, 2015, February 26, 2016, May 26, 2016, August 26, 2016, November 28, 2016 and February 27, 2017.


As of the date of issuance of these Financial Statements, there is no evidence of not compliance with all ratios above-mentioned.



F-215

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)

Seller financing

The Group maintains seller financing borrowings relating to the acquisition of certain investment properties, property, plant and equipment, trading properties and subsidiaries. Seller financing of the Group are as follows:

   Book value 
AcquisitionDetail 
June 30,
2015
  
June 30,
 2014
 
Soleil Factory (investment property)Mortgage financing of US$ 20.7 million with a fixed 5% interest rate due in June 2017.  -   85,254 
Zetol S.A. (trading property)Mortgage financing of US$ 7 million with a fixed 3.5% interest rate.  49,688   43,265 
Vista al Muelle S.A. (trading properties)Mortgage financing with a fixed 3.5% interest rate.  21,271   21,407 
Alto Tacuarí (property, plant and equipment)Unsecured financing of Rs 34 million with variable interest rate at 100% of the Interbank Deposit Certificate rate (“CDI”), due in June 2012.  85,037   96,240 
Nova Buriti (property, plant and equipment)Unsecured financing of Rs 21.7 million adjusted based on the General Price Index (“IGP-M”), due in June 2012.  58,064   69,281 
    214,060   315,447 

Loans and bank overdrafts

As of June 30, 2015 and 2014, short-term and long-term loans were granted by several domestic financial institutions. They are repayable at various dates between July 2013 and July 2020, and bear either fixed interest rates ranging from 1.5% to 15.01% per annum, or variable interest rates mainly based on Badlar plus spreads ranging from 249 to 410 basis points.

As of June 30, 2015 and 2014, bank overdrafts were drawn on several domestic financial institutions. The Group has bank overdrafts of less than three months bearing fixed interest rates ranging from 15% to 55% per annum.

IRSA CP

On November 14, 2012,20, 2006, the Group, through IRSA CP’s BoardCP, acquired through a public bidding the building known as Exedificio-escuela Gobernador Vicente de Olmos located in the city of Directors approved the subscription of a syndicated loan contract entered into by different banking institutionsCórdoba for the amount of Ps. 118 million. Principal shall32. This property is affected to a concession contract.
After the title deed was made, the government of the province of Córdoba declared the property to be payableof public use and subject to partial expropriation in nine quarterly and consecutive installments and shall accrue interest at a fixed annual nominal rate of 15.01%. Interests shallorder to be payable on a monthly basis.used exclusively for the Libertador San Martin Theatre.

 

F- 140
F-216

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



25.  
Borrowings (Continued)
22.

Provisions (Continued)
Brasilagro

IRSA CP has answered a complaint in an action and to challenge the law that declared such public interest on unconstitutional grounds. In the alternative, it has challenged the appraisal made by the plaintiff and, additionally, it has claimed damages not included in the appraisal and resulting immediately and directly from expropriation.
Our subsidiary Brasilagro raised short
At June 30, 2016, the property is recorded under Investment Properties.
Claims against Cellcom and long term financing grantedits subsidiaries
In the normal course of business, claims have been filed against Cellcom by Banco Itaúits customers. These are mostly motions for approval of class actions, primarily concerning allegations of illegal collection of funds, unlawful conduct or Breach of license, or a Breach of agreements with customers, causing monetary and Banco do Nordestenon-monetary damage to fund sewing expenses,them. The amounts claimed from Cellcom in consumer claims, amounted to NIS 26,183 million.
Claims against Shufersal and its subsidiaries
In the developmentnormal course of business, legal claims were filed against Shufersal by its customers. These are mostly motions for certification of class actions, which mainly concern claims of changing money unlawfully, acting contrary to the law or a license, or a Breach of the Cremaq projectagreements with customers, causing financial and non-financial loss to them. The amounts of the claims amounted to NIS 809 million.
There are also other claims by employees, subcontractors, suppliers which relate mainly to claims of Breach of the provisions of the law in relation to the termination of workers' employment and claims of Breaches of contract and compulsory payments to authorities. The total amount which Shufersal was being sued for these claims was NIS 26 million.
23.
Borrowings
Group’s borrowings as of June 30, 2016 and 2015 are as follows:
 June 30, 2016 June 30, 2015
Non-current   
Non-convertible notes69,997 5,427
Bank loans and others6,836 406
Non-recourse loan16,975 -
Non-current borrowings93,808 5,833
Current   
Non-convertible notes15,595 636
Bank loans and others4,662 524
Bank overdrafts1,397 1,291
Other borrowings1,834 15
Current borrowings23,488 2,466
Total borrowings117,296 8,299
F- 141
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
Urban properties and investment business of the operations center in Argentina
On March 3, 2016, IRSA and IRSA CP announced that they would launch offers to buy in cash: (i) 11.50% Class 2 NCN outstanding due in 2020 and issued by IRSA for a total nominal value of up to US$ 76.5 million, subject to a potential extension of the Offer Limit of NCN due in 2020 for a nominal value of up to US$ 73.5 million, at IRSA’s exclusive decision, (ii) each and every 8.50% Class 1 NCN outstanding due in 2017 and issued by IRSA, and (iii) each and every 7.875% Class 1 NCN outstanding due in 2017 and issued by IRSA CP.
On March 23, 2016, IRSA CP issued NCN for a nominal amount of US$ 360 million under its Global NCN Program. Class II NCN accrue interest semi-annually, at an annual fixed rate of 8.75% and are repayable at maturity on March 23, 2023. The issue price was 98.722% of nominal value.
IRSA CP’s NCN maturing in 2023 are subject to certain Commitments, Events of Breach and Limitations, including Limitations on Additional Indebtedness, Limitations on Restricted Payments, Limitations on Transactions with Affiliates, Limitations on the Merger, Take-over Merger and Limitations on the Sale of all or a substantial portion of the company’s Assets.
On April 7, 2016, the Meeting of IRSA's NCN holders approved the proposed amendments to the IRSA 2017 Trust Indenture, which included basically the elimination of all financial restrictive covenants on such class. Approximately 50.30% of holders of NCN due 2017 approved the amendments to the Trust Indenture for IRSA NCN 2017. As a consequence, a Supplementary Trust Agreement with the Bank of New York Mellon was signed, all amendments approved the Meeting, which came into force on April 8, 2016.
During March, April and May the Group acquired all IRSA CP's NCN Class I at 7.875% maturing in 2017 for a total amount US$ 120 million and US$ 75.4 million of IRSA’S NCN. On October 11, 2016 IRSA, acquired the remaining US$ 74.6 million of IRSA’S NCN at 8.5% maturing in 2017, so the following notes remains outstanding:
IRSA's NCN Class II at 11.50% maturing in 2020 US$ 71.4 million.
Such payments were accounted for as a cancellation of debt.
In relation to financial covenants under 11.50% NCN due in 2020 issued by IRSA, the Meeting of Noteholders held on March 23, 2016 approved:
i.
to modify the covenant on Limitation on Restricted Payments, so that the original covenant was replaced so as to take into consideration IRSA’s capability to make any restricted payment provided that (a) no Event of Default has occurred and persisted, and (b) IRSA may incur at least US$ 1 of additional debt pursuant to the Limitation on Additional Indebtedness; and
F- 142
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
ii.
the exclusion of IDBD or any of its subsidiaries for purposes of the definition of “Subsidiary” or any of the definitions or commitments under the Trust Indenture of Corporate Notes due in 2020 and issued by IRSA (regardless of whether the financial statements of any of these companies has any time been consolidated into IRSA’s financial statements).
iii.
a Supplementary Trust Indenture reflecting all the amendments approved, entered into with the Bank of New York Mellon on March 28, 2016.
Urban properties and investment business of the operations center in Israel
IDBD has certain restrictions and financial covenants in connection with its financial debt, included in its debentures, loans from banks and financial institutions.
As of June 30, 2016 IDBD reported that the application of the “Liquidity Covenant” and the acquisition“Economic Equity Covenant” (as described below) is currently suspended.
It was agreed between IDBD and the relevant lending coporations that the parties would work to formulate an arrangement, to replace or amend the current financial covenants by December 31, 2016.
If such arrangement is not reached, the previous financial covenants will re-apply then with respect to the results for IDBD´s first quarter of Jaborandi.2017 and thereafter. In the event that these covenants will re-apply, IDBD estimates that it will not be able to meet the thresholds that were determined in the past with respect to the Liquidity Covenant and the Economic Equity Covenant with respect to IDBD´s results for the first quarter of 2017 and thereafter.
Particularly, if the previous financial covenants will re-apply, IDBD estimates it will not be able to fulfill the covenant, which stipulates that the balance of cash and marketable securities will not fall below the scope of forecasted current maturities for the two quarters subsequent to the reporting quarter (the “Liquidity Covenant”). Regarding the Economic Equity Covenant, the economic equity as of June 30, 2016, amounted to a positive balance of NIS 247 million, significantly lower than the thresholds determined in the past, as part of to the Economic Equity Covenant.
In view of and due to the decrease of Mr. Ben Moshe’s holding rate in IDBD, beginning from February 2015 and thereafter, in March 2016 IDBD reached understandings with its lending corporations with regard to an amendment of the control and additional amendments relating to restrictions on the sale of main holdings.
F- 143
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23. Borrowings (Continued)
As per IDBD´s position, as of June 30, 2016, there were no conditions that established grounds for calling IDBD´s obligations to its financial creditors for immediate payment. Without derogating from the IDBD´s position, it is noted that the decision of the bondholders (Series I) dated April 21,2016 to call the full balance of IDBD´s debt to the bondholders for immediate repayment and the decision to take steps for dissolution are liable to raise grounds for the financial creditors, for calling for immediate repayment. According to IDBD’s legal advisor opinion, the conditions giving rise to a ground for demanding immediate repayment of the liabilities for the (Series I) bonds were not fulfilled. On July 18, 2016, the Court handed down its judgment, in which the Court accepted the consensus motion filed by the trustee to strike the motion for dissolution.
As of June 30, 2016, IDBD´s loans which are subject to the aforementioned financial covenants, at a scope of NIS 264 million, were classified under current liabilities, in consideration of the fact that IDBD has reached understandings with those relevant lending entities, which extended the arrangements specified in the financial covenants of the loan agreements until first quarter calendar year 2017 only, in other words, for a period shorter than twelve months.
.
On August 2, 2016 IDBD issued a new Series of Debentures in the Israeli market for an amount of NIS 325 million due November 2019 at an annual interest rate adjustable by CPI plus 4.25%. The Banco do Nordestenotes are pledged by shares of Clal Insurance Enterprise Holdings Ltd (“Clal”), subject to the approval of the Commissioner of Capital Markets, Insurance and Banco Itaú require that borrower hold deposits in investment mutualSavings. IDBD is working to get the authorization to constitute the guarantee and it filed an application to the Supreme Court asking for such approval. In case IDBD does not get the required approval, funds bearingmust be repaid with interest plus a penalty. On September 15, 2016, the High Court of Justice gave a partial judgment and decision, according to which it was decided, to reject the petition for the most part and to grant an order which instructs the Commissioner to appear and show a reason for her opposition to the request of IDBD to pledge up to 5% of the shares of Clal Holdings, subject to an outline agreed to at the interbank certificatetime by the IDBD. Furthermore, IDBD maintains the right to accede to a proposal for compromise which was raised in the context of depositthe discussion. A hearing date was set for January 2017.
F- 144
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23. Borrowings (Continued)
Pursuant to the decision of the Supreme Court sitting as the High Court of Justice in connection with the petition submitted by IDBD in connection with the pledge of the shares of Clal Holdings in September 2016, on October 13, 2016, the Board of Directors of the IDBD decided to execute a partial early redemption of the debentures, that is to be carried out on November 1, 2016, as follows:
● IDBD will carry out a partial early redemption of the debentures in an amount of approximately NIS 239 million of par value (“the redeemed portion”) and in a total of approximately NIS 244 million with respect to principal, interest and compensation for the redeemed portion.
● The determining date for the eligibility to receive the early redemption of the principal of the debentures is 10.25.2016.
● The early redemption represents 73.7% of the unpaid balance of the principal of the debentures, which is also the original balance of the series of the debentures.
● The rate (publishedof interest (including the compensation for carrying out the early redemption as an increment of 3% with respect to the period from August 3, 2016 through October 21 2016) that will be paid upon the partial early redemption of the redeemed portion of the principal is approximately 1.8%.
● The rate of interest (including the compensation for carrying out the early redemption as an increment of 3% with respect to the period from August 3, 2016 through October 31 2016) that will be paid in the context of the early redemption, which is calculated out of the balance of the unpaid balance of the principal on the date of the early redemption (NIS 325 million linked to the CPI) is approximately 1.3%.
● Pursuant to the “known” CPI (index with respect to the month of September 2016, which was published on 10.14.2016) as compared with the base index published with respect to the month of June 2016, no linkage increments will apply with respect to the redeemed portion upon early redemption.
● The unpaid balance of the principal of the debentures after executing the early redemption (without linkage) will stand at an amount of approximately NIS 86 million par value, which represents approximately 26.3%, of the original balance of the principal of the debentures. IDBD will act to pledge the shares of Clal Holdings against the balance of the unpaid principal of the debentures after carrying out the early redemption ( as is required according to the trust indenture).
● Pursuant to what is stated in the trust indenture, the redeemed portion will be paid in relation to all of the holders of the debentures, pro- rata according to the par value of the held debentures.
IDBD is continuing to act in order to reach consents with the relevant financing corporations in order to arrange over time the calculated financial covenants that were determined in the provisions of its loan agreements, and additional contractual issues that exist in the loan agreements.
F- 145
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
The breakdown of the borrowings of Operations Centers by CETIP, who provides custodianCompany as of June 30, 2016 was as follows:
   Agricultural business Urban properties and investments business  
     Operations Center in Argentina Operations Center in Israel    
Debt CresudBrasilAgroOthersSubtotal IRSAIRSA CPOthers
Subtotal
Operations Center in Argentina
 IDBDDICShufersalCellcomPBCOthers
Subtotal
Operations Center in Israel
 Subtotal Total
Non-convertible notes 3,283--3,283 2,2875,799-8,086 7,80712,43610,03715,27728,666-74,223 82,309 85,592
Bank loans and others 45245215919 1655130201 2,2141,171167792,0034,19510,378 10,579 11,498
Non-recourse loan ---- ---- -(i) 10,999--5,976-16,975 16,975 16,975
Bank overdrafts 114-47161 8594045944 -----292292 1,236 1,397
Other borrowings ---- ---- -----1,8341,834 1,834 1,834
Total debt 3,849452624,363 3,1625,8941759,231 10,02124,60610,05316,05636,6456,321103,702 112,933 117,296
(i) IDBD has a non-recourse loan, which was split into two components on the basis of an independent appraiser’s report. The commitment to transfer shares represents the main contract and depository services)was initially recognized at fair value and, later, at its depreciated cost. The derivative embedded represents a call option and is computed taking into account future payments of interest on the loan. The main contract and the embedded derivative ("non-recourse loan ") are disclosed net in borrowings.
F- 146
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
 Agricultural business
 Company Secure / Unsecure Series Currency Rate Adjustment factor Payment date of principal 
Interest
rate %
 
Capital nominal value in million
Issue currency
 
Value as of
June 30,
2016
 
Value as of
June 30,
2015
Non-convertible notesCresud Unsecured XIV US$ Fixed N/A 2018 1.50% 64 482 290
 Cresud Unsecured XV Ps. Floating N/A 2015 23.63% 176 - 121
 Cresud Unsecured XVI US$ Fixed N/A 2018 1.50% 218 1,446 1,004
 Cresud Unsecured XVII Ps. Floating N/A 2016 Badlar + 375 bp. 171 - 172
 Cresud Unsecured XVIII US$ Fixed N/A 2019 4.00% 68 512 309
 Cresud Unsecured XIX Ps. Fixed N/A 2016 27.50% 187 189 187
 Cresud Unsecured XX US$ Fixed N/A 2019 2.50% 36 123 56
 Cresud Unsecured XXI Ps. Floating N/A 2017 Badlar + 375 bp. 384 197 -
 Cresud Unsecured XXII US$ Fixed N/A 2019 4.00% 44 334 -
Subtotal Non-convertible notes                  3,283 2,139
                      
Bank loans and othersCresud Unsecured - US$ Floating N/A 2022 Libor + 300 BP or 6% (the higher) 30 200 128
 Cresud Unsecured - Ps. Fixed N/A 2016 15.01% 31 17 7
 Cresud Unsecured - Ps. Floating TEPF 2017 Rate Survey PF 30-59 days 40 11 19
 Cresud Unsecured - US$ Fixed N/A - 3.50% 15 225 -
 Cresud Secured - US$ Fixed N/A 2020 10.75% - 7.14% to 14.5% 6 1 1
 BrasilAgro Secured - Rs. Floating TJLP - TJLP + 3 to 4.40 - 7 10
 BrasilAgro Secured - Rs. Floating TJLP - TJLP + 3.45 to 4.45 SELIC + 3.45 - 211 184
 BrasilAgro Secured - Rs. Floating N/A - 7.51 to 15.12 - 130 75
 BrasilAgro Secured - Rs. Floating TJLP - TJLP + 5.50 to 8.70 - - 3
 BrasilAgro Unsecured - Rs. Fixed N/A - 6.92% - 21 22
 BrasilAgro Secured - Rs. Floating N/A - 100% CDI - 82 86
 BrasilAgro Secured - Rs. Floating N/A - 1.6905 + Exchange rate variation - - 29
 BrasilAgro Secured - Rs. Floating N/A - IGP-M - - 58
 Doneldon Secured - Bol. Fixed N/A - 6% annual - 11 -
 Doneldon Secured - Bol. Fixed N/A - 7% - 10.19% 14 - 3
 Carnes Pampeanas Secured - Ps. Floating N/A - 6% annual - 3 -
Subtotal bank loans and others                  919 625
Bank overdrafts                  161 609
Total                  4,363 3,373
F- 147
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
 Operations Center in Argentina
 Company Secure / Unsecure Series / Class Currency Rate Payment date of principal 
Interest
rate %
 
Capital nominal value in million
Issue currency
 
Value as of
June 30,
2016
Value as of
June 30,
2015
Non-convertible notesIRSA CP Unsecured Class I Ps. Fixed / Floating 2017 Badlar + 4 bp. 407 409-
 IRSA CP Unsecured Class II US$ Fixed 2023 8.75% 360 5,273-
 IRSA CP Unsecured Series I US$ Fixed 2017 7.88% - -1,034
 IRSA Unsecured Class I US$ Fixed 2017 8.50% 75 1,1591,401
 IRSA Unsecured Class VI Ps. Floating 2017 Badlar + 450bps 11 12711
 IRSA Unsecured Class V Ps. Floating 2015 Badlar + 395ps - -214
 IRSA Unsecured Class II US$ Fixed 2020 11.50% 75 1,1181,265
Total Non-convertible notes                8,0863,925
                   
Bank loansIRSA Secured - US$ Fixed 2020 3.2% to 14.3% 1 1-
and othersIRSA Unsecured - Ps. Floating 2017 Badlar 15 1414
 IRSA CP Secured - US$ Fixed 2020 3.2% to 14.3% - 53
 IRSA CP Unsecured - Ps. Fixed 2016 15.25% 1 14
 IRSA CP Unsecured - Ps. Fixed 2017 26.50% 7 710
 IRSA CP Unsecured - Ps. Fixed 2016 23% 36 36106
 IRSA CP Unsecured - Ps. Fixed 2015 / 2016 15.25% / 15.01% - -75
 IRSA CP Unsecured - Ps. Fixed / Floating 2016 Badlar / 8.50% 6 68
 HASA Unsecured - Ps. Fixed 2016 15.25% 6 64
 LLAO LLAO Unsecured - Ps. Fixed 2016 15.25% 1 13
 NFSA Unsecured - Ps. Fixed 2016 24% 6 67
 LIVECK Secured - US$ Fixed 2017 n/a 2 3521
 LIVECK Secured - US$ Fixed n/a 3.50% 5 8350
Total bank loans and others                201305
Other borrowings                -15
Bank overdrafts                944682
Subtotal Operations Center in Argentina                9,2314,927
F- 148
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
 Operations Center in Israel
 Company Secure / Unsecure Series Currency Rate Adjustment factor Payment date of principal 
Interest
rate %
 
Capital nominal value in million
Issue currency
 
Value as of
June 30,
2016
 IDBD Unsecured G NIS Fixed CPI 2016 – 2018 4.50% 802 3,534
Non-convertible notesIDBD Unsecured I NIS Fixed CPI 2020 – 2025 4.95% 1,013 3,164
 IDBD Unsecured J NIS Fixed N/A 2015 – 2018 6.60% 309 1,109
                    
 DIC Unsecured D NIS Fixed CPI 2012 – 2016 5.00% 103 510
 DIC Unsecured F NIS Fixed CPI 2017 – 2025 4.95% 2,719 9,427
 DIC Unsecured G NIS Fixed N/A 2012 – 2016 6.35% 8 31
 DIC Unsecured H NIS Fixed CPI 2014 – 2019 4.45% 124 541
 DIC Unsecured I NIS Fixed N/A 2010 – 2018 6.70% 513 1,927
                    
 Shufersal Unsecured B NIS Fixed CPI 2015 – 2019 5.20% 1,024 5,161
 Shufersal Unsecured C NIS Fixed N/A 2010 – 2017 5.45% 114 459
 Shufersal Unsecured D NIS Fixed CPI 2014 – 2029 2.99% 413 1,584
 Shufersal Unsecured G NIS Fixed N/A 2014 – 2029 5.09% 392 1,580
 Shufersal Unsecured F NIS Fixed CPI 2020 – 2028 4.30% 317 1,253
                    
 Cellcom Unsecured B NIS Fixed CPI 2013 – 2017 5.30% 185 880
 Cellcom Unsecured D NIS Fixed CPI 2013 – 2017 5.19% 599 2,865
 Cellcom Unsecured E NIS Fixed N/A 2012 – 2017 6.25% 164 673
 Cellcom Unsecured F NIS Fixed CPI 2017 – 2020 4.60% 715 3,032
 Cellcom Unsecured G NIS Fixed N/A 2017 – 2019 6.99% 285 1,230
 Cellcom Unsecured H NIS Fixed CPI 2018 – 2024 1.98% 950 3,483
 Cellcom Unsecured I NIS Fixed N/A 2018 – 2025 4.14% 804 3,114
                    
 PBC Unsecured C NIS Fixed CPI 2009 – 2017 5% 550 2,666
 PBC Unsecured D NIS Fixed CPI 2020 – 2025 4.95% 1,317 6,641
 PBC Unsecured F NIS Fixed CPI 2015 – 2023 4.95% 974 4,195
 PBC Unsecured G NIS Fixed N/A 2015 – 2025 7.05% 669 3,054
 PBC Unsecured Gav-Yam Series E NIS Fixed CPI 2014 – 2018 4.55% 283 1,375
 PBC Unsecured Gav-Yam Series F NIS Fixed CPI 2021 – 2026 4.75% 1,226 8,535
 PBC Unsecured Gav-Yam Series G NIS Fixed N/A 2013 – 2017 6.41% 215 907
 PBC Unsecured Ispro Series B NIS Fixed CPI 2007 – 2021 5.40% 255 1,293
Total Non-convertible notes                  74,223
                    
Bank loansIDBD Unsecured (1) - NIS Floating Prime interest rate 2015 – 2018 Prime + 1.3% 333 1,117
and othersIDBD Unsecured (1) - NIS Floating Prime interest rate 2015 – 2019 Prime + 1% 80 265
 IDBD Unsecured - NIS Floating Prime interest rate 2015 – 2020 Prime + 0.65% 63 198
 IDBD Secured (2) - NIS Fixed CPI 2015 – 2018 6.90% 150 634
                    
 DIC Unsecured - NIS Fixed N/A 2015 – 2017 5.39% 45 167
 DIC Unsecured - NIS Floating Prime interest rate 2015 – 2018 2.12% 111 397
 DIC Unsecured - NIS Fixed N/A 2015 – 2018 5.90% 86 311
 DIC Unsecured - NIS Fixed Prime interest rate 2015 – 2018 2.20% 86 296
                    
 Shufersal Secured - NIS Fixed CPI 2015 – 2017 4.95% 1 4
 Shufersal Secured - NIS Fixed CPI 2015 – 2017 4.95% 1 3
 Shufersal Secured   NIS Fixed CPI 2015 – 2017 4.75% - 2
 Shufersal Secured - NIS Fixed CPI 2015 – 2017 4.40% - 2
 Shufersal Secured - NIS Fixed CPI 2015 – 2017 3.25% 1 5
F- 149
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
 Company Secure / Unsecure Series Currency Rate Adjustment factor Payment date of principal Interest rate % 
Capital nominal value in million
Issue currency
 
Value as of
June 30,
2016
                    
 PBC Unsecured - NIS Floating CPI 2015 – 2020 1.97% 40 154
 PBC Unsecured - NIS Floating CPI 2020 2.65% 83 311
 PBC Unsecured - NIS Fixed N/A 2015 – 2020 3.07% 19 76
 PBC Unsecured - NIS Fixed N/A 2016 1.70% 301 1,176
 PBC Secured - NIS Floating CPI 2011 – 2018 1.55% 69 286
 PBC Unsecured - NIS Floating CPI 2002 – 2019 1.73% 62 327
 PBC Secured - NIS Floating CPI 2008 – 2016 1.95% 7 32
 PBC Secured - NIS Floating CPI 2015 – 2023 1.87% 106 409
 PBC Secured - NIS Floating CPI 2014 – 2022 1.77% 83 323
 PBC Secured - NIS Floating CPI 2013 – 2021 1.87% 55 219
 PBC Secured - NIS Floating CPI 2015 – 2022 1.86% 42 165
 PBC Secured - NIS Floating CPI 2011 – 2019 1.26% 36 149
 PBC Secured - NIS Floating CPI 2009 – 2017 1.80% 8 36
 PBC Secured - NIS Floating CPI 2022 1.88% 93 366
 PBC Secured - NIS Fixed N/A 2016 – 2016 1.26% 40 156
 PBC Secured - NIS Floating CPI 2015 – 2020 1.57% 22 85
 PBC Secured - NIS Floating CPI 2020 2.14% 50 188
 PBC Unsecured - NIS Floating CPI 2009 – 2016 12.16% 3 11
                    
 Bartan Unsecured - NIS Floating Prime interest rate 2015 – 2022 2.35% 2 8
 Bartan Secured   NIS Floating Prime interest rate 2022 2.89% 5 19
 Bartan Secured - NIS Floating Prime interest rate 2022 2.95% 4 16
                    
 IDB Tourism Unsecured - US$ Floating Libor interest rate 2020 5.66% 13 51
 IDB Tourism Unsecured - US$ Floating Libor interest rate 2015 – 2018 5.21% 197 767
                    
 IDBG Unsecured - US$ Floating Libor interest rate 2015 - 2015 Libor + 5% 223 869
                    
 Cellcom Unsecured - NIS Fixed - 2016 – 2021 4.60% 200 778
Total bank loans and others                  10,378
Bank overdrafts                  292
Non-recourse loans                  16,975
Others                  1,834
Subtotal Operations Center in Israel                  103,702
(1)
Corresponds to a bank loan for NIS 750 million, where repayment of principal had been deferred for three years starting March 2014 until October 2021March 2018.
(2)
In May 2012, IDBD was granted a secured loan for NIS 150 by the financial institutions of Menorah Group. Principal is repayable in two installments of NIS 50 million and FebruaryNIS 100 million in 2017 and 2018, respectively. As part of the loan, IDBD granted the lender any stock call option on the shares it held in DIC, representing approximately 1.7% of the share capital issued by this company.
F- 150
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
As of June 30, 2016 and 2015, total borrowings include collateralized liabilities (seller financing, leases and bank loans) of Ps. 73,694 and Ps. 156,428, respectively. These borrowings are mainly collateralized by investment properties and properties, plant and equipment of the Group (Notes 10 and 11).

26.  Employee benefits
Borrowings also include liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17 “Leases”. Information related to liabilities under finance leases is disclosed in Note 33.

The maturity of the Group's borrowings (excluding obligations under finance leases) and the Group's exposure to fixed and variable interest rates is as follows:
 June 30, 2016 June 30, 2015
 Agricultural business 
Urban properties
and investments
 Total Agricultural business 
Urban properties
and investments
 Total
   Operations Center in Argentina
Operations Center in
Israel
Subtotal     
Operations
Center in Argentina
  
Do accrue interest:             
Less than one year1,195 2,57318,17220,745 21,940 1,202 1,051 2,253
Between 1 and 2 years1,205 1616,82616,842 18,047 417 2,415 2,832
Between 2 and 3 years500 119,53519,536 20,036 848 (113) 735
Between 3 and 4 years1,332 144,6434,657 5,989 710 - 710
Between 4 and 5 years40 1,0637,0928,155 8,195 218 - 218
More than 5 years34 5,30336,16941,472 41,506 40 1,274 1,314
 4,306 8,970102,437111,407 115,713 3,435 4,627 8,062
Do not accrue interest:             
Less than one year31 2401,2651,505 1,536 21 180 201
Between 1 and 2 years5 3-3 8 4 1 5
Between 2 and 3 years- --- - 4 - 4
Between 3 and 4 years- 3-3 3 1 - 1
Between 4 and 5 years- 10-10 10 - - -
 36 2561,2651,521 1,557 30 181 211
 4,342 9,226103,702112,928 117,270 3,465 4,808 8,273
F- 151
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
23.
Borrowings (Continued)
The fair value of current and non-current borrowings for the years ended June 30, 2016 and 2015 is as follows:
            
 June 30, 2016 June 30, 2015
  Urban properties   Urban properties 
 Agricultural BusinessOperation Center in ArgentinaOperation Center in IsraelSubtotalTotal Agricultural BusinessOperation Center in ArgentinaSubtotalTotal
NCN3,2478,76475,80484,56887,815  4,3694,3696,606
Bank loans and others99726913,59713,86614,863 2,237340340943
Bank overdrafts1619442921,2361,397 6036826821,291
Non-recourse loan--16,97616,97616,976 609---
Other borrowings--1,8341,8341,834 -15
1515
Total borrowings4,4059,977108,503118,480122,885 3,4495,4065,4068,855
24.
Employee benefits
Equity Incentive Plan
The Group has an equity incentive plan, created in September 30, 2011, which aims at certain selected employees, directors and top management of the Company, IRSA and IRSA CP (the “Participants”). Participation in the plan is voluntary and employees are invited to participate by the Board.
Under the Incentive Plan, entitle the Participants to receive shares ("Contributions") of the Company and IRSA, based on a percentage of their annual bonus for the years 2011, 2012 and 2013, providing they remain as employee of the Company for at least five years, among other conditions, required to qualify such Contributions. These contributions shall be held by the Company and IRSA, and as the conditions established by the Plan are verified, such contributions shall be transferred to the Participants.
As of June 30, 2016 and 2015, the Company set up a reserve for the Incentive Plan under Shareholder’s Equity in the amount of Ps. 35 and Ps. 32, respectively. The reserve was based on the fair value of the shares to be granted under the Group’s contribution, on a proportional basis to the employee’s permanence in the Incentive Plan and adjusted for the probability that these beneficiaries may leave the Group before the required term has elapsed and/or the conditions to be entitled to the mentioned plan benefits are met as of each period end.
As of June 30, 2016 and 2015, the Group recognized a charge in connection with the Incentive Plan of Ps. 32.9 and Ps. 30.8, respectively. The total cost of the plan that has not yet been recognized because the term for the full granting of the benefit is still effective amounts to Ps. 27.3 and Ps. 56.4, respectively. This cost is expected to be recognized over an approximately two-year period.
During the fiscal years ended June 30, 2016 and 2015, the Group granted 1 and 1.8 million shares, respectively, corresponding to the Participants’ Contributions.
F- 152
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
24.
Employee benefits (Continued)
Movements in the number of matching shares outstanding under the incentive plan corresponding to the Company´s contributions are as follows:
 June 30, 2016 June 30, 2015
At the beginning7,613,638 10,033,785
Additions- 308,426
Granted(1,028,766) (1,883,077)
Disposals(260,135) (845,496)
At the end6,324,737 7,613,638
Defined contribution plan
The Group has a defined contribution plan (the “Plan”) covering certain selected managers in Argentina. The Plan was effective as from January 1, 2006. Employees may begin participation voluntarily on monthly enrolment dates. Participants may make pre-tax contributions to the Plan of up to 2.5% of their monthly salary (“Base Contributions”) and of up to 15% of their annual bonus (“Extraordinary Contributions”). Under the Plan, the Group matches employee contributions to the plan at a rate of 200% for Base Contributions and 300% for Extraordinary Contributions.

All contributions are invested in funds administered outside of the Group. Participants or their assignees, as the case may be, will have access to the 100% of the Company contributions under the following circumstances:

(i)
ordinary retirement in accordance with applicable labor regulations;
(ii)  total or permanent incapacity or disability;
ordinary retirement in accordance with applicable labor regulations;
(iii)  death.
(ii)

total or permanent incapacity or disability;
(iii)
death.
In case of resignation or termination without good cause, the manager will receives the Group’s contribution only if he or she has participated in the Plan for at least 5 years.

Contribution expense wasContributions made by the Group under the Plan amount to Ps. 2.9 million,10, Ps. 10.2 million5 and Ps. 6.4 million3 for the fiscal years ended June 30, 2016, 2015 and 2014, and 2013, respectively and was recognized in the income statements.


respectively.
 
F-217

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



27.  Share-based payments

Established by the Company and subsidiaries

Equity Incentive Plan

The Group has an equity incentive plan, which aims at certain selected employees, directors and top management of the Company, IRSA and IRSA CP (the “Participants”). Participation in the plan is voluntary and employees are invited to participate by the Board.

This Plan was effectively established on September 30, 2011 and is administered by the Board of Directors of the Company, IRSA and IRSA CP, as the case may be, or a committee appointed by the Board of Directors of the respective companies.

Under the Incentive Plan, over the last three years, entitle the Participants to receive shares ("Contributions") of the Company and IRSA, based on a percentage of their annual bonus, providing they remain as employee of the Company for at least five years, among other conditions, required to qualify such Contributions.

Contributions shall be held by the Company and IRSA, and as the conditions established by the Plan are verified, such contributions shall be transferred to the Participants.

On the other hand, the Plan provides an extraordinary bonus in the medium term. Shares granted as part of the bonus shall be transferred to the participants, there being no restriction whatsoever established by the Plan. As of the date of these financial statements, the Group transferred 685,568 shares related to this special bonus.

As of June 30, 2015, 2014 and 2013, the Company set up a reserve for the incentive plan under Shareholder’s Equity in the amount of Ps. 35.5 million, Ps. 79.2 million and Ps. 10.6 million, respectively. The reserve was based on the fair value of the shares to be granted under the Company’s contribution, on a proportional basis to the employee’s permanence in the plan and adjusted for the probability that these beneficiaries may leave the Company before the required term has elapsed and/or the conditions to be entitled to the Plan benefits are met as of each period end.

As of June 30, 2015, 2014 and 2013, the Group recognized a charge in connection with the Incentive Plan and special bonus of Ps. 30.8 million, Ps. 92.2 million and Ps. 9.7 million, respectively. The total cost of the plan that has not yet been recognized because the term for the full granting of the benefit is still effective amounts to Ps. 56.4 million, Ps. 64.6 million and Ps. 22.3 million, respectively. This cost is expected to be recognized over an approximately two-year period.


F-218

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



27.  
Share-based payments (Continued)

As of June 30, 2015, the Company granted 1.2 million shares, whereas no shares were granted as of June 30, 2014.

Movements in the number of matching shares outstanding under the incentive plan corresponding to the Company´s contributions are as follows:

  
June 30,
2015
  
June 30,
2014
 
At the beginning  10,033,785   3,232,474 
Additions  308,426   6,922,479 
Granted  (1,883,077)  - 
Disposals  (845,497)  (121,168)
At the end  7,613,637   10,033,785 

Established only by subsidiary undertakings

Brasilagro Stock Option Plan

The Group’s subsidiary, Brasilagro, has a stock option plan (the “Brasilagro Stock Option Plan”), under which Brasilagro grants equity-settled options to certain directors and top management (the “Participants” or "Beneficiaries").

F- 153
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
24.
Employee benefits (Continued)
The Board of Directors approved the three tranches of Brasilagro’s Stock Option Plan on August 11, 2010, July 3, 2012 and September 4, 2012, respectively, and Brasilagro’s Board of Directors was authorized to grant stock options to selected employees. Brasilagro’s Stock Option Plan document defined who may participate in the plan, the number of shares that each participant may purchase in exercising the stock options granted, the exercise price per share to be paid in cash by each participant and other conditions under which the options were granted. Upon exercise of each option, its beneficiary becomes entitled to purchase one share of Brasilagro’s capital stock at the exercise price set forth under the Plan.

Brasilagro’s Stock Option Plan has five beneficiaries and grants 233,689, 206,425 and 206,425 stock options at an exercise price of Rs. 8.97 (Ps. 33.2), Rs. 8.25 (Ps. 30.5), and Rs. 8.52 (Ps. 31.5) per share, respectively. The options may be exercised in full as from August 12, 2012, July 3, 2014 and September 4, 2014, respectively, and are exercisable during three years as from the time they become exercisable. As of June 30, 2015, none of the stock options was exercised or cancelled and 177,213 expired. As of June 30, 2014, none of the stock options was exercised, 109,054 were canceled and 68,159 expired.

 

F-219

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



27.  
Share-based payments (Continued)

The Group did not recognize any charge for the fiscal year ended June 30, 20152016 related to Brasilagro Stock Option Plan. During the fiscal years ended June 30, 20142015 and 2013,2014, the Group had recognized a charge of Ps. 2.5 million0.2 and Ps. 0.8 million,2.5, respectively.

The fair value of the Brasilagro’s awards was measured at the date of grant using the Black-Scholes valuation technique. This valuation model takes into account factors such as non-transferability, expected volatility, exercise restrictions and behavioral considerations.

Key grant-date fair value and other assumptions under the Brasilagro Stock Option Plan are detailed below.below:

Grant date First tranche Second tranche Third tranche Second tranche Third tranche
Expected Volatility 67.48% 41.62% 40.50%
Expected volatility 41.62% 40.50%
Expected life 5 years 5 years 5 years 5 years 5 years
Risk free rate 11.36% 9.37% 9.12% 9.37% 9.12%
Expected dividend yield 1.00% 0.50% 0.50% 0.50% 0.50%
Fair value per option Rs 6.16 Rs 3.60 Rs 4.08
Exercise Price Rs 8.97 Rs 8.25 Rs 8.52
Option’s fair value Rs. 3.6 (Ps. 13.32) Rs. 4.08 (Ps. 15.10)
Exercise price Rs. 8.25 (Ps. 30.53) Rs. 8.52 (Ps. 31.52)
Due date 08/12/2015 07/03/2017 09/04/2017 07/03/2017 09/04/2017

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Brasilagro Stock Option Plan are as follows:

 June 30, 2015 June 30, 2016
 First tranche  Second tranche  Third tranche First trancheSecond trancheThird tranche
 Exercise price  Options  Exercise price  Options  Exercise price  Options 
Exercise price
Options
 Options
Exercise price
Options
 Options
Exercise price
Options
 Options
At the beginning Ps. 8.97   301,848  Ps. 8.25   260,952  Ps. 8.52   260,952 Ps. 8.97 233,689Ps. 8.25 206,425Ps. 8.52 206,425
Granted   -   -   -   -   -   - - -- -- -
Canceled   -   -   -   -   -   - 
Cancelled- -- -- -
Exercised   -   -   -   -   -   - - (233,689)- -- -
Expired   -   (68,159)  -   (54,527)  -   (54,527)- -- -- -
At the end  Ps. 8.97   233,689  Ps. 8.25   206,425  Ps. 8.52   206,425 - -Ps. 8.25 206,425Ps. 8.52 206,425


 

F- 154
F-220

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



27.  
Share-based payments (Continued)
24.

Employee benefits (Continued)
 June 30, 2014 June 30, 2015
 First tranche  Second tranche  Third tranche First trancheSecond trancheThird tranche
 Exercise price  Options  Exercise price  Options  Exercise price  Options 
Exercise price
Options
 Options
Exercise price
Options
 Options
Exercise price
Options
 Options
At the beginning Ps. 8.97   370,007  Ps. 8.25   315,479  Ps. 8.52   315,479 Ps. 8.97 301,848Ps. 8.25 260,952Ps. 8.52 260,952
Granted   -   -   -   -   -   - - -- -- -
Cancelled   -   -   -   (54,527)  -   (54,527)- -- -- -
Exercised   -   -   -   -   -   - - -- -- -
Expired   -   (68,159)  -   -   -   - - (68,159)- (54,527)- (54,527)
At the end  Ps. 8.97   301,848  Ps. 8.25   260,952  Ps. 8.52   260,952 Ps. 8.97 233,689Ps. 8.25 206,425Ps. 8.52 206,425
Brasilagro Warrants

On March 15, 2006, the Board of Directors of Brasilagro approved the issuance of 512,000 share warrants (the "Brasilagro Warrants"), 256,000 of which correspond to the first tranche, and 256,000 of which correspond to the second tranche.

The first tranche of Brasilagro Warrants were delivered to its founding shareholders in March, 2006 before Brasilagro’s IPO. As reported by Brasilagro in its IPO Prospectus, said warrants were granted to its founding shareholders in recognition of their founding efforts, their entrepreneurial spirit in preparing Brasilagro for its IPO, the work done in developing the business plan, and their commitment to the Company’s growth. The warrants were distributed among the founding shareholders for no consideration.

As Brasilagro received services from its founding shareholders in exchange for share-based payments, the first issuance of Brasilagro Warrants are within the scope of IFRS 2. However, due to the fact that these warrants could have been fully exercised since March 15, 2009, that is, before the transition date to the IFRS (July 1, 2009), and that the fair value of the warrants had not been published, the Group applied the exemption available under IFRS 1 for these equity instruments.

Each lot of 1,000 Warrants grants the right to subscribe 100 shares of Brasilagro. Brasilagro Warrants vest over a three-year period from the date of grant at 33% every year, and are exercisable by their holders over a fifteen-year period. The number of shares to be subscribed upon exercise of the warrants shall be adjusted in the event of split or reverse split of shares.

Out of theThe 256,000 outstanding Brasilagro Warrantswarrants under the first tranche, 256,000 Warrants were exercisable as of June 30, 20152016 and 2014.2015.

 

F- 155
F-221

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



27.  
Share-based payments 24. Employee benefits (Continued)(Continued)

Brasilagro Warrants of the first issuance outstanding at each period end under have the following expiry date and exercise prices:

  Shares (i)  Exercise price per share Shares (i)
Expiry:Exercise price per share June 30, 2015  June 30, 2014   
June 30,
2016
 
June 30,
2015
April 27, 2021 Rs 16.72  256,000   256,000  Rs 18.20 256,000 256,000

(i)
From the Brasilagro Warrants under the first tranche 177,004 and 175,223 were owned by the Company as of June 30, 2015 and 2014, respectively.

From the Brasilagro Warrants under the first tranche 177,004 were owned by the Company as of June 30, 2016 and 2015, respectively.
Group’s management believes that Brasilagro Warrants under the second tranche (which are only exercisable if and when a transfer of control or acquisition of a significant interest occurs) has a fair value of zero as of any of the periods presented because the exercise price will be equal to the price per share to be paid by the party that obtains control or that acquires a significant interest in Brasilagro. As a result, no liability has been recorded with respect to the Brasilagro Warrants of the second issuance.

Each lot of 1,000 warrants grants the right to subscribe 100 shares of Brasilagro. Brasilagro Warrants of the second issuance are exercisable by their holders during a fifteen-year period but only in the event of change in control and/or acquisition of a material interest in Brasilagro. The number of shares to be subscribed upon exercise of the warrants shall be adjusted in the event of split or reverse split of shares.

As Brasilagro Warrants under the second issuance were delivered to provide Brasilagro’s founding shareholders with a mechanism to leverage their interest in Brasilagro, and not in exchange for goods and/or services, they are not within the scope of IFRS 2. Rather, they are accounted for as a derivative financial liability in accordance with IAS 32 and IFRS 9.

Out of the warrants under the second issuance 168,902 were held by the Company as of June 30, 20152016 and 2014.2015.

F- 156
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
24. Employee benefits (Continued)
IDBD Defined benefits
Defined benefits to hired employees include post-employment benefits, retirement benefits, share-based plans and other short and long term benefits. The Group’s liabilities in relation to severance pay and/or retirement benefits of Israeli employees are calculated in accordance with Israeli laws.
28. TaxesJune 30, 2016
Present value of unfunded obligations572
Present value of funded obligations1,070
Total Present value of defined benefits obligations1,642
Fair value of plan assets(1,101)
Recognized liability for defined benefits obligations541
Liability for other long-term benefits148
Total recognized liabilities689
Assets designed for payment of benefits for employees(4)
Net position from employee benefits685

Plans associated to certain key members of management
IDBD, through its subsidiaries, has granted share incentive plans to key members of management. In April 2016, some modifications have been introduced to the plans as regards exercise prices for each of the five tranches of options, thus establishing a range of NIS 9.5 million to NIS 12.5 million. The share price at the time of approval was NIS 7.73 million.
25.
Taxation
The Group’s income tax has been calculated on the estimated taxable profit for the years ended June 30, 2016, 2015 2014 and 2013,2014, at the rates prevailing in the respective tax jurisdictions. The subsidiaries of the Group in the jurisdictions where the Group operates are required to calculate their income taxes on a separate basis; thus, they are not permitted to compensate subsidiaries’ losses against subsidiaries income.

 

F-222

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



28.  
Taxes (Continued)

The detaildetails of the provision for the Group’s income tax is as follows:

 
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 June 30, 2016 June 30,2015 June 30, 2014
Current income tax   (687,214)  (267,805)  (251,342)(673) (687) (268)
Deferred income tax   390,921   676,136   218,440 853 391 676
Minimum Presumed Income Tax   (7,057)  (18,916)  (617)
Income tax   (303,350)  389,415   (33,519)
MPIT17 (7) (19)
Income tax expense197 (303) 389

F- 157
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
25. Taxation (Continued)
The statutory tax rate in the countries where the Group operates for all of the years presented are:

Tax jurisdiction Income tax rate
Argentina 35%35%
Brazil between 25% - 34%34%
Uruguay between 0% - 2525%
Bolivia 25%25%
United States between 0% - 4545%
Bermudas 0%
Israel0%26.5%

Below is a reconciliation between the income tax recognized and that which would result from applying the prevailing tax rate, applicable in the respective countries, on the profit / (loss) before income tax for the years ended June 30, 2016, 2015 and 2014:
 June 30, 2016 June 30, 2015 June 30, 2014
Gain / (loss) for the year calculated at the tax rate prevailing in the respective countries90 (858) 550
Permanent differences:     
Share of profit / (loss) of joint ventures and associates475 543 (154)
Gain from disposal of joint ventures and associates- - 9
Capital indexation of foreign companies- - 1
Unrecognized tax losses(158) (21) (43)
Non-deductible items(253) (8) 3
Adjustment of share capital- 4 -
Tax on personal assets(2) - -
Change in tax rate(357) - -
Unrecognized tax losses carryforwards(4) - -
Non-taxable income109 57 -
Others297 (20) 23
Income tax expense197 (303) 389
Deferred tax assets and liabilities of the Group as of June 30, 20152016 and 20142015 will be recovered as follows:

  
June 30,
 2015
  
June 30,
2014
 
Deferred income tax asset to be recovered after more than 12 months  1,199,230   1,211,186 
Deferred income tax asset to be recovered within 12 months  407,254   90,414 
Deferred income tax assets                                                                                       1,606,484   1,301,600 
 June 30, 2016 June 30, 2015
Deferred income tax assets to be recovered after more than 12 months5,138 1,101
Deferred income tax assets to be recovered within 12 months1,969 374
Deferred income tax assets7,107 1,475

 
June 30,
 2015
  
June 30,
2014
 
June 30, 2016
 June 30, 2015
Deferred income tax liabilities to be recovered after more than 12 months  (905,779)  (903,373)(12,705) (798)
Deferred income tax liabilities to be recovered within 12 months  (199,210)  (15,630)(406) (175)
Deferred income tax liabilities   (1,104,989)  (919,003)(13,111) (973)


 

F- 158
F-223

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



28.  
Taxes 25. Taxation (Continued)(Continued)

The movement in the deferred income tax (opened by assets and liabilities) during the years ended June 30, 20152016 and 2014,2015, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax assets Tax loss carry-forwards  Advanced payments from customers  Investments  
 Investment
properties and
property, plant and equipment
  Trading properties  Others  Total 
As of June 30, 2013  334,469   96,520   68,994   -   17,890   77,933   595,806 
Charged / (Credited) to the income statements  625,081   4,778   -   -   -   (2,732)  627,127 
Currency translation adjustment  60,145   1,990   -   -   -   16,532   78,667 
As of June 30, 2014  1,019,695   103,288   68,994   -   17,890   91,733   1,301,600 
Charged to the income statements  162,266   222,353   71,555   68,790   6,932   27,236   559,132 
Reserve for changes in investment in subsidiaries  (50,359)  -   -   -   -   -   (50,359)
Use of tax loss carryforwards  (157,367)  -   -   -   -   -   (157,367)
Currency translation adjustment  (41,331)  401   -   -   -   (5,592)  (46,522)
As of June 30, 2015  932,904   326,042   140,549   68,790   24,822   113,377   1,606,484 
Deferred income tax assets Tax loss carry-forwards Advanced payments from customers Investments Trade and otherr receivables Investment properties and property, plant and equipment Provisions Inventories Trading properties Others Total
June 30, 2014 1,019 103 6 - - 2 - 18 91 1,239
Charged/ (Credited) to the statement of income 162 220 72 1 - (1) 1 7 25 487
Changes of non-controlling interest (50) - - - - - - - - (50)
Use of tax loss carryforwards (157) - - - - - - - - (157)
Cumulative translation adjustment (41) 2 - - - - - - (5) (44)
June 30, 2015 933 325 78 1 - 1 1 25 111 1,475
(Credited)/ Charged to the statement of income (16) (161) - 1 (4) - 1 (8) 3 (184)
Changes of non-controlling interest (88) - - - - - - - - (88)
Use of tax loss carryforwards (366) - - - - - - - - (366)
Business combinations 2,261 1,025 - - - - - - 442 3,728
Cumulative translation adjustment 1,661 598 - - 6 1 - - 276 2,542
June 30, 2016 4,385 1,787 78 2 2 2 2 17 832 7,107


F- 159
Deferred income tax liabilities Investment properties  Property, plant and equipment  Biological assets  Investments  Trade and other receivables  Others  Total 
As of June 30, 2013  (577,883)  (163,143)  (68,146)  (50,803)  (65,166)  (19,953)  (945,094)
Charged / (Credited) to the income statements  49,362   7,420   (41,260)  (2,608)  (5,358)  32,567   40,123 
Additions for business combination  33,346   -   -   -   -   -   33,346 
Currency translation adjustment  (17,948)  (23,717)  (1,870)  -   (3,439)  (404)  (47,378)
As of June 30, 2014  (513,123)  (179,440)  (111,276)  (53,411)  (73,963)  12,210   (919,003)
Charged / (Credited) to the income statements  495,031   33,722   26,227   (19,197)  (680,162)  (23,832)  (168,211)
Reclassifications from trading properties  (33,346)  -   -   -   -   -   (33,346)
Currency translation adjustment  (1,233)  11,879   1,859   -   2,280   786   15,571 
As of June 30, 2015  (52,671)  (133,839)  (83,190)  (72,608)  (751,845)  (10,836)  (1,104,989)

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
25. Taxation (Continued)
Deferred income tax liabilities Investment properties Properties, plant and equipment Biological assets Intangible assets Investments Inventories Trade and other receivables Others Total
June 30, 2014 (514) (121) (157) - 7 - (73) 24 (834)
Charged/ (Credited) to the statement of income 495 20 27 - (20) (2) (611) (30) (121)
Reclassifications from trading properties
 (33) - - - - - - - (33)
Cumulative translation adjustment (1) 12 2 - - - 2 - 15
Junio 30, 2015 (53) (89) (128) - (13) (2) (682) (6) (973)
Charged/ (Credited) to the statement of income 938 23 (117) 247 (837) (17) 572 227 1,036
Business combinations (5,630) - - (2,031) - - (20) (728) (8,409)
Cumulative translation adjustment (3,205) 7 (1) (1,076) - (35) (13) (442) (4,765)
June 30, 2016 (7,950) (59) (246) (2,860) (850) (54) (143) (949) (13,111)
F- 160
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
25. Taxation (Continued)
Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefits through future taxable profits is probable. Tax loss carry-forwards may have expiration dates or may be permanently available for use by the Group depending on the tax jurisdiction where the tax loss carry-forwardcarry forward is generated. Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry-forwardcarry forward in Bolivia expire within 3 years. Tax loss carry-forwardscarry forwards in Brazil do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax losses up to a maximum of 30%.

 

As of June 30, 2016, the Group’s tax loss carry-forwards expiration dates are as follows:
 
Jurisdiction Tax loss carry-forward Due date
Argentina 117 2017
Argentina 250 2018
Argentina 914 2019
Argentina 173 2020
Argentina 1,263 2021
Uruguay 16 2017
Uruguay 10 2018
Uruguay 18 2019
Uruguay 7 2020
Uruguay 5 2021
Bolivia 15 2017
Bolivia 9 2018
Bolivia 13 2019
Israel 68,049 Do not expires
  70,859  
F-224

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



28.  
Taxes (Continued)

In order to fully realize the deferred tax asset, the Group will need to generate future taxable income. To this aim the Group made a projection for future years when deferred assets will be deductible. Such projection is based on aspects such as the expected performance of the main macroeconomic variables affecting the business, production issues, pricing, yields and costs that make up the operational flows derived from the regular exploitation of fields and other assets of the group, the flows derived from the performance of financial assets and liabilities and the income generated by the Group’s strategy of crop rotation. Such strategy implies the purchase and/or development of fields in marginal areas or areas with a high upside potential and periodical sale of such properties that are deemed to have reached their maximum appreciation potential.

Based on the estimated and aggregate effect of all these aspects on the Group’s performance, Management estimates that as at June 30, 2015,2016, it is probable that the Company will realize all of the deferred tax assets.

As
F- 161
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of June 30, 2015, the tax loss carry-forwards of the Group and the jurisdictions which generated them are as follows:Argentine Pesos, except otherwise indicated)

Jurisdiction Tax loss carry-forward  Date of generation  Due date 
Argentina                                                          32,694   2011   2016 
Argentina                                                          123,003   2012   2017 
Argentina                                                          254,814   2013   2018 
Argentina                                                          1,774,300   2014   2019 
Argentina                                                          162,902   2015   2020 
Uruguay                                                          903   2011   2016 
Uruguay                                                          9,777   2012   2017 
Uruguay                                                          1,093   2013   2018 
Uruguay                                                          16,057   2014   2019 
Uruguay                                                          4,336   2015   2020 
Bolivia                                                          149   2012   2015 
Bolivia                                                          9,064   2014   2017 
Bolivia                                                          6,803   2015   2018 
   2,395,895         

25. Taxation (Continued)
The Group did not recognize deferred income tax assets of Ps. 43.3 million74,266.4 and Ps. 57.1 million43.33 as of June 30, 2016 and 2015, and 2014, respectively the main deferred income tax asset not recognized is related to certain businesses which are still in development stage or that have a history of recurring losses.our subsidiary IDBD. Although management estimates that the business will generate sufficient income, pursuant to IAS 12, management has determined that, as a result of the recent loss history and the lack of verifiable and objective evidence due to the subsidiary’s results of operations history, there is sufficient uncertainty as to the generation of sufficient income to be able to offset the losses within a reasonable timeframe, therefore, no deferred tax asset is recognized in relation to these losses.

 

F-225

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



28.  
Taxes (Continued)

The Group did not recognize deferred income tax liabilities of Ps. 71.83 million825.18 and Ps. 46.4 million71.83 as of June 30, 20152016 and 2014,2015, respectively, related to the potential dividends distribution of itstheir investments in foreign subsidiaries, associates and joint ventures. In addition, the withholdings and/or similar taxes paid at source may be creditable against the Group’s potential final tax liability.
The Group hasCompany does not set up an allowance for MPIT and is considering filing a declaratory action under the intentionterms of section 322 of the Civil and abilityCommercial Procedural Code against the AFIP seeking certainty as to indefinitely reinvest these results.

Below is a reconciliation between the income tax recognized and that which would result from applyingapplication of the prevailing tax rate on the Income/loss before income taxMPIT for the years ended June 30,fiscal year 2014, 2015 and advance payments from 7 through 11 corresponding to fiscal year 2014, in relation to the decision by the Argentine Supreme Court in the case “Hermitage” on September 15, 2010 and 2013:“Perfil” on February 11, 2014. In such judicial precedents, the Court had declared such tax to be unconstitutional given that, under certain circumstances, it proves to be unreasonable and inconsistent with the ability-to-pay principle.

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Tax calculated at the tax rates applicable to profits in the respective countries  858,031   (550,285)  61,284 
Permanent differences:            
Share of (loss) / profit of associates and joint ventures  (543,178)  153,919   (24,715)
Capital indexation of foreign companies  (3,971)  (1,591)  - 
Loss from disposal of associates and joint ventures  -   (8,668)  - 
Unrecognized tax losses                                                                     21,591   43,398   16,008 
Non-taxable income                                                                     (57,050)  (31,454)  (9,603)
Non-deductible expenses                                                                     7,882   3,700   8,937 
Others                                                                     20,045   1,566   (18,392)
Income tax expense                                                                     303,350   (389,415)  33,519 
26.

Leases
29.  Leases

The Group as lessee

Operating leases:

In the ordinary course of business, the Group enters into several operating lease agreements. The Group conducts a portion of its agricultural activities on land rented from third parties under operating lease contracts averaging a harvest year. The Group uses rented land for cultivation or cattle rising. Lease contracts are generally renewable for additional harvest periods. Rent is generally payable at intervals during the harvest year. Lease contracts vary but generally payments are generally based on the market price of a particular crop multiplied by a fixed amount of tons per hectare leased.
Other contracts are based on a fixed amount of US dollars per hectare. Rent expense for the years ended as of June 30, 2016, 2015 2014 and 20132014 amounted to Ps. 79.7, Ps. 98.8 million,and Ps. 78.6, million and Ps. 56.4 million, respectively and is included in the line item "Cost" in the income statements.

 

F-226

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



29.  
Leases (Continued)

As discussed in Note 2.9, the Group is also using land in the Province of Salta under rights of use agreement (the "Anta Agreement") for which the Group is currently paying a rent fee of 10% of the production. Rent expense for the years ended June 30, 2016, 2015 2014 and 20132014 amounted to Ps. 4.5, Ps. 4.7 million,and Ps. 2.6, million and Ps. 1.4 million, respectively, and is included in the line item "Costs" in the income statements.

F- 162
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
26. Leases (Continued)
The Group leases two properties which uses as shopping centers. These contracts provideproperty or spaces for administrative or commercial use both in Argentina and Israel under operating lease arrangements. The agreements entered into include several clauses, including but not limited, to fixed, monthly payments, adjusted pursuant to a rent escalation clause. Rent expensevariable or adjustable payments. Some leases were agreed upon with related parties (Note 35). The amounts involved have not been material for any of the years ended June 30, 2015, 2014 and 2013 amounted to Ps. 3.0 million, Ps. 2.9 million and Ps. 2.9 million, respectively, and is included in the line item "Costs" in the income statements.filed periods.

The Group also rents office spaces under an operating lease with companies related to the Chairman and Director of the Group. (See Note 38)(Note 35).

The future aggregate minimum lease payments the Group will have to cancel under non-cancellable operating leases are as follows:

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
No later than 1 year  37,662   44,181   22,852 
Later than one year and not later than five years  47,858   83,598   16,908 
More than 5 years  83,995   102,315   39,884 
   169,515   230,094   79,644 
 June 30, 2016 June 30, 2015 June 30, 2014
No later than one year3,907 38 44
Later than one year not later than five years6,859 48 84
More than five years2,254 84 102
 13,020 170 230

Finance leases:leases

The Group rents certain computer equipment under various finance leases for an average term of three years. Book value of these assets under finance leases is disclosed in Note 11.12.

At the commencement of the lease term, the Group recognizes a lease liability equal to the carrying amount of the leased asset. In subsequent periods, the liability decreases by the amount of lease payments made to the lessors using the effective interest method. The interest component of the lease payments is recognized in the income statements. Book value of liabilities under finance leases is disclosed in Note 25.26.
 
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

 

F-227

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



29.  
Leases (Continued)

The future aggregate minimum lease payments under cancellable operating leases are as follows:

 
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 June 30, 2016 June 30, 2015 June 30, 2014
No later than 1 year   12,172   2,291   1,612 
Later than 1 year and not later than 5 years  15,650   1,348   1,790 
No later than one year11 12 2
Later than one year not later than five years17 15 1
  27,822   3,639   3,402 28 27 3
Future finance charges   (2,356)  (350)  (354)(2) (2) -
Present value of finance lease liabilities  25,466   3,289   3,048 26 25 3

F- 163
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
26. Leases (Continued)
The fair value of finance lease liabilities is as follows:

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
No later than 1 year                                                              11,768   2,102   1,460 
Later than 1 year and not later than 5 years  13,698   1,187   1,588 
Present value of finance lease liabilities  25,466   3,289   3,048 
 June 30, 2016 June 30, 2015 June 30, 2014
No later than one year12 12 2
Later than one year and not later than five years14 13 1
Present value of finance lease liabilities26 25 3

Under the terms of these agreements, no contingent rents are payable. The interest rate inherent is fixed at the contract date for all of the lease term. The average interest raterates on finance lease payables at June 30, 2016, 2015 and 2014 were 11.1%, 9.2% and 2013 were 9.2%, 11.20% and 10.75%, respectively.

The Group as lessor

Operating leases (Shopping centers, offices and other buildings):leases:
 
TheIn the segment Shopping Centers and Offices and others in the Operations Center Argentina and in the segment Real Estate in the Operations Center Israel, the Group enters into cancellable operating lease agreements typical in the business. Given the diversity of properties and lessees, and the various economic and regulatory jurisdictions where the Group operates, the agreements may adopt different forms, such as fixed, variable, adjustable leases, etc. For example, in the Operations Center Argentina, operating lease agreements relatingwith lessees of shopping centers generally include step-up clauses and contingent payments. In Israel, agreements tend to shopping centers. The agreements have an average term ragingbe agreed upon for fixed amounts, although in some cases they may include adjustment clauses. Income from three to five years. Some leases relating to anchor stores having termsare recorded in the statement of ten years, which are usually extendable. Tenants are charged a rent which is the higher between (i) the base rent;income under rental and (ii) the percentage rent (which is generally established as a percentage over sales that ranges between 4% and 10%). Furthermore, pursuant to the rent escalation clause establishedservice income in most lease arrangements, the tenants’ base rent generally increases between 18% and 24% each year during the agreement term. Regarding the percentage rent, since the rent is not known until the endall of the period, such percentage rent meets the definition of contingent rent under IAS 17 "Leases". Accordingly, rental income will be recognized once the contingent rent is known.


F-228

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



29.  
Leases (Continued)

For the fiscal years ended June 30, 2015, 2014 and 2013, the average (basic rental) and contingent (supplementary rental) rental income of the Group’s shopping centers amounted to Ps. 929,063, Ps. 746,666 and Ps. 588,121, and to Ps. 461,394, Ps. 329,258 and Ps. 254,429, respectively, and are included under “Revenue” in the income statements.filed periods.
 
Additionally, the Group owns a shopping centerRental properties are considered to be investment property known as "Patio Olmos" in the Province of Córdoba, Argentina.(Note 10). The Group rents this property to a third party shopping center operator under an operating lease agreement expiring in 2032. The lease provides for fixed monthly payments, adjusted pursuant to a rent escalation clause. Rental income for the years ended June 30, 2015, 2014book value, depreciation charge, and 2013 amounted to Ps. 181, Ps. 151 and Ps. 343 and isaccumulated depreciation are included in the line item "Revenue" in the income statements.Note 10.

The Group enters into cancellable operating leasing agreements relating to offices and other buildings. The agreements have an average term raging from three to five years. The tenants are charged a base rent payable on a monthly basis.

Rental income of the Group’s offices and other buildings amounted to Ps. 305,882,321, Ps. 255,788306 and Ps. 204,329256 for the fiscal years ended June 30, 2016, 2015 2014 and 2013,2014, respectively and is included into “Revenue” in the income statements.

The future minimum proceeds under non-cancellable operating leases from Group’s offices and other buildings are as follows:

 
June 30,
2015
  
June 30,
2014
 June 30, 2016 June 30, 2015 June 30, 2014
2015   -   731,570 - - 732
2016   982,335   522,764 - 982 523
2017   690,358   220,605 3,137 690 221
2018   322,625   58,600 3,237 323 59
2019   83,321   18,291 2,564 83 18
Later than 2019   23,989   14,420 
20201,988 24 14
Later than 20205,577  
  2,102,628   1,566,250 16,503 2,102 1,567

F- 164
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
26. Leases (Continued)
Farmland leases

From time to time, the Group leases certain farmlands. The leases have an average term of one crop year. Rental income is generally based on the market price of a particular crop multiplied by a fixed amount of tons per hectare leased.


F-229

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



29.  
Leases (Continued)
 
Rental income was Ps. 22, Ps. 15.1 million,and Ps. 13.8 million and Ps. 23.8 million for the years ended June 30, 2016, 2015 2014 and 20132014 and is included within “Revenue” in the income statements.

Even though all leases described above are cancellable by law, the Group considered them to be non-cancellable (see Note 2.28 for further details).

The future aggregate minimum lease proceeds under non-cancellable operating leases from the Group are as follows:

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
No later than 1 year                                                                5,092   8,501   6,898 
Later than one year and not later than five years  614   643   6,916 
More than 5 years                                                                -   1,928   1,379 
   5,706   11,072   15,193 
 June 30, 2016 June 30, 2015 June 30, 2014
No later than one year14 5 9
Later than one year and not later than five years- 1 1
More than five years- - 2
 14 6 12

Finance leases:

The Group does not act as a lessor in connection with finance leases.

 

F-230

 
Cresud Sociedad Anónima,
27.
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)Shareholders' equity



30.  Shareholders’ Equity

Share capital and premium

The share capital of the Group is represented by common shares with a nominal value of Ps. 1 per share and one vote each. The movementsNo other activity has been recorded for the fiscal years ended June 30, 2016, 2015 and 2014 in the capital accounts, other than those related to the acquisition of treasury shares.
Inflation adjustment of share capital
The Group’s financial statements were previously prepared on the basis of general price-level accounting which reflected changes in the purchase price of the Argentine Peso in the historical financial statements through February 28, 2003. The inflation adjustment related to share capital was appropriated to an inflation adjustment reserve that formed part of shareholders' equity. The balance of this reserve could be applied only towards the issuance of common stock to shareholders of the Company. Resolution 592/11 of the CNV requires that at the transition date to IFRS certain equity accounts, such as the inflation adjustment reserve, are not adjusted and are considered an integral part of June 30, 2015share capital.
F- 165
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
27.
Shareholders' equity (Continued)
Legal reserve
According to Law No. 19,550, 5% of the profit of the year is separated to constitute a legal reserve until they reach legal capped amounts (20% of total capital). This legal reserve is not available for dividend distribution and 2014 are as follows:can only be released to absorb losses. The Group has not reached the legal limit of this reserve.

  Number of shares  Capital  Share premium  Share premium of treasury stock 
As of June 30, 2013                                              496,561,976   496,562   773,079   - 
Purchase of treasury stock  (5,565,479)  (5,565)  -   - 
As of June 30, 2014                                              490,996,497   490,997   773,079   - 
Shares distribution resolved by Shareholders' meeting held on November 14, 2014  5,565,479   5,565   -   - 
Share premium resolved by Shareholders' meeting held on November 14, 2014  -   -   (220,881)  - 
Purchase of treasury stock  (3,067,837)  (3,068)  -   - 
Exercise of warrants                                              80,074   80   1,132   - 
Awards granted under equity incentive plan  1,203,030   1,203   -   12,678 
Maturity share warrants                                              -   -   106,134   - 
As of June 30, 2015                                              494,777,243   494,777   659,464   12,678 

Special reserve

Pursuant to CNV General Ruling No. 609/12, the Company set up a special reserve, to reflect the positive difference between the balance at the beginning of retained earnings disclosed in the first financial statements prepared according to IFRS and the balance at closing of retained earnings disclosed in the last financial statements prepared in accordance with previously effective accounting standards. This reserve cannotmay not be used to make distributions in kind or in cash, and canmay only be reversed to be capitalized, or otherwise to absorb potential negative balances in Retained Earnings. The Company reversed the above mentioned Reserve was reversed underreserve to absorb the appropriationaccumulated deficit as of Retained Earnings resolved by Shareholders’ meeting held on November 14,the fiscal year ended June 30, 2014.

Dividends
During the year ended June 30, 2016, there were no distributions of dividends. Dividends distributed during fiscal year ended June 30, 2015 amounted to Ps. 6. Dividends distributed during fiscal year ended June 30, 2014 amounted to Ps. 120.
Additional paid-in capital from treasury shares
Upon sale of the treasury shares, the difference between the net realizable value of the treasury shares sold and their acquisition cost shall be recorded, whether it is a gain or a loss, as part of owners’ contributions not yet capitalized to be called “Additional Paid-in Capital from Treasury Shares”.
 

F- 166
F-231

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



30.  
Shareholders’ Equity 27. Shareholders’ Equity (Continued)(Continued)

Treasury stock

During 2009, the Company acquired 30 million shares of own stock for Ps. 1.7 million in cash following a Board of Directors' resolution dated October of 2008. As per Argentine Corporations Law, an entity has a period of one year from acquisition to sell or otherwise dispose of treasury stock unless an extension is provided for in a shareholders meeting. In November 2009, the Board of Directors assigned 25 million shares of treasury stock to the shareholders on a pro rata basis. After this assignment, the Group held 5 million shares of treasury stock. In October 2011, the General Ordinary and Extraordinary Shareholders’ Meeting approved the allocation of treasury stock to the “Equity Incentive Plan”.

On April 11, 2014, the Company reported a potential repurchase of shares intended to curb the drop in prices and reduce fluctuations on the Company’s shares and ADS and strengthen its position in the market, thus minimizing potential temporary imbalances that may arise between supply and demand. On that same date, the Shareholders’ Meeting approved a partial release of the account “Reserve for new projects” in an amount of up to Ps. 200 million, in order to appropriate such amount of money to set up a reserve entitled “Reserve for the repurchase of securities”. In view of this measure, the Shareholders’ Meeting approved the repurchase of securities issued by the Company in an amount of Ps. 200 million, to be carried out before December 31, 2014, which period may be extended for an identical term. Cresud’s Board of Directors set forth the terms and conditions governing the purchase of the Company's own stock pursuant to Section 64 of Law N° 26,831 and the CNV’s regulations, for up to an aggregate amount of Ps. 200 million and up to 5% of the capital stock, in the form of common shares or American Depositary Shares (ADS) representing 10 shares each, and up to a daily limit of 25% of the average daily transaction volume experienced by the Company’s shares, along with the markets where they are listed, during the prior 90 business days, andGroup’s other reserves at a price ranging from a minimum of Ps. 1 up to Ps. 13.5 per share and ranging from a minimum of US$ 1 per ADS up to US$ 14 per ADS.

During the year ended June 30, 2016, 2015 and 2014 the Company purchased 128,749 common shares (N.V. Ps. 1 per share) for a total amount of Ps. 0.2 million and 543,673 ADRs (representing 5,436,730 common shares) for a total amount of US$ 6.6 million, completing the terms and conditions of the share repurchase plan.were as follows:

During the fiscal year ended June 30, 2015 Cresud repurchased 37,657 common, registered shares of own stock of Ps. 1 nominal value and 1 vote per share, in exchange for Ps. 0.5 million and 303,018 American Depositary Shares or ADRs representing 10 shares each for a total amount of US$ 3.9 million, thus completing the terms and conditions of the share repurchase plan.
 Cost of treasury sharesTransactions with non-controlling interest
Reserve for
cumulative translation adjustment
Reserve for
share based compensation
Reserve for future dividendsHedging instrumentsReserve for new developmentsReserve for defined benefit plansReserve for the acquisition of securities issued by the Company
Other
subsidiaries reserves
Total
other
reserves
Balance as of June 30, 2013-(22)38--337---326
Other comprehensive income for the year- 631-------631
Total comprehensive income for the year--631-------631
Cash dividends------(120)---(120)
Equity settled compensation---63------63
Cancellation of BrasilAgro warrants---(1)------(1)
Acquisition of treasury shares(55)---------(55)
Release of reserve for new developments resolved by Shareholders’ Meeting held on April 11, 2014------(200)-200--
Transaction with non-controlling interest-7--------7
Balance as of June 30, 2014(55)(15)63470--17-200-851
Other comprehensive loss for the year--(191)-------(191)
Total comprehensive loss for the year--(191)-------(191)
Appropriation of retained earnings resolved by Shareholders’ Meeting held on November 14, 2014:           
- Share distribution55-------(55)--
- Reserve for new developments------(17)- -(17)
- Reserve for repurchase of share--------(113)-(113)
Equity settled compensation---28------28
Acquisition of treasury shares(32)---------(32)
Awards granted under equity incentive plan---(16)------(16)
Transaction with non-controlling interest-69--------69
Balance as of June 30, 2015(32)5444382----32-579
Other comprehensive income / (loss) for the year--422--(24)-(6)--392
Total comprehensive income / (loss) for the year--422--(24)-(6)--392
Appropriation of retained earnings resolved by Shareholders’ Meeting held on October 30 and November 26, 2015:           
- Reserve for future dividends----31-----31
Equity settled compensation---17------17
Equity incentive plan granted---(4)------(4)
Transaction with non-controlling interest-106--------106
Cumulative translation adjustment before business combination--(58)-------(58)
Share of changes in subsidiaries’ equity---------2323
Balance as of June 30, 2016(32)1608079531(24)-(6)32231,086

 

F- 167
F-232

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



28.
30.  
Shareholders’ Equity (Continued)Revenues

On November 14, 2014, the Shareholders’ Meeting decided to conclude the shares and ADRs repurchase plan.
 June 30, 2016 June 30, 2015 June 30, 2014
Sale of trading properties191 10 63
Crops1,015 950 818
Cattle80 57 62
Dairy65 72 54
Sugarcane294 198 124
Supplies63 55 70
Beef966 806 549
Sale of communication equipment1,844 - -
Revenue from supermarkets18,536 - -
Revenues from sales23,054 2,148 1,740
Consignment revenues119 32  
Rental and services5,264 2,995 2,449
Hotel services557 396 332
Communication services4,956 - -
Tourism services1,152 - -
Leases and agricultural services40 37 29
Commissions66 38 47
Consumer financing171 - -
Others5 6 7
Revenue from services12,330 3,504 2,864
Total revenues35,384 5,652 4,604

On December 12, 2014, as per the powers delegated by the Regular General Shareholders’ meeting on October 31, 2014, the Board decided to distribute pro rata among shareholders 5,565,479 treasury shares, which represent 0.0114% per share or 1.1406% on the outstanding capital of 487,928,660.
29.

Costs
Share warrants

 June 30, 2016 June 30, 2015 June 30, 2014
Cost of leases and services13 12 9
Other operative costs10 9 8
Cost of property operations23 21 17
Crops1,707 1,753 1,508
Cattle254 220 151
Dairy135 133 104
Sugarcane494 368 207
Supplies49 43 56
Beef837 655 446
Leases and agricultural services7 7 15
Consignment costs6 3 -
Commissions11 12 8
Brokerage operations55 32 29
Others9 7 8
Costs of agricultural sales and services3,564 3,233 2,532
Costs of leases and services2,432 1,224 1,129
Costs of trading properties and developments15 14 19
Costs from hotel operations381 278 216
Costs of sale of communication equipment1,304 - -
Costs of communication services3,304 - -
Costs of tourism services1,049 - -
Costs of supermarkets13,867 - -
Costs of sale and developments151 - -
Total costs26,090 4,770 3,913
In May 2015, certain option holders exercised their right to purchase additional shares, with the resulting addition of 80,074 common shares with a nominal value of Ps. 1 each. The exercise of such options resulted in an inflow of Ps. 1.2 million. All of Cresud’s existing options expired on May 22, 2015, after the end of the exercise period.

Restrictions on distribution of dividends

-  Legal reserve

According to Argentine law, 5% of the profit of the year is separated to constitute a legal reserve until they reach legal capped amounts (20% of total capital). This legal reserve is not available for dividend distribution and can only be released to absorb losses. Shareholders’ Meeting held on November 14, 2014 resolved the use of the statutory reserve in the amount of Ps. 81,616 to absorb accumulated losses. The Company shall have to fully replenish such reserve before any distribution of accumulated earnings.

-  Treasury stock

Given that the repurchase of shares for subsequent sale is to be funded out of net cash income or free reserves, pursuant to section 220.2. of Act 19,550, insofar as the Company maintains Treasury shares there is a restriction on the distribution of retained earnings or free reserves, equal to the acquisition cost.

Dividends

The dividends paid in the years ended June 30, 2014 and 2013 were Ps.120 million (Ps. 0.244 per share) and Ps. 120 million (Ps. 0.242 per share), respectively. No dividends were distributed as of June 30, 2015.

 

F- 168
F-233

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



30.  
Shareholders’ Equity (Continued)

Expired dividends

During the years ended 2015, 2014 and 2013, Ps. 811, Ps. 1,690 and Ps. 629, respectively, expired, corresponding to dividends no yet paid from prior years.

31.  Revenues

  June 30, 2015 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Trading properties  9,860   -   -   9,860 
Crops  -   950,251   -   950,251 
Cattle  -   56,650   -   56,650 
Dairy  -   71,940   -   71,940 
Sugarcane  -   197,828   -   197,828 
Beef  -   -   806,018   806,018 
Supplies  -   55,034   -   55,034 
Sales revenues  9,860   1,331,703   806,018   2,147,581 
Base rent  1,251,812   -   -   1,251,812 
Contingent rent  461,583   -   -   461,583 
Admission rights  156,438   -   -   156,438 
Parking fees  112,120   -   -   112,120 
Commissions  51,333   1,774   -   53,107 
Consignment revenues  -   32,356   -   32,356 
Property management fee  33,784   -   -   33,784 
Expenses and Collective Promotion Funds (“CPF”)  884,684   -   -   884,684 
Flattening of tiered lease payments  31,293   -   -   31,293 
Leases and agricultural services  -   37,048   -   37,048 
Advertising and brokerage fees  -   35,877   -   35,877 
Others  11,900   5,778   -   17,678 
Service income  2,994,947   112,833   -   3,107,780 
Consumer financing  147   -   -   147 
Hotel operations  396,297   -   -   396,297 
Other revenues:  396,444   -   -   396,444 
Total Group revenue  3,401,251   1,444,536   806,018   5,651,805 



 

F-234

 
Cresud Sociedad Anónima,
30.
Comercial, Inmobiliaria, Financiera y AgropecuariaExpenses by nature

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


31.  
Revenues (Continued)

  June 30, 2014 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Trading properties  62,641   -   -   62,641 
Crops  -   817,702   -   817,702 
Cattle  -   61,691   -   61,691 
Dairy  -   53,935   -   53,935 
Sugarcane  -   123,851   -   123,851 
Beef  -       548,740   548,740 
Supplies  -   70,388   -   70,388 
Sales revenues  62,641   1,127,567   548,740   1,738,948 
Base rent  1,079,779   -   -   1,079,779 
Contingent rent  329,889   -   -   329,889 
Admission rights  126,495   -   -   126,495 
Parking fees  81,382   -   -   81,382 
Commissions  42,458   2,042   -   44,500 
Property management fee  27,121   -   -   27,121 
Expenses and Collective Promotion Funds (“CPF”)  736,302   -   -   736,302 
Flattening of tiered lease payments  14,771   -   -   14,771 
Leases and agricultural services  -   29,044   -   29,044 
Brokerage fees  -   44,834   -   44,834 
Others  12,202   6,608   -   18,810 
Service income  2,450,399   82,528   -   2,532,927 
Consumer financing  574   -   -   574 
Hotel operations  331,562   -   -   331,562 
Other revenues  332,136   -   -   332,136 
Total Group revenue  2,845,176   1,210,095   548,740   4,604,011 

  June 30, 2013 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Trading properties                                                          24,867   -   -   24,867 
Crops                                                          -   745,932   -   745,932 
Cattle                                                          -   74,534   -   74,534 
Dairy                                                          -   38,818   -   38,818 
Sugarcane                                                          -   160,259   -   160,259 
Beef                                                          -   -   206,121   206,121 
Supplies                                                          -   47,990   -   47,990 
Sales revenues                                                          24,867   1,067,533   206,121   1,298,521 
Base rent                                                          828,923   -   -   828,923 
Contingent rent                                                          254,854   -   -   254,854 
Admission rights                                                          107,608   -   -   107,608 
Parking fees                                                          62,484   -   -   62,484 
Commissions                                                          33,620   1,347   -   34,967 
Property management fee                                                          21,803   -   -   21,803 
Expenses and Collective Promotion Funds (“CPF”)  594,290   -   -   594,290 
Flattening of tiered lease payments  22,641   -   -   22,641 
Leases and agricultural services  -   30,815   1,634   32,449 
Brokerage fees                                                          -   29,883   -   29,883 
Others                                                          9,052   4,038   -   13,090 
Service income                                                          1,935,275   66,083   1,634   2,002,992 
Consumer financing                                                          1,203   -   -   1,203 
Hotel operations                                                          225,835   -   -   225,835 
Other revenues                                                          227,038   -   -   227,038 
Total Group revenue                                                          2,187,180   1,133,616   207,755   3,528,551 


 
F-235

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



32.  Costs

  June 30, 2015 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Cost of leases and services                                                       -   11,983   -   11,983 
Other operative costs                                                       -   9,002   -   9,002 
Cost of property operations                                                       -   20,985   -   20,985 
Crops                                                       -   1,752,577   -   1,752,577 
Cattle                                                       -   219,713   -   219,713 
Dairy                                                       -   133,259   -   133,259 
Sugarcane                                                       -   368,172   -   368,172 
Beef                                                       -   -   654,813   654,813 
Supplies                                                       -   42,814   -   42,814 
Leases and agricultural services  -   7,217   -   7,217 
Brokerage fees                                                       -   32,372   -   32,372 
Commissions                                                       -   11,969   -   11,969 
Consignment costs                                                       -   3,069   -   3,069 
Others                                                       -   6,617   -   6,617 
Cost of agricultural sales and services  -   2,577,779   654,813   3,232,592 
Cost of sale of trading properties  13,934   -   -   13,934 
Cost from hotel operations                                                       277,884   -   -   277,884 
Cost of leases and services                                                       1,224,264   -   -   1,224,264 
Other costs                                                       56   -   -   56 
Total Group costs                                                       1,516,138   2,598,764   654,813   4,769,715 

  June 30, 2014 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Cost of leases and services                                                       -   17,374   -   17,374 
Other operative costs                                                       -   8,228   -   8,228 
Cost of property operations                                                       -   25,602   -   25,602 
Crops                                                       -   1,509,500   -   1,509,500 
Cattle                                                       -   150,810   -   150,810 
Dairy                                                       -   104,334   -   104,334 
Sugarcane                                                       -   206,751   -   206,751 
Beef                                                       -   -   446,094   446,094 
Supplies                                                       -   55,362   -   55,362 
Leases and agricultural services  -   -   7,213   7,213 
Commissions                                                       -   7,663   -   7,663 
Brokerage fees                                                       -   29,044       29,044 
Others                                                       -   8,101   -   8,101 
Cost of agricultural sales and services  -   2,071,565   453,307   2,524,872 
Cost of sale of trading properties  18,971   -   -   18,971 
Cost from hotel operations                                                       215,980   -   -   215,980 
Cost of leases and services                                                       1,128,794   -   -   1,128,794 
Other costs                                                       373   -   -   373 
Total Group costs                                                       1,364,118   2,097,167   453,307   3,914,592 


F-236

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



32.  
Costs (Continued)

  June 30, 2013 
  Urban properties and investments  Agricultural  Agroindustrial  Total 
Cost of leases and services  -   12,052   -   12,052 
Other operative costs  -   5,675   -   5,675 
Cost of property operations  -   17,727   -   17,727 
Crops  -   1,216,190   -   1,216,190 
Cattle  -   142,621   -   142,621 
Dairy  -   74,826   -   74,826 
Sugarcane  -   302,206   -   302,206 
Beef  -   -   194,270   194,270 
Supplies  -   42,162   -   42,162 
Leases and agricultural services  -   -   4,132   4,132 
Commissions  -   3,224   -   3,224 
Brokerage fees  -   20,601   -   20,601 
Others  -   5,299   -   5,299 
Cost of agricultural sales and services  -   1,807,129   198,402   2,005,531 
Cost of sale of trading properties  12,347   -   -   12,347 
Cost from hotel operations  168,282   -   -   168,282 
Cost of leases and services  915,701   -   -   915,701 
Other costs  907   -   -   907 
Total Group costs  1,097,237   1,824,856   198,402   3,120,495 




F-237

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


33.  Expenses by nature

The Group discloses expenses in the statement of income statements by function of as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”.
The following tables provide the additional required disclosure of expenses by nature and their relationship to the function within the Group.

For the year ended June 30, 2015:
 June 30, 2016 June 30, 2015 June 30, 2014
Leases, services charges and vacant property costs142 45 54
Depreciation and amortization2,769 259 297
Doubtful accounts71 30 10
Advertising, publicity and other selling expenses964 238 184
Taxes, rates and contributions723 304 243
Maintenance and repairs1,135 436 336
Fees and payments for services2,092 286 252
Director´s fees207 134 124
Payroll and social security liabilities5,057 1,041 890
Cost of sale of goods and services14,861 63 61
Changes in biological assets and agricultural produce1,810 1,609 1,241
Supplies and labor1,135 1,113 886
Freights 159 138 90
Commissions and expenses21 28 19
Conditioning and clearance30 20 15
Travel expenses and stationery36 55 25
Management fees- 11 -
Export expenses25 - -
Others3,376 52 73
Total34,613 5,862 4,800

  Group costs          
  Costs of property operations  Cost of agricultural sales and services  Cost of agriculture production  Cost of sale of trading properties  Cost from Consumer Financing  Cost from hotel operations  Other operative costs  General and administrative expenses  Selling expenses  Total 
Leases, services charges and vacant property costs  17,364   14,380   -   1,167   -   284   86   9,693   2,216   45,190 
Depreciation and amortization  162,175   56,055   11,120   -   -   11,578   3,007   12,658   1,229   257,822 
Doubtful accounts                                           -   -   -   -   -   -   -   -   29,168   29,168 
Advertising, publicity and other selling expenses  173,274   -   -   -   -   6,556   -   -   58,290   238,120 
Taxes, rates and contributions  108,332   2,865   11,306   3,272   -   335   59   15,640   161,849   303,658 
Maintenance and repairs  325,651   12,816   21,007   6,560   9   33,984   1,285   31,556   2,751   435,619 
Fees and payments for services  8,573   150,738   5,686   512   47   1,334   795   109,930   8,073   285,688 
Director´s fees                                           -   -   -   -   -   -   -   133,967   -   133,967 
Payroll and social security liabilities  404,076   119,100   65,384   154   -   162,423   2,887   239,270   46,976   1,040,270 
Cost of sale of properties  -   -   -   2,246   -   -   -   -   -   2,246 
Food, beverage and other lodging expenses  -   -   -   -   -   60,852   -   8,264   4,361   73,477 
Changes in biological assets and agricultural produce  -   1,608,966   -   -   -   -   -   -   -   1,608,966 
Supplies and labor                                           -   13,649   1,094,456   -   -   -   9   12   4,392   1,112,518 
Freights                                           373   1,897   11,811   -   -   -   19   44   123,872   138,016 
Bank commissions and expenses  -   8,959   358   -   -   -   -   14,628   3,735   27,680 
Conditioning and clearance  -   -   -   -   -   -   -   -   20,141   20,141 
Travel and library expenses  11,887   14,936   10,883   23   -   530   856   14,736   2,626   56,477 
Management fee                                           -   -   -   -   -   -   -   11,401   -   11,401 
Others                                           12,559   8,202   -   -   -   8   -   16,021   4,479   41,269 
Total expenses by nature  1,224,264   2,012,563   1,232,011   13,934   56   277,884   9,003   617,820   474,158   5,861,693 

 

F- 169
F-238

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



33.  
Expenses by nature 30. Expenses by nature (Continued)(Continued)

For the year ended June 30, 2014:2016:

 Group costs          Group costs  
 Costs of property operations  Cost of agricultural sales and services  Cost of agriculture production  Cost of sale of trading properties  Cost from Consumer Financing  Cost from hotel operations  Other operative costs  General and administrative expenses  Selling expenses  Total Cost of agricultural sales and servicesCost of agriculture productionOther agricultural operative costsCost of leases and servicesCost of trading properties and developments
Cost of
hotel operations
Cost of sale of communication equipmentCost of communication servicesCost of tourism services
Cost of
supermarkets
Total
costs
General and administrative expensesSelling expensesTotal
Leases, services charges and vacant property costs  16,700   15,282   1,080   1,404   -   280   172   14,601   4,939   54,458 331-4712--45-12994142
Depreciation and amortization  217,462   45,925   7,559   707   -   10,819   2,666   9,973   1,808   296,919 49133578-11-68368451,4502911,0282,769
Doubtful accounts   -   -   -   -   -   -   -   -   10,461   10,461 --------611071
Advertising, publicity and other selling expenses  145,331   -   -   1   -   4,701   -   -   34,478   184,511 ---282------282-682964
Taxes, rates and contributions  86,996   2,110   9,033   2,299   -   -   179   14,289   128,536   243,442 313-21941----24020463723
Maintenance and repairs  255,053   10,641   14,841   3,551   3   26,321   490   23,861   1,071   335,832 17241611857--61-779792771,135
Fees and payments for services  28,762   120,369   4,551   66   368   2,347   103   83,373   11,103   251,042 1735117-15-675--8864567502,092
Director´s fees   -   -   -   -   -   -   -   124,207   -   124,207 --------207-207
Payroll and social security expenses  362,055   94,032   56,326   168   -   121,332   4,085   213,139   38,365   889,502 
Cost of sale of properties  -   -   -   10,740   -   -   -   -   -   10,740 
Food, beverage and other lodging expenses  -   -   -   -   -   49,792   -   6,726   3,753   60,271 
Payroll and social security liabilities1499045601220-405905182,0378312,1895,057
Cost of sale of goods and services---40152481,30413-13,30414,861-14,861
Changes in biological assets and agricultural produce  -   1,239,869   -   -   -   -   -   -   755   1,240,624 1,808-------1,808-21,810
Supplies and labor   -   24,485   859,688   -   -   -   -   -   1,761   885,934 781,056------1,134-11,135
Freights   -   1,267   7,240   -   -   -   6   12   81,003   89,528 113------14-145159
Bank commissions and expenses  -   5,788   199   -   -   -   -   6,413   6,167   18,567 10-------107421
Conditioning and clearance  -   -   12   -   -   -   -   -   15,002   15,014 ---------3030
Travel and library expenses  -   12,525   7,007   -   -   -   527   3,719   974   24,752 14141------296136
Export expenses---------2525
Others   16,435   2,332   85   35   2   388   -   33,626   12,550   65,453 13--79-26-1,528785-2,4312776683,376
Total expenses by nature  1,128,794   1,574,625   967,621   18,971   373   215,980   8,228   533,939   352,726   4,801,257 2,3481,229102,4331663801,3043,3041,04913,86726,0902,2446,27934,613


 

F- 170
F-239

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



30. Expenses by nature (Continued)
33.  
Expenses by nature (Continued)

For the year ended June 30, 2013:2015:

 Group costs          Group costs      
 Costs of property operations  Cost of agricultural sales and services  Cost of agriculture production  Cost of sale of trading properties  Cost from Consumer Financing  Cost from hotel operations  Other operative costs  General and administrative expenses  Selling expenses  Total 
Cost of
agricultural sales and services
 Cost of agriculture production Other agricultural operative costs Cost of property operations Cost of trading properties and developments 
Cost of
hotel operations
 
Total
costs
 General and administrative expenses Selling expenses Total
Leases, services charges and vacant property costs  11,505   1,300   964   1,774   -   136   119   5,442   926   22,166 14 - - 17 1 - 32 10 3 45
Depreciation and amortization  209,164   37,513   5,600   529   -   13,591   2,373   10,689   279   279,738 56 11 3 163 - 12 245 13 1 259
Doubtful accounts   -   -   -   -   -   -   -   -   16,114   16,114 1 - - - - - 1 - 29 30
Advertising, publicity and other selling expenses  115,013   -   1   -   -   -   13   12   16,542   131,581 - - - 173 - 7 180 - 58 238
Taxes, rates and contributions  68,982   1,670   6,494   1,500   -   263   21   12,936   83,204   175,070 3 11 - 109 3 - 126 16 162 304
Maintenance and repairs  226,164   5,925   13,072   2,741   38   21,603   55   19,236   978   289,812 13 21 - 326 7 34 401 32 3 436
Fees and payments for services  29,390   123,222   2,639   237   858   1,301   19   51,206   4,401   213,273 151 6 - 9 1 1 168 110 8 286
Director´s fees   -   -   -   -   -   -   -   82,060   -   82,060 - - - - - - - 134 - 134
Payroll and social security expenses  244,311   67,784   35,467   155   3   96,096   2,610   141,550   25,561   613,537 
Cost of sale of properties  -   -   -   5,373   -   -   -   -   -   5,373 
Food, beverage and other lodging expenses  -   -   -   -   -   29,643   -   2,900   680   33,223 
Payroll and social security liabilities119 65 5 404 - 162 755 239 47 1,041
Cost of sale of goods and services- - - - 2 61 63 - - 63
Changes in biological assets and agricultural produce  -   877,118   -   -   -   -   -   -   -   877,118 1,609 - - - - - 1,609 - - 1,609
Supplies and labor   -   3,575   767,384   -   -   -   -   -   -   770,959 14 1,094 1 - - - 1,109 - 4 1,113
Freights   44   462   10,360   6   -   151   23   327   84,987   96,360 2 12 - - - - 14 - 124 138
Bank commissions and expenses  1   2,621   229   -   -   4,869   -   5,278   16,446   29,444 
Commissions and expenses9 - - - - - 9 15 4 28
Conditioning and clearance  -   -   18   -   -   -   -   -   17,766   17,784 - - - - - - - - 20 20
Travel and library expenses  374   1,092   4,212   29   -   575   445   7,785   1,558   16,070 15 11 - 12 - - 38 14 3 55
Management fees- - - - - - - 11 - 11
Others   10,753   48,763   95   3   8   54   -   6,962   10,021   76,659 7 - - 12 - 1 20 24 8 52
Total expenses by nature  915,701   1,171,045   846,535   12,347   907   168,282   5,678   346,383   279,463   3,746,341 2,013 1,231 9 1,225 14 278 4,770 618 474 5,862

 

F- 171
F-240

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



34.  Employee costs

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Salaries, bonuses and social security costs  998,906   784,655   596,678 
Share-based payments                                                                30,823   94,682   10,497 
Pension costs – defined contribution plan  10,541   10,165   6,362 
   1,040,270   889,502   613,537 

35.  Other operating results, net

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Gain from purchase of subsidiaries                                                                  -   -   136,724 
Gain from disposal of equity interest in subsidiaries, associates and joint ventures  22,075   -   15,433 
Gain (loss) from commodity derivative financial instruments  8,128   (14,859)  5,104 
(Loss) gain from disposal of other property items  (893)  (366)  1,379 
Expenses related to transfers of real properties (1)  (119,429)  -   - 
Reversal of currency translation adjustment (2)  188,323   -   - 
Recovery of allowances                                                                  -   239   2,698 
Tax on personal assets                                                                  (14,929)  (13,705)  (17,649)
Administration fee                                                                  418   -   4,681 
Management fee                                                                  3,666   46   1,108 
Contingencies (3)                                                                  (28,806)  (18,473)  (28,645)
Donations                                                                  (40,558)  (33,283)  (31,053)
Project Analysis and Assessment                                                                      (3,124)  (1,182)
Unrecoverable VAT                                                                  (576)  (446)  (146)
Others                                                                  (5,210)  8,963   9,616 
Total other operating results, net                                                                  12,209   (75,008)  98,068 

(1)30. Expenses by nature (Continued)
For the year ended June 30, 2014:
 Group costs      
 
Cost of
agricultural sales and services
 Cost of agriculture production Other agricultural operative costs Cost of property operations Cost of trading properties and developments 
Cost of
hotel operations
 
Total
costs
 General and administrative expenses Selling expenses Total
Leases, services charges and vacant property costs15 1 - 17 1 - 34 15 5 54
Depreciation and amortization46 8 3 217 1 11 286 9 2 297
Doubtful accounts- - - - - - - - 10 10
Advertising, publicity and other selling expenses- - - 145 - 5 150 - 34 184
Taxes, rates and contributions2 9 - 87 2 - 100 14 129 243
Maintenance and repairs11 15 - 255 4 26 311 24 1 336
Fees and payments for services120 5 - 29 - 2 156 86 10 252
Director´s fees- - - - - - - 124 - 124
Payroll and social security liabilities93 56 6 362 - 121 638 213 39 890
Cost of sale of goods and services- - - - 11 50 61 - - 61
Changes in biological assets and agricultural produce1,240 - - - - - 1,240 - 1 1,241
Supplies and labor24 860 - - - - 884 - 2 886
Freights 1 7 1 - - - 9 - 81 90
Commissions and expenses6 - 1 - - - 7 6 6 19
Conditioning and clearance- - - - - - - - 15 15
Travel and library expenses13 7 - - - - 20 4 1 25
Others2 - 1 14 - - 17 38 18 73
Total expenses by nature1,573 968 12 1,126 19 215 3,913 533 354 4,800
F- 172
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements On July 31, 2014 Cresud transferred(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
31.
Employee costs
 June 30, 2016 June 30, 2015 June 30, 2014
Salaries, bonuses and social security costs4,880 999 785
Share-based payments48 31 95
Defined contribution plan costs17 11 10
Other costs and employee benefits112 - -
Total employee costs5,057 1,041 890
32.
Other operating results, net
 June 30, 2016 June 30, 2015 June 30, 2014
(Loss) / Gain from commodity derivative financial instruments(77) 8 (15)
Tax on personal assets(6) (15) (14)
Gain from disposal of interest in associates4 22 -
Reversal of currency translation adjustment (i)97 188 -
Consulting fees1 4 -
Contingencies (ii)(5) (29) (18)
Donations(58) (40) (34)
Project analysis and assessment- - (3)
Unrecoverable VAT- (1)  
Expenses related to transfers of investment properties to subsidiaries (iii)- (119) -
Remediation income at fair value from the interest held in an associate before takeover26 - -
Others(26) (6) 9
Total other operating results, net(44) 12 (75)
(i)
As of June 30, 2016, Ps. 144 correspond to IRSA an areathe reversal of 1,058 hectares locatedcurrency translation adjustment before business combination with IDBD and Ps. 4 to the reversal of the translation reserve generated in Luján,Rigby, following the partial repayment of principal of the company. As of June 30, 2015 pertains to the reversal of the translation reserve generated in Buenos Aires Province. Rigby following the partial repayment of principal of the company.
(ii)
Including costs and legal expenses.
(iii)
On December 22, 2014, IRSA conveyed title on the properties located in Bouchard 710, Suipacha 652, Torre BankBoston EdificioTower, República EdificiosBuilding, Intercontinental Plaza Building and the plot of land next to the latter, onto its subsidiary IRSA CP, which as from such date continues to operate such properties. These transfers have had no effects whatsoever in the consolidated financial statements of the Group other than the expenses and taxes associated to the transfer.
(2)Pertains to the reversal of the translation reserve generated in Rigby following the partial repayment of principal of the company (see Note 3).
(3)Including costs and legal expenses.


 
F-241

F- 173
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)


36.  Financial results, net

33.
  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Financial income:         
- Interest income                                                                100,094   119,291   72,813 
- Foreign exchange gains                                                                124,393   153,856   104,686 
- Dividends income                                                                16,622   15,041   23,249 
- Other financial income                                                                -   -   109 
Financial income                                                                241,109   288,188   200,857 
             
Financial costs:            
- Interest expense                                                                (886,710)  (737,913)  (483,772)
- Foreign exchange losses                                                                (686,435)  (2,053,377)  (586,382)
- Other financial costs                                                                (124,140)  (83,086)  (64,899)
Financial costs                                                                (1,697,285)  (2,874,376)  (1,135,053)
Less financial costs capitalized                                                                12,957   22,376   10,307 
Total financial costs                                                                (1,684,328)  (2,852,000)  (1,124,746)
Other financial results:            
- Fair value gains of financial assets at fair value through profit or loss  187,529   379,091   23,739 
- Gain / (Loss) on the revaluation of receivables arising from the sale of farmland  52,984   20,751   (3,165)
- (Loss) / Gain from repurchase of Non-convertible Notes  (1,945)  (44,688)  2,057 
- Fair value gain on embedded derivatives  -   -   64 
- Loss derivative financial instruments (except commodities)  (83,510)  (365,740)  (7,567)
Total other financial results                                                                155,058   (10,586)  15,128 
Total financial results, net                                                                  (1,288,161)  (2,574,398)  (908,761)
Financial results, net

37.  Earnings per share
 June 30, 2016 June 30, 2015 June 30, 2014
Financial income     
Interest income805 100 119
Foreign exchange gains1,097 124 154
Dividends income72 17 15
Financial income1,974 241 288
Financial costs     
Interest expense(2,739) (874) (715)
Foreign exchange losses(3,999) (686) (2,054)
Other financial costs(981) (125) (83)
Total financial costs(7,719) (1,685) (2,852)
Other financial results:     
Fair value (loss) / gain on financial assets and liabilities at fair value through profit or loss(1,241) 188 379
Loss from repurchase of Non-convertible Notes(39) (2) (45)
Gain / (Loss) on derivative financial instruments (except commodities)1,089 (83) (365)
Gain on the revaluation of receivables arising from the sale of farmland33 53 21
Impairment of investment properties and property, plant and equipment(352) - -
Total other financial results(510) 156 (10)
Total financial results, net(6,255) (1,288) (2,574)

(a)  Basic
34.

Earnings per share
(a)
Basic
Basic earnings per share amounts are calculated in accordance with IAS 33 by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares purchased by the Group and held as treasury shares.

  
June 30,
2015
  
June 30,
2014
  
June 30,
2013
 
Loss attributable to equity holders of the parent  (249,619)   (1,067,880)  (26,907)
Weighted average number of ordinary shares in issue (thousands)  492,020   496,132   496,562 
Basic loss per share                                                              0.51   (2.15)  (0.05)
 June 30, 2016June 30, 2015June 30, 2014
(Loss) / Gain attributable to equity holders of the parent(1,892)(176)(1,068)
Weighted average number of ordinary shares in issue (in million)495492496
Basic earnings per share(3.82)0.36(2.15)

 

F- 174
F-242

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



37.
Earnings per share 34. Earnings per share (Continued)(Continued)

(b)
Diluted

Diluted
Diluted earnings per share amounts are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential shares. Ordinary shares purchased by the Group and held as treasury shares are excluded from the calculation of diluted earnings per share. As of June 30, 2016, 2015 and 2014 the Group does not haveholds treasury shares with potentially dilutive securities.effect. The diluted earnings per share is as follows:
 
June 30, 2015
Gain attributable to equity holders of the parent176
Weighted average number of ordinary shares in issue (in million)554
Diluted earnings per share0.32
Since the Company posted a loss for the years ended June 30, 2015,2016 and 2014, and 2013, there is no diluted effect whatsoever.

38.  Related party transactions
35.

Related party transactions
During the normal course of business, the Group conducts transactions with different entities or parties related to it. An individual
As mentioned in Note 3, on October 11, 2015, the Group took over IDBD. Before takeover, the Group had entered into certain transactions with IDBD as associate, mainly related to the subscription of warrants and/or legal entity is considered acapital contributions, but had not conducted commercial transactions. See Note 3 for further information related party where:to investment in IDBD.

·  An entity, individual or close relative of such individual or legal entity exercises control, or joint control, or significant influence over the reporting entity, or is a memberRemunerations of the Board of Directors or the Senior Management of the entity or its controlling company.

·  An entity is a subsidiary, associate or joint venture of the entity or its controlling or controlled company.

The following section provides a brief description of the main transactions conducted with related parties which are not described in other notes of these consolidated financial statements:

1.  Remunerations of the Board of Directors

The Business Company Act No. 19,550 provides that the remuneration of the Board of Directors, where it is not set forth in the Company’s by-laws, shall be fixed by the Shareholders' Meetings. The maximum amount of remuneration that the members of the Board are allowed to receive, including salary and other performance-based remuneration of permanent technical-administrative functions, may not exceed 25% of the profits.

 

F-243

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

Such maximum amount will be limited to 5% where no dividends are distributed to the Shareholders, and will be increased proportionately to the distribution, until reaching such cap where the total of profits is distributed.

F- 175
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
Some of our Directors are hired under the Employment Contract Act No. 20,744. This Act rules on certain conditions of the work relationship, including remuneration, salary protection, working hours, vacations, paid leaves, minimum age requirements, workmen protection and forms of suspension and contract termination.

The remuneration of directors for each fiscal year is based on the provisions established by the Business Company Act No. 19,550, taking into consideration whether such directors perform technical-administrative functions and depending upon the results recorded by the Company during the fiscal year.
Once such amounts are determined, they should be approved by the Shareholders’ Meeting.

2.  Senior Management remuneration

The members of the Senior or Top Management are appointed and removed by the Board of Directors, and perform functions in accordance with the instructions delivered by the Board itself.

The Society’s Senior Management is composed of as follows:
 
NameDate of birthPositionIn theActual position since
Alejandro G. Elsztain03/31/1966General Manager1994
Matias Iván Gaivironsky02/23/1976Financial Manager2011
David A. Perednik11/15/1957Administrative Manager1997
Carlos Blousson09/21/1963General Manager of operationsOperations in Argentina Bolivia and ParaguayBolivia2008
Matías I. Gaivironsky02/23/1976Administrative and Financial Manager2011
Alejandro Casaretto10/15/1952Regional Agricultural Manager2008

The remuneration earned by Senior Management for their functions consists of an amount that is fixed taking into account the manager's backgrounds, capacity and experience, plus an annual bonus based on their individual performance and the Group's results. Members of the senior management participate in defined contribution and share-based incentive plans that are described in Notes 2624 and 27,25, respectively.

The Senior Management of the Operations Center in Israel is composed as follows:
 
F-244

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

3.  
Name
Corporate Service Agreement:
Date of birth
Position
Current position held since
Sholem Lapidot
10/22/1979
Chief Executive Officer
2016
Gil Kotler
04/10/1966
Chief Financial Officer
2016
Aaron Kaufman
03/03/1970
VP & General Counsel
2015

In due course,Corporate Service Agreement with IRSA and IRSA CP
Given that the operating areas of our Company, IRSA and IRSA CP share certain characteristics of affinity, the Board considered it was convenient to implement alternatives that should allowallows to reduce certain fixed costs, in view that the operating areas of IRSA and Cresud share certain characteristics of affinity, with the aim of reducing their incidence on the operating results, building on and enhancing the individual efficiencies of each of the companies in the different areas that form part of operating management.

F- 176
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
To such end, on June 30, 2004, a Master Agreement for the Exchange of Corporate Services (“Frame Agreement") was entered into between ourthe Company, IRSA and IRSA CP.CP, which was amended on August 23, 2007, August 14, 2008, November 27, 2009, March 12, 2010, July 11, 2011, October 15, 2012, November 12, 2013, February 24, 2014, February 18, 2015 and November 12, 2015.

TheUnder the current Master Agreement corporate services are provided in the following areas: Human Resources, Finance, Institutional Relations, Administration and Control, Insurance, Security, Agreements, Technical Tasks, Infrastructure and Services, Architecture and Design, Development and Works, Real Estate, Hotels, Board of Directors, Board of directors of Real Estate Business, General Manager Office, Board Safety, Audit Committee, Real Estate Business Management, Human Resources of Real Estate Business, Fraud Prevention, Internal Audit, Planning, Shared Services Center, Procurement and Environment and Quality.
Pursuant to this agreement, had a term of 24 months, is renewable automatically for equal periods, unless it is terminated by any of the parties upon prior notice.

It is also worth noting that the parties havecompanies hired an external consulting firm to review and evaluate half-yearly the criteria used in the process of determining the amount of corporate services, as well as the basis for distribution and documentation. Notably,source documentation used in the parties retain absolute freedomprocess indicated above, by means of a half-yearly report.
It should be noted that the operations indicated above allows our Company, IRSA and confidentiality regarding theirIRSA CP to keep our strategic and business decisions.commercial decisions fully independent and confidential, with cost and profit apportionment being made on the basis of operating efficiency and equity, without pursuing individual economic benefits for any of the companies.

Offices and Shopping centers spaces leases
The offices of our president are located at 108 Bolivar, in the Autonomous City of Buenos Aires. The property has been rented to Isaac Elsztain e Hijos S.A., a company controlled by some family members of Eduardo Sergio Elsztain, our president, and to Hamonet S.A., a company controlled by Fernando A. Elsztain, one of our directors, and some of its family members.
In the futureaddition, Tarshop, BACS, BHN Sociedad de Inversión S.A., BHN Seguros Generales S.A. and BHN Visa S.A. rent offices owned by IRSA CP in orderdifferent buildings.
Furthermore, we also let various spaces in our Shopping Centers (stores, stands, storage space or advertising space) to continuethird parties and related parties such us Tarshop S.A. and BHSA.
Lease agreements entered into with the policyassociates included similar provisions and amounts to those included in place which primarily seeks to allocate corporate resources among the several areas as efficiently as possible and continue cutting certain fixed costs relatedagreements with third parties.
F- 177
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the parties’ activities. The Master Agreement may be extended and/or amendedConsolidated Financial Statements(Continued)
(All amounts in connection with other areas shared by the parties. The last amendment was made on February 18, 2015.millions of Argentine Pesos, except otherwise indicated)

4.  Donations granted to Fundación IRSA:

35. Related party transactions (Continued)
Donations granted to Fundación IRSA and Fundación Museo de los Niños
Fundación IRSA is a non-profit charity institution that seeks to support and generate initiatives concerning education, the promotion of corporate social responsibility and the entrepreneurial spirit of the youth. It carries out corporate volunteering programs and fosters donations by the Group’s employees. The main members of Fundación IRSA's Board of Directors are: Eduardo S. Elsztain (Chairman)(President); Saul Zang (Vice ChairmanPresident I), Alejandro Elsztain (Vice ChairmanPresident II) and Mariana C. de Elsztain (secretary). It funds its activities with the donations made by IRSA CP,us, IRSA and Cresud.


F-245

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousandsIRSA CP. Fundación Museo de los Niños is a non-profit association, created by the same founders of Argentine Pesos, except sharesFundación IRSA and per share data andits Management Board is formed by the same members as otherwise indicated)



38.           Related party transactions (Continued)

5.  Rentals and/or rights of use:

In the course of its normal operations, the Group enters into different kinds of agreementsFundación IRSA’s. Fundación Museo de los Niños acts as special vehicle for the rentaldevelopments of real property"Museo de los Niños, Abasto" and spaces in shopping centers related to its activities, namely:

(a)  Lease agreements, gratuitous bailment agreements or agreements for the use of space in shopping centers:

The Group normally leases diverse spaces in its Shopping Centers (stores, stands, storage rooms or advertising spaces) to related parties, such as Tarshop S.A. (Group’s associate) and Banco Hipotecario S.A. (IRSA’s associate).

Store lease agreements are usually for three years and provide for monthly rental payments, proportional payment of common expenses and contributions to the Fondo"Museo de Promociones Colectivas (FPC) (Collective Promotion Fund), as well as payment of all direct expenses and taxes resulting fromlos Niños, Rosario". On October 29, 1999, our shareholders approved the execution of the agreements. The monthly rental is increased annually by a certain percentage as from the second contract year, on an annual and cumulative basis. The agreements further provide the payment of a right of admission and a special installment corresponding to the FPC, payable at the startaward of the agreement (called FPC Lanzamiento).

The right“Museo de los Niños, Abasto” to use the stands located in the shopping centers is usually granted by way of use permit agreements or, in specific cases, under gratuitous bailment agreements. In the former case, the agreements have a term of one or two years, provide for the payment of a monthly rental and a single percent contribution for the payment of common expenses and the FPC, as well as the payment of all the direct expenses and taxes associated to the execution of agreements. Where the term is in excess of one year, the agreement provides for a percentage increase after the first year. Under the gratuitous bailment agreement, the lessee does not make the monthly payment or the contribution to the above cited fund, but pays for the stand’s specific direct expenses.

As for the rental of storage space, these agreements are accessory to the rental of a store or the right to use a stand, so in general their term coincides with that of the primary agreement. These agreements provide only for the payment of a monthly rental, which is increased annually by a given percentage as from the second year, and while they do not include payments of any common fund or direct expenses, they do provide for the payment of taxes associated with the execution of the agreement.

Furthermore, the Group offers different spaces located in the shopping centers for the advertising of different companies, brands and/or products (non-traditional advertising or NTA). These are generally short-term agreements and provide for the placement of advertising in a specific number of locations at the shopping centers in exchange for a global consideration. The taxes that levy the execution of these agreements are usually paid by the counterparties.


Fundación Museo de los Niños.
 
F-246

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

(b)  Rights of use granted to Fundación Museo de los Niños:

InOn October 31, 1997, IRSA CP entered into an agreement with Fundación IRSA whereby a store atit loaned 3,800 square meters of the area built in the Abasto shopping mall was granted underShopping Center for a gratuitous bailment agreement for atotal term of 30 years. Subsequently, in September 1999, Fundación IRSA assigned freeyears, and on November 29, 2005, shareholders of cost all of the rights of use over such store and its respective obligations to Fundación Museo de los Niños.

Fundación Museo de los Niños is a charitable non-profit organization created by the same founders of Fundación IRSA and has the same members of the administration committee.

In November 2005, IRSA CP signedapproved another agreement entered into with Fundación Museo de los Niños granting under gratuitous bailment a store atwhereby 2,670.11 square meters built in the Shopping Center Alto Rosario shopping mallwere loaned for a term of 30 years.

Fundación Museo de los NiñosIRSA has used these spacesthe available area to set up "Museohouse the museum called “Museo de los Niños, Abasto” and “Museo de los Niños, Rosario", twoan interactive learning centers intendedcenter for childrenkids and adults. Both agreements provide that the payment of common expenses and direct expenses relatedadults, which was opened to the services performed by these stores should be borne by Fundación Museo de los Niños.

(c)  Office leases:

Cresud, together with IRSA and IRSA CP rent the offices of our president located at 108 Bolivar,public in the City of Buenos Aires, property of Isaac Elsztain e Hijos S.C.A. (a company controlled by certain relatives of Eduardo S. Elsztain, our president) and Hamonet S.A. (a company controlled by Fernando A. Elsztain, one of our directors, and some of its family members). Both contracts were renewed for 36 month period and are effective from March 1, 2014 through February 28, 2017 and April 1, 2014 through March 31, 2017, respectively; they establish a monthly rental payment of US$ 15 per month, which is spread and assumed in equal shares by the three companies.1999.

On the other hand, Cresud leases certain floors and parking space at the Intercontinental Plaza tower, located in Moreno 877, in the Autonomous City of Buenos Aires. These properties were leased from IRSA’s main office and are owned by IRSA CP, under agreements which expire in 2017. The monthly rental payment agreed amounts to US$ 24 plus the obligation to pay common expenses and taxes levied on the real property, proportionately to the total area rented.


 

Legal services
 
F-247

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

Additionally, Tarshop S.A. rents three floors and parking space, of our building in Suipacha 652, under agreements which expire in 2017. The monthly rental payment agreed amounts to US$ 52 plus the obligation to pay common expenses and taxes levied on the real property, proportionately to the total area rented.

6.  Service provider or recipient:

In the normal course of business operations conducted by the Group, the Group renders and receives different types of services, the most significant being:

(a)  Management fee:

The Group usually enters into certain administration and/or management agreements involving the group’s companies and other related parties based upon such parties’ backgrounds, knowledge, experience and expertise in managing this type of business, as well as the existence of qualified staff and a proper structure to render the relevant type of services. These agreements usually designate one of the Group’s companies as exclusively responsible for the management of the complexes and/or companies in exchange of a money consideration, calculated on a base that may be fixed or variable.

In addition, there is a management agreement in place with CAMSA, a consulting company retained by the Group to provide advisory services. The shareholders of CAMSA are Eduardo S. Elsztain, Group’s shareholder and Chairman of the Board, and Saúl Zang, Vice-Chairman of the Board.  Under the agreement dated November 1994, CAMSA provides the Group with services such as (i) advisory with respect to capital investments in all aspects of agricultural operations, including, among others, sales, marketing, distribution, financing, investments, technology and business proposals; (ii) acts on the Group’s behalf in such transactions, negotiating the prices, conditions, and other terms of each operation; and (iii) advisory regarding securities investments with respect to such operations. The agreement expressly provides that CAMSA may not provide advisory services with respect to transactions that are entirely related to real estate. The Group pays CAMSA an annual fee equal to 10% of the Group’s annual net income after taxes. Under the agreement, the Group is required to reimburse CAMSA normal expenses incurred in performing the services. The agreement is subject to termination by either party upon not less than 60 days prior written notice. If the Group terminates the agreement without cause, the Group must pay CAMSA twice the average of the amounts of the management fee paid for the two preceding fiscal years.


F-248

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

Furthermore, Brasilagro provides agricultural advisory services to Cresca S.A. ("Cresca"), joint venture between Brasilagro and Carlos Casado S.A. ("Casado"), with agricultural activities in Paraguay, under a 10-year agreement, automatically renewal for two additional 10-year periods, and receives management fees as follows by way of consideration, Cresca must paid to the Group: (a) (i) an amount equal to 12% per annum on the total amount to be paid annually by Cresca for preparing the lands (from natural to productive state) in purpose of agricultural and cattle farming development for the first 41,930 has. and (ii) an amount equal to 10% on the concepts mentioned above from the ha. 41,931 on; and (b) an amount equal to 10% per annum on the gross margin from sales revenue less (i) direct selling expenses (including but not limited to commissions, withholding taxes, freight and any other expense arising for or from sales), (ii) direct production costs, (iii) structure costs and (iv) tax costs.

(b)  Special reimbursement programs with several means of payment

The Group carries out diverse business actions and promotions intended to promote larger number of visitors and consumption inside its shopping centers.

Some promotions offer different types of discounts to clients and/or interest-free financing plans on specific dates or periods. To this end, the Group enters into agreements with various third party financial entities and/or related parties, such as Banco Hipotecario S.A. and Tarshop S.A..

Overall, these agreements establish different refund percentages, on specific dates or periods, for clients making purchases at all the participating stores using the means of payment specific of each financial entity and, on occasions, additional financing plans with interest-free installments. The cost of the refunds granted to the clients is generally distributed as a percentage among the lessors of the shopping centers and the financial entities, while the cost of interest-free financing is borne, in general, by the latter. The Group acts as an intermediary and is in charge of the lessors’ engagement and the advertising of these promotions. This activity results in no money flows or transfer of revenues or costs between the Group and its related parties.

  (c)  Legal services

The Group hires legal services from Estudio Zang, Bergel & Viñes. Our Vice-president,es, from which Saúl Zang is a partner and our alternate directors, Juan M. Quintana, Salvador D. Bergel, and D. Pablo Vergara del Carril are memberssits at the Board of that law firm.


the Group companies.
 
F-249

 
Cresud Sociedad Anónima,Purchase-Sale of goods and/or services hiring
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

7.  Sale of goods and/or services

In the normal course of its business and with the aim of building on and enhancingmake resources more efficient, the individual efficiencies of each of the Group’s companiesGroup, or its related parties, including its parent company, in the different areas comprising the operating management, and with a view to obtaining the best prices and rates, supplies and materials are purchased,certain occasions purchase and/or hire services are hired on behalf of a company which later sells and/or recoversrecover for companies of the Group or other related parties, based upon their actual utilization.

The category manly comprises:

(a)  Sale of radio or TV advertising seconds and/or spaces in newspapers and magazines

The Group usually enters into agreements with third parties whereby it acquires, for future use, rights to use different means (pages in newspapers and magazines, radio or TV seconds, etc.), which it subsequently uses in its advertising campaigns. Such means may be used by the acquiring company or by other related parties, in which case the former sells such spaces to the latter.

(b)  Sale of materials and supplies

Usually, each of the Group companies buys from third parties different types of supplies and materials required to carry out its activities, which it then uses directly or sells to one or more Group companies or related parties, based upon utilization needs.

(c)  Reimbursement of expenses

These operations do not entail additional profits to the company recovering expenses, for the same are carried out as per the cost value of the goods or services acquired.


F- 178
F-250

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.35. Related party transactions(Continued)

8.  Financial operations
Borrowings

(a)  Borrowings

In the normal course of its activities, the Group enters into diverse loan agreements or credit facilities between the group’s companies and/or other related parties. These loans generallyborrowings accrue interestinterests at market rates from the date of each disbursement until the date of effective repayment,rates.
Financial and may be paid off wholly or partially prior to the due date, either in cash and/or through capitalization (conversion into shares), and/or by way of offsetting arrangements involving debit and credit balances existing between the companies.service operations with BHSA

(b)  Master agreement for US dollar-denominated forward transactions with Banco Hipotecario S.A.

IRSA CP and Banco Hipotecario S.A. entered into a master agreement for the performance of dollar-denominated forward transactions. This master agreement provides that the parties may carry out this type of transactions by fixing a certain forward price (“the Agreed Price”). Such transactions are settled in cash by paying the difference between the Agreed Price and the quoted price of the US dollar on the settlement date.

(c)  Securities loan agreement with IFISA

The Company works with several financial entities in the Argentine market for operations including, but not limited to, credit, investment, purchase and sale of securities and financial derivatives. Such entities include BHSA and its subsidiaries. Furthermore, BHSA and BACS usually act as underwriters in Capital Market transactions for the Company and its subsidiaries.
In addition, we have entered into a securities loan agreementagreements with BHSA, who provides collection services for our Shopping Centers.
Transactions with IFISA
On February 10, 2015, Dolphin, sold 71,388,470 IDBD shares to IFISA, for an amount of US$ 25.6 million, US$ 4 million of which were paid upon execution and the remaining balance of US$ 21.6 million were financed for a company incorporated under the lawsterm of República Oriental del Uruguay, which granted 4,053,942 Global Depositary Shares, representing 10 ordinary shares with a face value of Ps. 1 per share of IRSA. This loan does not imply the transfer of any politic nor economic right correspondingup to the values, which are held by Cresud. Regarding voting rights,360 days and priced at Libor 1M (one month) + 3%. On May 9, 2016, the parties agreed thatto extend the Company will grantexpiration date for 30 days as from execution of the addenda, to be automatically renewable every 30 days for a powermaximum term of attorney180 days, and increasing the rate to 9% since February 10, 2016.
On May 31, 2015, IRSA, through Dolphin, sold to IFISA with46 million of warrants Series 4 for a total amount of NIS 0.46 million (equivalent to US$ 0.12 million at the respective voting instructions. In respecttime of the transaction), provided IFISA agreed to dividends,exercise them fully when Dolphin were so required by IDBD.
On July 28, 2015, the Group, through Dolphin granted a loan to IFISA will transfer the funds to Cresud. The loanfor an amount of US$ 7.2 million, due in July 2016, which accrues interest at an annualLibor 1M (one month) + 3%. On May 9, the parties agreed to extend the expiration date to June 8, 2016, to be automatically renewable every 30 days for a maximum term of 180 days, and increased the rate equivalent to 3 month LIBOR, plus 50 basis points,9%.
On October 9, 2015, the Group, through REIG V granted a loan in the amount of US$ 40 million to IFISA. The term of the loan is one year calculated from the disbursement and is due on June 25, 2016.bore interest at a rate of 3% + Libor 1M, determined monthly. On October 7, 2016, the Group extended the deadline for repayment within 30 days from October 8, 2016, automatically renewable for periods of 30 days to a maximum of 180 days and settled interest at a rate of 9% per annum.



 

F- 179
F-251

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.35. Related party transactions(Continued)
In February 2016, DN B.V., a subsidiary of Dolphin, entered into an option contract with IFISA whereby Dolphin is granted the right, but not the obligation to acquire 92,665,925 shares of IDBD held by IFISA at a share price of NIS 1.64 plus an annual interest of 8.5%. The exercise date for the option extends for two years.
In June 2014, the Group – through Real Estate Investment Group IV LP – renewed a credit facility granted by IFISA, a company indirectly controlled by Eduardo Sergio Elsztain, for a total amount of 1.4 million shares of Hersha Hospitality Trust. The transaction was agreed upon for a term of 30 days, which could be renewed for up to 360 days; the facility was priced at LIBOR (3 months) + 50 bp. This credit facility was cancelled after the end of fiscal year 2014 in order to sell the remaining amount of Hersha.
On June 30, 2016, the Company had a credit facility with IFISA involving shares and/or GDRs of IRSA for up to 3,500,000 GDRs. This credit facility will expire in June 2017 and accrues interest at an annual fixed rate of 6%.
On June 18, 2012, Cresud signed a credit facility with IFISA for a maximum amount of US$ 6, which expired on November 24, 2012, extended until November 24, 2015, at a rate of LIBOR (12 MONTH) + 300 bp.; the credit facility was terminated on the expiration date.
Investment in investment funds managed by BACS
The Group invests its liquid funds in mutual funds managed by BACS among other entities.
San Bernardo lease
We lease a rural establishment in the Province of Córdoba, which is owned by San Bernardo de Córdoba S.A. (previously denominated Isaac Elsztain e hijos S.C.A.) pursuant to a lease agreement entered into in August 2015, for a fraction of 12,600 hectares.
The consideration for the lease was agreed at an amount equal to 3.5 kg of beef per hectare. For computation purposes the price per kilo of beef reported in the webpage of the Mercado de Hacienda de Liniers (Cattle Market) is considered. In addition, a productivity premium was agreed equal to 15% of the excess over 240,000 kilograms of cattle in the establishment; this will be a one-off payment to be effected in September 2016. The lease contract may be extended for up to two annual periods. Currently, the parties are negotiating the conditions for its extension.
F- 180
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
Consulting Agreement
In accordance with the terms of the Consulting Agreement, in force as from November 7, 1994, CAMSA provides us with advisory services on matters related to capital expenditure in all areas of the agricultural business. An 85% of the capital stock of CAMSA is held by one of our shareholders and President of our Board of Directors, while the remaining 15% of the capital stock is owned by our First Vice President.
Based on the terms and conditions of the Consulting Agreement, CAMSA provides us with the following services:
advise in relation to investing in all aspects of the agricultural business, including sales, marketing, distribution, financing, investment, technology and business proposals, among others;
acts on behalf of our company in such transactions, negotiating prices, terms and conditions and other terms of each transaction; and
provides advisory services on investments in securities related to such transactions.
The Consulting Agreement expressly provides that CAMSA cannot provide advice on transactions exclusively related to real property.
As regards the Consulting Agreement, in consideration for its services we pay CAMSA an annual fee equal to 10% of our annual net income after tax. During fiscal years ended June 30, 2016 and 2014, no expense was recorded in relation to this item, while in fiscal year 2015 we paid Ps. 11,4.
The Consulting Agreement can be revoked by any of the parties upon prior written notice that should not exceed 60 days. If we revoke the Consulting Agreement without cause, we will be liable to pay CAMSA twice the average fee amounts paid for management services during the two fiscal years preceding such revocation.
Sale of advertising space in media
The Group frequently enter into agreements with third parties whereby we sell/acquire rights of use to advertise in media (TV, radio stations, newspapers, etc.) that will later be used in advertising campaigns. Normally, these spaces are sold and/or recovered to/from other companies or other related parties, based on their actual use.
F- 181
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
The following is a summary of the balances with related parties as of June 30, 2016:
Related party Description of transaction 
Investment in financial assets
 Non-current
 
Investment in financial assets
 Current
 Trade and other receivables Non-current Trade and other receivables Current Trade and other payables Current Borrowings Non-current Borrowings Current
Associates                
Tarshop Reimbursement of expenses - - - 1 - - -
  Leases and/or rights of use - - - - (1) - -
New Lipstick Reimbursement of expenses - - - 4 - - -
Lipstick Reimbursement of expenses - - - 1 - - -
Metropolitan Reimbursement of expenses - - - - - - -
Agro-Uranga S.A Dividends receivables - - - 1 - - -
 Brokerage - - - - (1) - -
Agrofy S.A. Other receivables - - - 17 - - -
BHSA Reimbursement of expenses - - - 1 (1) - -
 Borrowings - - - - - (2) (10)
BACS Reimbursement of expenses - - - 1 - - -
  Non-convertible notes 100 21 - - - - -
Total Associates   100 21 - 26 (3) (2) (10)
F- 182
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
Related party Description of transaction 
Investment in financial assets
Non-current
 
Investment in financial assets
Current
 Trade and other receivables Non-current Trade and other receivables Current Trade and other payables Current Borrowings Non-current Borrowings Current
Joint Ventures                
Cresca S.A. Loans granted - - 162 - - - -
Puerto Retiro Borrowings - - - 3 - - -
NPSF Reimbursement of expenses - - - 2 - - -
 Borrowings - - - - - - (6)
 Share-based payments - - - 1 - - -
 Management fees - - - 4 - - -
Quality Reimbursement of expenses - - - 1 - - -
Cyrsa Credit due to capital reduction - - - 3 - - -
Total Joint Ventures   - - 162 14 - - (6)
Other related parties                
CAMSA Reimbursement of expenses - - - 9 - - -
Estudio Zang, Bergel & Viñes Legal services - - - - (1) - -
IFISA Reimbursement of expenses - - - 1,074 - - -
  Financial operations - - - 12 - - -
Museo de los Niños Leases and/or rights of use - - - 2 - - -
Boulevard Norte S.A. Reimbursement of expenses - - - 1 - - -
Ogden Argentina S.A. Borrowings - - - 1 - - -
Consultores Venture Capital Uruguay Management fees - - - 2 - - -
Total Other related parties   - - - 1,101 (1) - -
Directors and Senior Management                
Directors and Senior Management Fees - - - - (29) - -
 Advances - - - 4 - - -
Total Directors and Senior Management   - - - 4 (29) - -
Total   100 21 162 1,145 (33) (2) (16)
F- 183
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
35. Related party transactions (Continued)
The following is a summary of the balances with related parties as of June 30, 2015:
 
Related partyDescription of transaction 
Investment in financial assets
Non-current
  
Investment in financial assets
Current
  Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Associates                            
Tarshop S.A.Reimbursement of expenses  -   -   -   1,792   -   -   -   -   - 
 Leases and/or rights of use  -   -   -   -   (25)  (722)  -   -   - 
New Lipstick LLCReimbursement of expenses  -   -   -   2,567   -   -   -   -   - 
CondorFinancial operations  -   -   -   29,492   -   -   -   -   - 
Lipstick Management LLCReimbursement of expenses              854                     
MetropolitanReimbursement of expenses  -   -   -   -   -   (10)  -   -   - 
Agro-Uranga S.AReceivables on futures and options  -   -   -   184   -   -   -   -   - 
 Purchase of goods and/or services  -   -   -   -   -   (807)  -   -   - 
 Commissions receivable  -   -   -   12   -   -   -   -   - 
 Brokerage  -   -   -   -   -   (40)  -   -   - 
 Sale of inputs  -   -   -   595   -   -   -   -   - 
Agro Managers S.A.Reimbursement of expenses  -   -   -   297   -   -   -   -   - 
Banco Hipotecario S.A.Reimbursement of expenses  -   -   -   -   -   (117)  -   -   - 
 Advances  -   -   -   -   -   (1,428)  -   -   - 
 Commissions per supermarket aisle  -   -   -   68   -   -   -   -   - 
 Borrowings  -   -   -   -   -   -   (7,674)  (22,155)  - 
 Leases and/or rights of use  -   -   -   762   -   -   -   -   - 
Banco de Crédito yReimbursement of expenses  -   -   -   1,766   -   -   -   -   - 
SecuritizaciónLeases and/or rights of use  -   -   -   42   -   -   -   -   - 
 Non-convertible notes  100   452   -   -   -   -   -   -   - 
Total Associates   100   452   -   38,431   (25)  (3,124)  (7,674)  (22,155)  - 

Related party Description of transaction 
Investment in financial assets
 Non-current
 Trade and other receivables Non-current Trade and other receivables Current Trade and other payables Current Borrowings Non-current Borrowings Current
Associates              
Tarshop Reimbursement of expenses - - 2 - - -
  Leases and/or rights of use - - - (1) - -
New Lipstick Reimbursement of expenses - - 3 - - -
Condor Financial operations - - 29 - - -
Lipstick Reimbursement of expenses     1      
Agro-Uranga S.A Purchase of goods and/or services - - - (1) - -
 Sale of inputs - - 1 - - -
BHSA Advances - - - (1) - -
 Borrowings - - - - (8) (22)
 Leases and/or rights of use - - 1 - - -
BACS Reimbursement of expenses - - 2 - - -
  Non-convertible notes 100 - - - - -
Total Associates   100 - 39 (3) (8) (22)


 
F-252

F- 184
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



35.
38.           Related party transactions(Continued)

 
Related party Description of transaction 
Investment in financial assets
Non-current
  Investment in financial
assets Current
  Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Joint Ventures                             
Cresca S.A. Management fees  -   -   -   29   -   -   -   -   - 
  Loans granted  -   -   114,446   -   -   -   -   -   - 
Puerto Retiro S.A. Borrowings  -   -   -   2,148   -   -   -   -   - 
  Reimbursement of expenses  -   -   -   257   -   -   -   -   - 
Nuevo Puerto Santa Fe S.A. Reimbursement of expenses  -   -   -   543   -   (5)  -   -   - 
  Borrowings  -   -   -   -   -   -   -   (7,826)  - 
  Share-based payments  -   -   -   467   -   -   -   -   - 
  Leases’ collections  -   -   -   -   -   (4)  -   -   - 
  Leases and/or rights of use  -   -   -   -   -   (594)  -   -   - 
  Management fees  -   -   -   2,644   -   -   -   -   - 
Quality Invest S.A. Management fee  -   -   -   22   -   -   -   -   - 
  Reimbursement of expenses  -   -   -   233   -   -   -   -   - 
Baicom Networks S.A. Management fee  -   -   -   16   -   -   -   -   - 
  Borrowings  -   -   1,275   222   -   -   -   -   - 
  Contributions to be paid in  -   -   -   10   -   -   -   -   - 
  Reimbursement of expenses  -   -   -   924   -   -   -   -   - 
Cyrsa S.A Credit due to capital reduction  -   -   -   8,847   -   -   -   -   - 
 . Borrowings  -   -   -   -   -   -   (14,438)  -   - 
   Reimbursement of expenses  -   -   -   11   -   (23)  -   -   - 
Entretenimiento Reimbursement of expenses  -   -   -   115   -   -   -   -   - 
Universal S.A. Borrowings  -   -   -   80   -   -   -   -   - 
Entertainment Holding S.A. Reimbursement of expenses  -   -   -   211   -   -   -   -   - 
   Borrowings  -   -   -   72   -   -   -   -   - 
Total Joint Ventures    -   -   115,721   16,851   -   (626)  (14,438)  (7,826)  - 
Related party Description of transaction 
Investment in financial assets
 Non-current
 Trade and other receivables Non-current Trade and other receivables Current Trade and other payables Current Borrowings Non-current Borrowings Current
Joint Ventures              
Cresca S.A. Loans granted - 114 - - - -
Puerto Retiro Borrowings - - 2 - - -
NPSA Reimbursement of expenses - - 1 - - -
 Borrowings - - - - - (8)
 Leases and/or rights of use - - - (1) - -
 Management fees - - 3 - - -
Baicom Borrowings - 1 - - - -
  Reimbursement of expenses - - 1 - - -
Cyrsa Credit due to capital reduction - - 9 - - -
  Borrowings - - - - (14) -
Total Joint Ventures   - 115 16 (1) (14) (8)
Other related parties              
CAMSA Management fees - - - (7) - -
  Reimbursement of expenses - - 7 - - -
Estudio Zang, Bergel & Viñes Legal services - - - (1) - -
IFISA Financial operations - - 323 - - -
Museo de los Niños Leases and/or rights of use - - 1 - - -
Boulevard Norte S.A. Reimbursement of expenses - - 1 - - -
Ogden Argentina S.A. Borrowings - - 1 - - -
Consultores Venture Capital Uruguay Management fees - - 2 - - -
Total Other related parties   - - 335 (8) - -
Directors and Senior Management              
Directors and Senior Management Fees       (42) - -
Total Directors and Senior Management   - - - (42) - -
Total   100 115 390 (54) (22) (30)


 

F- 185
F-253

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.35. Related party transactions(Continued)

Related partyDescription of transaction Investment in financial assets Non-current  Investment in financial assets Current  Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Other related parties                            
CAMSAManagement fees  -   -   -   -   -   (6,743)  -   -   - 
 Reimbursement of expenses  -   -   -   7,292   -   -   -   -   - 
Estudio Zang, Bergel & ViñesAdvances  -   -   -   33   -   -   -   -   - 
 Legal services  -   -   -   377   -   (1,185)  -   -   - 
Estudio Managing PartnersManagement fees  -   -   -   -   -   (34)  -   -   - 
Fundación IRSAReimbursement of expenses  -   -   -   102   -   -   -   -   - 
Inversiones Financieras del Sur S.A.Financial operations  -   -   -   323,018   -   -   -   -   - 
 Dividends receivable  -   -   -   359   -   -   -   -   - 
Museo de los NiñosReimbursement of expenses  -   -   -   94   -   -   -   -   - 
 Leases and/or rights of use  -   -   -   750   -   -   -   -   - 
Austral GoldReimbursement of expenses  -   -   -   331   -   (1)  -   -   - 
 Borrowings  -   -   -   5   -   -   -   -   - 
Boulevard Norte S.A.Reimbursement of expenses  -   -   -   881   -   -   -   -   - 
Ogden Argentina S.A.Reimbursement of expenses  -   -   -   250   -   -   -   -   - 
 Borrowings  -   -   -   724   -   -   -   -   - 
La Rural S.A.Reimbursement of expenses  -   -   -   -   -   (39)  -   -   - 
Consultores Venture Capital UruguayManagement fees  -   -   -   1,125   -   -   -   -   - 
Total Other related parties   -   -   -   335,341   -   (8,002)  -   -   - 
Directors and Senior Management                                     
Directors and Senior ManagementFees                  -   (41,634)  -   -   - 
 Advances  -   -   -   317   -   -   -   -   - 
 Guarantee deposits                  (21)  -   -   -   - 
 Reimbursement of expenses  -   -   -   40   -   (15)  -   -   - 
Total Directors and Senior Management   -   -   -   357   (21)  (41,649)  -   -   - 
Total   100   452   115,721   390,980   (46)  (53,401)  (22,112)  (29,981)  - 


 

The following is a summary of the transactions with related parties for the year ended as of June 30, 2016:
Related party Leases and/or rights to use Administration and management fees Sale of goods and/or services Compensation of Directors and senior management Legal services Financial operations Commissions Donations
Associates                
Agro-Uranga S.A. - - 3 - - - - -
Tarshop 12 - - - - - - -
BACS 6 - - - - 21 - -
BHSA 3 - - - - (5) - -
Total Associates 21 - 3 - - 16 - -
Joint Ventures                
Cyrsa - - - - - (3) - -
NPSA - 3 - - - (2) - -
Puerto Retiro - - - - - 1 - -
Adama - - 16          
ISPRO - - 9          
Mehadrin - - 48          
Total Joint Ventures - 3 73 - - (4) - -
Other related parties                
San Bernardo de Córdoba S.A. (1) - - - - - - -
Fundación IRSA - - - - - - - (8)
Hamonet S.A. (1) - - - - - - -
Estudio Zang, Bergel & Viñes - - - - (6) - - -
Isaac Elsztain e Hijos S.C.A. (1) - - - - - - -
Condor - - - - - 122 - -
IFISA - - - - - 39 - -
Total Other related parties (3) - - - (6) 161 - (8)
Directors and Senior Management                
Directors - - - (156) - - - -
Senior Management - - - (16) - - - -
Total Directors and Senior Management - - - (172) - - - -
Total 18 3 76 (172) (6) 173 - (8)
 
F-254

F- 186
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.35. Related party transactions(Continued)

The following is a summary of the balances with related parties as of June 30, 2014:
 
Related partyDescription of transaction Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Associates                      
Tarshop S.A.Reimbursement of expenses  -   689   -   -   -   -   - 
 Commissions per supermarket aisle  -   19   -   -   -   -   - 
 Leases and/or rights of use  -   -   (175)  (677)  -   -   - 
New Lipstick LLCReimbursement of expenses  -   2,297   -   -   -   -   - 
Lipstick Management LLCReimbursement of expenses  -   765   -   -   -   -   - 
Agro-Uranga S.ADividends receivable  -   39   -   -   -   -   - 
 Purchase of goods and/or services  -   -   -   (112)  -   -   - 
 Brokerage  -   29   -   (70)  -   -   - 
 Sale of inputs  -   425   -   -   -   -   - 
Agro Managers S.A.Reimbursement of expenses  -   303   -   -   -   -   - 
Banco Hipotecario S.A.Reimbursement of expenses  -   12   -   (1,547)  -   -   - 
 Commissions per supermarket aisle  -   59   -   -   -   -   - 
 Borrowings  -   -   -   -   (18,376)  (23,530)  - 
 Derivatives  -   -   -   -   -   -   (5,225)
 Leases and/or rights of use  -   200   -   -   -   -   - 
Banco de Crédito y SecuritizaciónLeases and/or rights of use  -   19   -   (80)  -   -   - 
Total Associates   -   4,856   (175)  (2,486)  (18,376)  (23,530)  (5,225)




F-255

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)
Related partyDescription of transaction Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Joint Ventures                      
Cresca S.A.Management fees  -   38   -   -   -   -   - 
 Loans granted  96,269   -   -   -   -   -   - 
Puerto Retiro S.A.Contributions to be paid in  -   160   -   -   -   -   - 
 Reimbursement of expenses  -   213   -   -   -   -   - 
 Financial operations  -   3,23   -   -   -   -   - 
Nuevo Puerto Santa Fe S.A.Reimbursement of expenses  -   223   -   (72)  -   -   - 
 Borrowings  -   -   -   -   -   (71)  - 
 Share-based payments  -   304   -   -   -   -   - 
 Leases’ collections  -   -   -   (18)  -   -   - 
 Leases and/or rights of use  -   -   -   (630)  -   -   - 
 Management fees  -   1,338   -   -   -   -   - 
Quality Invest S.A.Management fees  -   22   -   (45)  -   -   - 
 Reimbursement of expenses  -   64   -   -   -   -   - 
Baicom Networks S.A.Management fees  -   2   -   -   -   -   - 
 Borrowings  1,143   -   -   -   -   -   - 
 Contributions to be paid in  -   10   -   -   -   -   - 
 Reimbursement of expenses  -   193   -   -   -   -   - 
Cyrsa S.A.Borrowings  -   -   -   -   (133,314)  -   - 
 Reimbursement of expenses  -   140   -   (9)  -   -   - 
Boulevard Norte S.A.Reimbursement of expenses  -   864   -   -   -   -   - 
 Borrowings  -   4   -   -   -   -   - 
Entertainment Holding S.A.Reimbursement of expenses  -   165   -   -   -   -   - 
 Borrowings  -   20   -   -   -   -   - 
Total Joint Ventures   97,412   6,990   -   (774)  (133,314  (71)  - 



F-256

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)
Related partyDescription of transaction Trade and other receivables Non-current  Trade and other receivables Current  Trade and other payables Non-current  Trade and other payables Current  Borrowings Non-current  Borrowings Current  Derivative financial instruments 
Other related parties                      
CAMSAAdvances to be recovered  -   1,468   -   -   -   -   - 
 Management fees  -   11,595   -   (11,098)  -   -   - 
 Reimbursement of expenses  -   4,713   -   (1)  -   -   - 
Estudio Zang, Bergel & ViñesAdvances  -   4   -   -   -   -   - 
 Legal services  -   -   -   (739)  -   -   - 
Fundación IRSAReimbursement of expenses  -   75   -   -   -   -   - 
Inversiones Financieras del Sur S.A.Financial operations  -   54,724       (5)            
Museo de los NiñosReimbursement of expenses  -   767       (9)            
Austral GoldReimbursement of expenses  -   8   -   (1)  -   -   - 
Entretenimiento Universal S.A.Reimbursement of expenses  -   103   -   -   -   -   - 
 Borrowings  -   68   -   -   -   -   - 
Ogden Argentina S.A.Reimbursement of expenses  -   228   -   -   -   -   - 
 Borrowings  -   4   -   -   -   -   - 
IRSA Real Estate Strategies LPCapital contribution  -   -   -   (8)  -   -   - 
IRSA Developments LPCapital contribution  -   -   -   (13)  -   -   - 
EMPManagement fees  -   -   -   (31)  -   -   - 
Total Other related parties   -   73,757   -   (11,905)  -   -   - 
Directors and Senior Management                             
Directors and Senior ManagementFees  -   301   -   (23,830)  -   -   - 
 Guarantee deposits  -   -   (20)  -   -   -   - 
 Reimbursement of expenses  -   96   -   (10)  -   -   - 
Total Directors and Senior Management   -   397   (20)  (23,84)  -   -   - 
Total   97,412   86,000   (195)  (39,005)  (151,690)  (23,601)  (5,225)



F-257

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

The following is a summary of the transactions with related parties for the year ended as of June 30, 2015:

Related party Leases and/or rights to use  Administration and management fees  Sale of goods and/or services  Compensation of Directors and senior management  Legal services  Financial operations  Commissions  Donations 
Associates                        
Agro-Uranga S.A.  -   -   7,950   -   -   -   -   - 
Tarshop S.A.  9,120   -   -   -   -   -   72   - 
Banco Crédito y Securitización S.A.  4,459   -   -   -   -   -   -   - 
Banco Hipotecario S.A.  2,105   -   (2)  -   -   (15,212)  5   - 
Total Associates  15,684   -   7,948   -   -   (15,212)  77   - 
Joint Ventures                                
Cyrsa S.A.  -   -   -   -   -   (9,176)  -   - 
Cresca S.A.  -   -   20   -   -       -   - 
Baicom Networks S.A.  -   12   -   -   -   150   -   - 
Nuevo Puerto Santa Fe S.A.  (712)  2,164   -   -   -   (1,400)  -   - 
Puerto Retiro S.A.  -   -   -   -   -   563   -   - 
Quality Invest S.A.  -   216   -   -   -   -   -   - 
Entretenimiento Universal S.A.  -   -   -   -   -   13   -   - 
Entertainment Holding S.A.  -   -   -   -   -   12   -   - 
Total Joint Ventures  (712)  2,392   20   -   -   (9,838)  -   - 
Other related parties                                
CAMSA  342   (11,401)  -   -   -   -   -     
Fundación IRSA  -   -   -   -   -   -   -   (4,731)
Estudio Zang, Bergel & Viñes  -   -   -   -   (4,663)  -   -   - 
Hamonet S.A.  (425)  -   -   -   -   -   -   - 
Austral Gold Argentina S.A.  -   418   -   -   -   -   -   - 
Fibesa S.A.  -   -   -   -   -   -   -   - 
Isaac Elsztain e Hijos S.C.A.  (813)  -   -   -   -   -   -   - 
Boulevard Norte S.A.  -   -   -   -   -   1   -   - 
Ogden Argentina S.A.  -   -   -   -   -   20   -   - 
Condor Hospitality Trust Inc. (formerly Supertel Hospitality Inc. due to change of corporate name)  -   -   -   -   -   161,002   -   - 
Inversiones Financieras del Sur S.A.  -   -   -   -   -   227,467   -   - 
Total Other related parties  (896)  (10,983)  -   -   (4,663)  388,490   -   (4,731)
Directors and Senior Management                                
Directors  -   -   -   (133,967)  -   -   -   - 
Senior Management  -   -   -   (11,389)  -   -   -   - 
Total Directors and Senior Management  -   -   -   (145,356)  -   -   -   - 
Total  14,076   (8,591)  7,968   (145,356)  (4,663)  363,440   77   (4,731)
Related party Leases and/or rights to use Administration and management fees Sale of goods and/or services Compensation of Directors and senior management Legal services Financial operations Commissions Donations
Associates                
Agro-Uranga S.A. - - 8 - - - - -
Tarshop 9 - - - - - - -
BACS 4 - - - - - - -
BHSA 2 - - - - (15) - -
Total Associates 15 - 8 - - (15) - -
Joint Ventures                
Cyrsa - - - - - (9) - -
NPSF (1) 2 - - - (1) - -
Puerto Retiro - - - - - 1 - -
Total Joint Ventures (1) 2 - - - (9) - -
Other related parties                
CAMSA - (11) - - - - -  
Fundación IRSA - - - - - - - (5)
Estudio Zang, Bergel & Viñes - - - - (5) - - -
Isaac Elsztain e Hijos S.C.A. (1) - - - - - - -
Condor - - - - - 161 - -
IFISA - - - - - 227 - -
Total Other related parties (1) (11) - - (5) 388 - (5)
Directors and Senior Management                
Directors - - - (134) - - - -
Senior Management - - - (11) - - - -
Total Directors and Senior Management - - - (145) - - - -
Total 13 (9) 8 (145) (5) 364 - (5)

 

F- 187
F-258

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.35. Related party transactions(Continued)

The following is a summary of the transactions with related parties for the year ended as of June 30, 2014:

Related party Leases and/or rights to use  Administration and management fees  Sale of goods and/or services  Compensation of Directors and senior management  Legal services  Financial operations  Donations  Leases and/or rights to use Administration and management fees Sale of goods and/or services Compensation of Directors and senior management Legal services Financial operations Donations
Associates                                   
Agro-Uranga S.A.  -   -   8,365   -   -   -   -  - - 8 - - - -
Tarshop S.A.  8,172   (239)  -   -   -   -   - 
Banco Crédito y Securitización S.A.  1,544   -   -   -   -   -   - 
Banco Hipotecario S.A.  560   -   -   -   -   25,966   - 
Tarshop 8 - - - - - -
BACS 2 - - - - - -
BHSA 1 - - - - 26 -
Total Associates  10,276   (239)  8,365   -   -   25,966   -  11 - 8 - - 26 -
Joint Ventures                                          
Cyrsa S.A.  -   -   -   -   -   (20,897)  - 
Cyrsa - - - - - (21) -
Cresca S.A.  -   46   77   -   -   2,216   -  - - - - - 2 -
Baicom Networks S.A.  -   12   -   -   -   136   - 
Nuevo Puerto Santa Fe S.A.  (632)  1,124   -   -   -   -   - 
Puerto Retiro S.A.  -   -   -   -   -   917   - 
Quality Invest S.A.  -   216   -   -   -   -   - 
Canteras Natal Crespo S.A.  -   -   -   -   -   -   - 
NPSF (1) 1 - - - - -
Puerto Retiro - - - - - 1 -
Total Joint Ventures  (632)  1,398   77   -   -   (17,628)  -  (1) 1 - - - (18) -
Other related parties                                          
CAMSA  -   230   2   -   -   -   - 
Fundación IRSA  -   -   1   -   -   -   (3,325) - - - - - - (3)
Estudio Zang, Bergel & Viñes  -   -   -   -   (4,193)  -   -  - - - - (4) - -
Hamonet S.A.  (400)  -   -   -   -   -   - 
Austral Gold Argentina S.A.  -   -   1   -   -   -   - 
Fibesa S.A.  -   -   2   -   -   -   - 
Isaac Elsztain e Hijos S.C.A.  (769)  -   -   -   -   -   -  (1) - - - - - -
Consorcio de Propietarios Edificios Avda.. del Libertador 498  -   -   1   -   -   -   - 
Inversiones Financieras del Sur S.A.  -   -   -   -   -   21,911   - 
IFISA - - - - - 22 -
Total Other related parties  (1,169)  230   7   -   (4,193)  21,911   (3,325) (1) - - - (4) 22 (3)
Directors and Senior Management                                          
Directors  -   -   -   (124,207)  -   -   -  - - - (124) - - -
Senior Management  -   -   -   (30,143)  -   -   -  - - - (30) - - -
Total Directors and Senior Management  -   -   -   (154,350)  -   -   -  - - - (154) - - -
Total  8,475   1,389   8,449   (154,350)  (4,193)  30,249   (3,325) 9 1 8 (154) (4) 30 (3)

 

F- 188
F-259

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



38.           Related party transactions (Continued)

The following is a summary of the transactions with related parties for the year ended as of June 30, 2013:

Related party Leases and/or rights to use  Administration and management fees  Sale of goods and/or services  Corporate services  Compensation of Directors and senior management  Legal services  Financial operations  Donations 
Associates                        
Agro-Uranga S.A.  -   -   6,154   -   -   -   -   - 
Tarshop S.A.  5,991   -   -   301   -   -   -   - 
Banco Hipotecario S.A.  453   -   -   -   -   -   (1,378)  - 
Total Associates  6,444   -   6,154   301   -   -   (1,378)  - 
Joint Ventures                                
Cyrsa S.A.  -   4,681   -   -   -   -   (8,724)  - 
Cresca S.A.  -   1,108   -   -   -   -   510   - 
Baicom Networks S.A.  -   -   -   -   -   -   96   - 
Nuevo Puerto Santa Fe S.A.  (111)  888   -   -   -   -   -   - 
Puerto Retiro S.A.  -   -   -   -   -   -   481   - 
Quality Invest S.A.  -   216   -   -   -   -   28   - 
Canteras Natal Crespo S.A.  -   96   -   -   -   -   11   - 
Total Joint Ventures  (111)  6,989   -   -   -   -   (7,598)  - 
Other related parties                                
Inversiones Financieras del Sur S.A.  -   -   -   -   -   -   8,758   - 
Fundación IRSA  -   -   -   -   -   -   -   (1,420)
Estudio Zang, Bergel & Viñes  -   -   -   -   -   (3,285)  -   - 
CAMSA  -   (5,736)  -   -   -   -   -   - 
Dolphin Fund PLC (i)  -   -   -   -   -   -   (117,576)  - 
Hamonet S.A.  (365)  -   -   -   -   -   -   - 
Isaac Elsztain e Hijos S.C.A.  (468)  -   -   -   -   -   -   - 
Total Other related parties  (833)  (5,736)  -   -   -   (3,285)  (108,818)  (1,420)
Directors and Senior Management                                
Directors  -   -   -   -   (82,060)  -   -   - 
Senior Management  -   -   -   -   (12,288)  -   -   - 
Total Directors and Senior Management  -   -   -   -   (94,348)  -   -   - 
Total  5,500   1,253   6,154   301   (94,348)  (3,285)  (117,794)  (1,420)

 

36.
Cost of sales and services provided
 
F-260

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)



39.           CNV General Resolution N° 622

As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622, below there is a detail of the notes to the Separate Financial Statements that disclosure the information required by the Resolution in Exhibits.
DescriptionBiological assetsInventoriesAgricultural servicesServices and other operating costsTrading propertiesHotelsMobile phonesSupermarketsPropertiesOthersTotal as of 06.30.16Total as of 06.30.15Total as of 06.30.14
Inventories as of 06.30.15407485--1337----1,032(i) 909(ii) 583
              
Acquisition for business combination------2201,6752,680-4,575--
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest267(95)--------172182140
              
Changes in the net realizable value of agricultural produce after harvest-208--------208(34)(17)
              
Decrease due to harvest-1,247--------1,2471,2281,029
Acquisitions and classifications321,501----1,23313,304191-16,2611,2551,144
Consume(1)(617)--------(618)(605)(517)
Additions----71---354-425113
Impairments--------(158)-(158)--
Disposals----(2)1----(1)(1)(12)
Transfers           3-
Expenses incurred-118811,645153613,2926216441,2248,0011,6661,495
Exchange difference-(68)--49-1071,2141,58042,886(46)(11)
Inventories as of 06.30.16(567)(650)--(251)(8)(327)(2,888)(4,462)(27)(9,180)(iv) (1,030) (907)
Costs as of 06.30.161382,129811,645153614,52513,9268291,20124,850--
Costs as of 06.30.151281,825591,22414278   --3,528-
Costs as of 06.30.14761,444541,13019216   1- 2,940
 
Exhibit A - Property, plant and equipmentNote 10 - Investment properties
Note 11 - Property, plant and equipment
Exhibit B - Intangible assetsNote 13 - Intangible assets
Exhibit C - Equity investmentsNote 8 and 9 - Investments in associates and joint ventures
Exhibit D - Other investmentsNote 16 - Financial instruments by category
Note 17 - Restricted assets
Exhibit E - ProvisionsNote 18 - Trade and other receivables
Note 24 – Provisions
Exhibit F - Cost of sale and servicesNote 40 - Cost of sales and services provided
Exhibit G - Foreign currency assets and liabilitiesNote 41 - Foreign currency assets and liabilities


F-261

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to Consolidated Financial Statements (Continued)
(All amounts in thousands of Argentine Pesos, except shares and per share data and as otherwise indicated)


40.  Cost of sales and services provided

  Agricultural business  Urban properties and investments business          
Description Biological assets  Inventories  Agricultural services  Subtotal Agricultural business  Services and other operating costs  Trading properties  Hotels  Others  Subtotal Urban properties and investments business  Total as of 06.30.15  Total as of 06.30.14  Total as of 06.30.13 
Inventories as of 06.30.14  345,771   420,387   -   766,158   -   137,151   6,011   -   143,162  
(i) 909,320
  
(ii) 582,555
  
(iii) 555,022
 
                                              
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest  174,787   7,388   -   182,175   -   -   -   -   -   182,175   140,014   62,992 
                                                 
Changes in the net realizable value of agricultural produce after harvest  -   (34,471)  -   (34,471)  -   -   -   -   -   (34,471)  (17,447)  11,756 
                                                 
Decrease due to harvest  -   1,227,881   -   1,227,881   -   -   -   -   -   1,227,881   1,028,868   752,820 
Acquisitions and classifications  14,203   1,240,496   -   1,254,699   -   -   -   -   -   1,254,699   1,144,268   658,392 
Consume  (753)  (604,107)  -   (604,860)  -   -   -   -   -   (604,860)  (517,144)  (387,332)
Additions  -   -   -   -   -   1,067   -   -   1,067   1,067   13,252   3,091 
Disposals  -   -   -   -   -   (1,898)  1,328   -   (570)  (570)  (12,146)  (5,948)
Transfers  -   -   -   -   -   3,107   -   -   3,107   3,107   -   - 
Expenses incurred  -   91,208   59,235   150,443   1,224,264   13,587   277,471   56   1,515,378   1,665,821   1,494,730   1,166,340 
Exchange difference  -   (39,698)  -   (39,698)  -   (6,126)  -   -   (6,126)  (45,824)  (11,245)  33,704 
Inventories as of 06.30.15  (405,842)  (483,922)  -   (889,764)  -   (132,954)  (6,926)  -   (139,880) (iv) (1,029,644)   (906,962)  (582,555)
Costs as of 06.30.15  128,166   1,825,162   59,235   2,012,563   1,224,264   13,934   277,884   56   1,516,138   3,528,701   -   - 
Costs as of 06.30.14  75,900   1,444,441   54,284   1,574,625   1,128,794   18,971   215,980   373   1,364,118   -   2,938,743   - 
Costs as of 06.30.13  73,387   1,062,644   35,014   1,171,045   915,701   12,347   168,282   907   1,097,237   -       2,268,282 

(i) Includes Ps. (13,373)(13) corresponding to materials of IRSA and FYO and Ps. (2,358)(2) of meet due for slaughtering of Cactus as of June 30, 2014.
(ii) Includes Ps. (10,358)(10) corresponding to materials and inputs of IRSA as of June 30, 2013.
(iii) Includes Ps. (10,867)(11) corresponding to materials and inputs of IRSA as of June 30, 2012.
(iv) Includes Ps. (18,056)(18) corresponding to materials and inputs of IRSA and FYO and Ps. (2,446)(2) of meet due for slaughtering of SACPSA as of June 30, 2015. Does not include Ps. 6900.7 corresponding to fattening.


 

F- 189
F-262

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



41.  Foreign currency assets and liabilities
37.

Foreign currency assets and liabilities
Book amounts of foreign currency assets and liabilities are as follows:

Items (3) Amount of foreign currency (2)  Prevailing exchange rate (1)  Total as of 06.30.15  Amount of foreign currency (2)  Prevailing exchange rate (1)  Total as of 06.30.14  Amount of foreign currency (2) Prevailing exchange rate (1) Total as of 06.30.16 Amount of foreign currency (2) Prevailing exchange rate (1) Total as of 06.30.15
Assets                              
Restricted assets                  
US Dollar  -   -   -   6,372   8.033   51,189 
Total restricted assets          -           51,189 
Trade and other receivables                                    
Uruguayan Peso  1,193   0.335   400   1,162   0.356   414  3 0.334 1 - 0.335 -
US Dollar  29,288   8.988   263,241   29,646   8.033   238,144  43 14.940 637 29 8.988 263
Euros  0.2998   10.005   3   2   10.991   26  12 16.492 195 - 10.005 -
Swiss francs  -   -   -   27   9.051   242 
Trade and other receivables related parties                                    
US Dollar  10,284   9.088   93,463   -   -   -  42 15.040 635 10 9.088 93
Total trade and other receivables          357,107           238,826      1,468     356
Investment in financial assets                                    
US Dollar  26,618   8.988   239,246   67,062   8.033   538,710  166 14.940 2,477 27 8.988 240
New Israel Shekel  2,642   2.407   6,361   5   2.377   13  - - - 3 2.407 6
Uruguayan Peso  721   14.134   10,196   39,905   0.356   14,206 
Pounds 1 19.763 19 1 14.134 10
Investment in financial assets            
US Dollar 33 14.940 499     -
Total Investment in financial assets          255,803           552,929      2,995     256
Derivative financial instruments                                    
US Dollar  1,145   8.988   10,294   3,839   8.033   30,841  1 14.940 15 1 8.988 10
New Israel Shekel  94,880   2.407   228,415              - - - 95 2.407 228
Financial instruments related parties                                    
US Dollar  3,169   9.088   28,798              - - - 3 9.088 29
Total Derivative financial instruments          267,507           30,841 
Total derivative financial instruments     15     267
Cash and cash equivalents                                    
Uruguayan Peso  54   0.335   18   101   0.356   36  - - - - 0.335 -
US Dollar  38,775   8.988   348,509   19,605   8.033   157,484  84 14.940 1,260 39 8.988 349
Euros  114   10.005   1,140   121   10.991   1,329  4 16.492 60 - 10.005 1
Swiss francs  -   9.728   1   1   9.051   1 
New Israel Shekel  957   2.407   2,304   116,210   2.377   276,235  - - - 1 2.407 2
Pounds  2   14.134   32   2   13.913   32 
Yenes  41   -   3   2   2.377   4 
Brazilian Reais  12   3.000   35   3   3.550   9 
Total Cash and cash equivalents          352,042           435,130      1,320     352


 

F- 190
F-263

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



41.  
Foreign currency assets and liabilities 37. Foreign currency assets and liabilities (Continued)(Continued)

Items (3) Amount of foreign currency (2)  Prevailing exchange rate (1)  Total as of 06.30.15  Amount of foreign currency (2)  Prevailing exchange rate (1)  Total as of 06.30.14  Amount of foreign currency (2) Prevailing exchange rate (1) Total as of 06.30.16 Total as of 06.30.15 Prevailing exchange rate (1) Amount of foreign currency (2)
Liabilities                              
Trade and other payables                              
Uruguayan Peso  99   0.334   33   1,520   0.382   580 
New Israel Shekel 2 3.892 7 - - -
US Dollar  13,007   9.088   118,212   18,030   8.133   146,635  100 15.040 1,502 13 9.088 118
Euros  0.39   10.140   4   1   11.148   3  3 16.640 54 - - -
Trade and other payables related parties                                    
US Dollar  4   9.088   34              2 15.040 31 - - -
Total trade and other payables          118,283           147,218      1,594     118
Borrowings                                    
US Dollar  616,036   9.088   5,598,537   712,773   8.133   5,796,986  1,945 15.040 29,246 616 9.088 5,598
Total borrowings          5,598,537           5,796,986      29,246     5,598
Derivative financial instruments                                    
US Dollar  944   9.088   8,580   -   -   -  1 15.040 19 1 9.088 9
Brazilian Reais  -   -   -   204   3.69   753 
New Israel Shekel  208,825   2.407   502,641   134,984   2.377   320,847  - - - 210 2.3809 500
Total Derivative financial instruments          511,221           321,600 
Provisions                        
US Dollar  10   9.088   91   200   8.133   1,627 
Total provisions          91           1,627 
Total derivative financial instruments     19     509

(1)
Exchange rate as of June 30, 2015 and 2014 according to Banco Nación Argentina records.
(2)  Considering foreign currencies those that differ from each Company’s functional currency at each year-end.
Exchange rate as of June 30, 2016 and 2015 according to Banco Nación Argentina records.
(3)  The Company uses derivative instruments as complement in order to reduce its exposure to exchange rate movements. See Note 20.
(2)

Considering foreign currencies those that differ from each Group’s functional currency at each year-end.

(3)
The Group uses derivative instruments as complement in order to reduce its exposure to exchange rate movements. See Note 19.
38.
Negative working capital
At the end of the year, the Group carried a working capital deficit of Ps. 478 whose treatment is being considered by the Board of Directors and the respective Management.
39.
Subsequent events
Sale of farmlands
On July 5, 2016, Cresud has sold the field “El Invierno” and “La Esperanza” of 2,615 hectares of agricultural activity located in “Rancul”, province of La Pampa. The total amount of the transaction was fixed at US$ 6 million (equivalents to Ps. 90.1), US$ 5 million (equivalents to Ps. 75.1) of which have been paid while the remaining balance of US$ 1 million (equivalents to Ps. 15) – secured by a mortgage on the property – will be paid in five equal, consecutive, annual installments, with the last being due in August 2021. The estimated gain is Ps. 78.5 and has been recorded in the first quarter of the fiscal year 2017.
 

F- 191
F-264

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



42.Barter transactions
39.

Subsequent events (Continued)
Acquisition of equity interest in EHSA
On July 6, 2016, the Group through IRSA CP acquired from FEG Entretenimientos S.A. a 25% shareholding in EHSA. The transaction amount for the acquisition was set at Ps. 66.5, 50% of the amount has already been paid while the remaining balance will be paid down in two equal installments payable within 60 and 90 days. Later, the Group generally enters into barter transactions with third party developerssold a 5% of the shares in the ordinary coursesum of business. By virtuePs. 13.45. A 50% of these transactions, the Group generally exchanges undeveloped plots of land for properties tothat amount has already been received. The remaining balance will be developed and received in two equal installments within 60 and 90 days. As a result, IRSA CP holds 70% of the future. Following is a descriptionvoting stock of pending transactions that have not yet been perfected by the third parties asEHSA, company whose main asset consists of June 30, 2015:an indirect interest of 25% in LRSA.

Caballito plotSale of landunits in Intercontinental Building

On JuneJuly 29, 2011, the Group2016, IRSA Propiedades Comerciales executed a bill of sale for 1,702 square meters corresponding to two office floors and TGLT, entered into an agreement to barter a plot of land located in Méndez de Andes street16 parking units in the neighborhood of Caballito in the city of Buenos Aires for cash and future residential apartmentsIntercontinental Plaza building to be constructed by TGLT on the mentioned land.an unrelated party. The transaction amount was agreed upon at US$ 12.86.01 million: the sum of US$ 1.60 million has already been paid, while the remaining balance will be paid upon execution of the deed of conveyance and delivery of possession.
IRSA Non-convertible notes Classes VII and VIII
On September 1, 2016, Non-Convertible Notes Class VII and VIII were tendered under the Program approved by the Shareholders’ Meeting for up to US$ 300 million. TGLT plans to constructThe settlement took place on September 8, 2016. The results of the offer are shown below:
Non-convertible notes Class VII for an apartment building with residential offices and parking space. In consideration, TGLT paid US$ 0.2 million in cash and will transfer to IRSA: (i) a numberamount of apartmentsPs. 384.2 to be determined representing 23.10%matured 36 months after the issuing date, which accrue interest at an annual floating interest rate, Badlar plus 299 basis points, interest payable on a quarterly basis. Principal will be amortized in only one installment due on September 9, 2019.
Non-convertible notes Class VIII for a nominal value of total square meters of residential space; (ii) a numberUS$ 184.5 million to be determinedmatured 36 months after the issuing date, paid in and payable in US Dollars, which will accrue interest at an annual fixed interest rate of parking space representing 21.10%7.0%, interest payable on a quarterly basis. Principal will be amortized in only one installment due on September 9, 2019.
Non-convertible notes in IDBD and subsidiaries
In July 2016, Shufersal acquired Non-Convertible Notes Series B for a nominal value of total square meters of parking space; and (iii) in case TGLT builds complementary storage rooms, a number to be determined, representing 21.10% of square meters of storage space. TGLT is committed to build, finish and obtain authorization for the three buildings making up the project within 36 to 48 months from that date and TGLT mortgaged the land in favor of IRSA as guarantee. A neighborhood association named Asociación Civil y Vecinal SOS Caballito Por Una Mejor Calidad de Vida secured a preliminary injunction which suspended the works to be carried out by TGLT in the abovementioned property. Once said preliminary injunction was deemed final, the GovernmentNIS 511 million with an increase of the Cityissue of Buenos Aires and TGLT were served noticeNon-Convertible Notes Series F by a ratio of 1.175 for each NIS 1 of the complaint. IRSA is not involved in these proceedingsSeries B. The Non-Convertible Notes Series B acquired by Shufersal were cancelled and has not been sued or summoned as a third party by any of the parties involved in the legal action.delisted.

Beruti plot of land

On October 13, 2010, the Group and TGLT entered into an agreement to barter a plot of land located at Beruti Street 3351/59 in the Autonomous City of Buenos Aires for cash and future residential apartments to be constructed by TGLT on the mentioned land. The transaction, which was subject to certain precedent conditions including the completion by TGLT of its initial public offering, was agreed at US$ 18.8 million. TGLT plans to construct an apartment building with residential and commercial parking space. In consideration, TLGT will transfer IRSA CP (i) a number of apartments to be determined representing 17.33% of total square meters of residential space; (ii) a number of parking spaces to be determined representing 15.82% of total square meters of parking space; (iii) all spaces reserved for commercial parking in the future building and (iv) the amount of US$ 10.7 million payable upon delivering the deeds of title on the land. TGLT perfected its initial public offering on the Stock Exchange of Buenos Aires on October 29, 2010 and therefore, the precedent condition to the transaction was completed on that date. TGLT paid US$ 10.7 million on November 5, 2010. On December 16, 2010, the title deed to the Beruti plot of land was executed.

 

F- 192
F-265

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



42.
Barter transactions (Continued)
40.

Subsequent events (Continued)
To secure performance
Increase stake in Shufersal
DIC acquired, on September 12, 2016, 9,097,127 shares of obligations assumed by TGLT under the deed of sale, a mortgage was granted in favor of IRSA CP.

An association named Asociación Amigos Alto Palermo presented an injunction requestingShufersal, such that the construction is prohibited and obtained a suspension interim measure for this purpose. Later, the Court of Appeals from the Autonomous City of Buenos Aires ordered the lifting of such interim measure. Currently, the “amparo” (judicial action for the protection of constitutional rights) is going through the trial stage, and no decision has been made on the meritsamount of the case.

Rosario plot of land

The Group, through IRSA CP, subscribed with Condominios del Alto S.A. a barter contract in connection with an own plot of land (plot 2 H), locatedcompany’s holdings in the Cityissued capital of Rosario, Province of Santa FeShufersal rose from approximately 53.89% to approximately 58.17% (and approximately 56.61% in full dilution), for a total amountconsideration of US$ 2.3 million. On November 27, 2008,NIS 133 million from the title deed was recorded.

As partial considerationBronfman-Fisher Group. It also received an option (‘the option’) for the above mentioned  barter, Condominios del Alto S.A. agreedacquisition of up to transfer9,097,127 additional shares of Shufersal that the full property, possession and ownershipBronfman-Fisher Group owns, at a strike price of NIS 14.62 for each share of Shufersal (subject to accepted adjustments). The option will be valid until December 12, 2016. In addition, when the parties signed the agreement, it was determined that the directors of Shufersal that were appointed by the Bronfman-Fisher Group would give it notices of resignation from Shufersal’s Board of Directors, with immediate effect.
Open Sky Ltd. (IDB Tourism)
IDB Tourism is involved in favor of IRSA CP of the following future real estate: (i) 42 functional housing units (apartments), which represent and will further represent jointly 22% of the own covered square meters of housing (apartments) of the building that Condominios del Alto S.A. will construct in the plot; and (ii) 47 parking spaces, which represent and will further represent jointly 22% of the own covered square meters of parking space units in the same building.

On April 14, 2011 IRSA CP and Condominios del Alto S.A. subscribed a supplementary deed which specifies the Functional Housing Units (apartments) in the barter transaction agreement that should be transferred to the Company and the ownership title of the 45 parking spaces and 5 storage rooms.

As a consequence of the co-bartering parties having fulfilled with obligations assumed with ADIF, the Argentine National State has determined, through Resolution No, 31-ADIF-P-2013, the compliance with the charge regarding the lot 2 H, has been verified upon reaching the minimum investment fixednegotiations for the cited lot,sale of its holdings in conformity with ONABE Provision No, 07/2009 and Resolution N° 65-ADIF-P-2010, and has proceeded to release IRSA Propiedades Comerciales S.A. and Condominios del Alto SA from any obligation as to ADIF with respect the lot 2 H.Open Sky Ltd., under terms which have not yet been fully formulated.


 

F- 193
F-266

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

Schedule I

42.
Barter transactions (Continued)

Furthermore, on May 17, 2013, the property was reportedThe following is a summary of The Group´s investments in real state as condominium property, and on November 14, 2013, the title deed was executed in favor of IRSA CP.

As of June 30, 2015 works have been concluded, and all of the units involved2016 prepared in the swap have been received.accordance with SEC Regulation S-X 12-28

Conil

On November 5, 2014, the Group executed a conveyance deed evidencing a barter and mortgage transaction in favor of Darío Palombo (acting as Trustee of “Fideicomiso Esquina Guemes”) to convey title on four plots of land located in Avellaneda district. The agreement provides for the development by the Trust of two building construction undertakings. In consideration for such work, the compensation agreed included the amount of US$ 0.01 million and delivery, within 24 months as from such agreement execution, of two functional units for commercial purposes and one functional unit for office purposes (the non-monetary compensation was valued at US$ 0.7 million).


43.  CNV General Ruling N° 629/14 – Storage of documentation

On August 14, 2014, the CNV issued General Resolution N° 629 whereby it introduced amendments to rules related to storage and conservation of corporate books, accounting books and commercial documentation. In this sense, it should be noted that the Group has entrusted the storage of certain non-sensitive and old information to the following providers:

Documentation storage providerLocation
Bank S.A.Gral. Rivas 401, Avellaneda, Province of Buenos Aires
Ruta Panamericana Km 37.5, Garín, Province of Buenos Aires
Av. Fleming 2190, Munro, Province of Buenos Aires
Iron Mountain Argentina S.A.Av. Amancio Alcorta 2482, Autonomous City of Buenos Aires
Pedro de Mendoza 2143, Autonomous City of Buenos Aires
Saraza 6135, Autonomous City of Buenos Aires
Azara 1245, Autonomous City of Buenos Aires
Polígono industrial Spegazzini, Autopista Ezeiza Km 45, Cañuelas, Province of Buenos Aires

It is further noted that a detailed list of all documentation held in custody by providers, as well as documentation required in section 5 a.3) of section I, Chapter V, Title II of the RULES (2013 as amended) are available at the registered office.


 

    Initial Costs Subsequent Costs Costs at year - end          
Name Encumbrances Plot of land Buildings, facilities and improvements (i) Improvements / Additions / Disposals / Transfers Plot Plot of land Buildings, facilities and improvements (i) Total Accumulated depreciation Net book value Date of construction Date of acquisition Useful life as of 06.30.016
Shopping Center Properties:                        
Centro operaciones Argentina                        
Abasto de Buenos Aires  - 10 455 16 10 471 481 (222) 259 nov-1998 Jul-1994 16
Alto Palermo Shopping  - 9 583 14 9 597 606 (397) 209 oct-1990 Nov-1997 14
Alto Avellaneda  - 18 312 31 18 343 361 (233) 128 oct-1995 Dec-1997 11
Alcorta Shopping  - 11 213 16 11 229 240 (117) 123 jun-1992 Jun-1997 15
Alto Noa  - - 71 8 - 79 79 (46) 33 sep-1994 Mar-1995 13
Buenos Aires Design  - - 74 9 - 83 83 (77) 6 nov-1993 Nov-1997 2
Patio Bullrich  - 10 206 11 10 217 227 (124) 103 sep-1988 Oct-1998 16
Alto Rosario  - 26 140 21 26 161 187 (58) 129 nov-2004 Nov-2004 18
Mendoza Plaza  - 11 174 12 11 186 197 (104) 93 jun-1994 Dec-1994 15
Dot Baires Shopping  - 85 331 96 85 427 512 (138) 374 may-2009 Nov-2006 24
Córdoba Shopping Antichresis 1 104 1 1 105 106 (57) 49 mar-1990 Dec-2006 14
Distrito Arcos  - - - 305 - 305 305 (26) 279 - Nov-2009 15
Alto Comahue  - 1 12 328 1 340 341 (22) 319 - May-2006 30
Patio Olmos  - 12 22 1 12 23 35 (9) 26 may-1995 Sep-2007 17
Soleil Premium Outlet  - 23 56 38 23 94 117 (37) 80 - Jul-2010 14
Total Shopping Center Properties - 217 2,753 907 217 3,660 3,877 (1,667) 2,210      
Office buildings and Other Rental Properties Portfolio:                        
Centro operaciones Argentina                        
Alto Palermo Shopping Annex - - 38 - - 38 38 (8) 30 -    
Dot Building - 13 75 56 13 131 144 (23) 121 sep-2010 Nov-2006 28
Anchorena 559 - 1 6 - 1 6 7 (4) 3 n/a n/a n/a
Anchorena 665 - 2 9 - 2 9 11 (1) 10 n/a n/a n/a
Zelaya 3102 - 1 - - 1 - 1 - 1 n/a n/a n/a
Bouchard 710 - 40 49 2 40 51 91 (12) 79 - Jun-2005 24
Bouchard 551 - 5 6 1 5 7 12 (3) 9 - Mar-2007 28
Dique IV - - 6 (6) - - - - - n/a n/a n/a
Intercontinental Plaza (i) - 2 120 (82) 2 38 40 (28) 12 jun-1996 Nov-1997 23
Libertador 498 - 1 6  1 1 7 8 (4) 4 n/a n/a n/a
 
F-267

F- 194
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



43.           CNV General Resolution N° 629/14 – Storage of documentation (Continued)

On February 5, 2014 there was a widely known fire in Iron Mountain’s warehouse. To the date of these financial statements, the Group is waiting for the company that experienced the fire to report whether the documentation submitted has been actually affected by the fire and its condition after the accident. Nevertheless, based on the internal review carried out by the Group, duly reported to the CNV on February 12, 2014, the information kept at the Iron Mountain premises that were on fire do not appear to be sensitive or capable of affecting normal operations.


44.  Groups of assets and liabilities held for sale

Assets and liabilities related to the operation of the building located in 183 Madison Av., NY, United States, owned by the subsidiary of the Group, Rigby 183 LLC, and that form part of the international business segment, have been reported in the consolidated financial statements as of June 30, 2014 as available for sale as per the contract for the sale of the building entered into with Tishman Speyer Development Corporation on May 16, 2014. The transaction is subject to compliance with certain conditions which are expected to be complied with in September 2014.

Pursuant to IFRS 5, assets and liabilities available for sale have been valued at the lower of their book value or fair value less selling cost. Since fair value is higher than book value of the pool of assets available for sale including some goodwill related to the acquisition, no impairment has been recorded.

The following table shows the main assets and liabilities held for sale:

Group’s assets held for sale

Investment properties                                                         1,098,990
Intangible assets - Goodwill                                                         77,086
Restricted assets                                                         163,501
Trade and other receivables                                                         17,990
Derivative financial instruments                                                         299
Total                                                         1,357,866

Group’s liabilities directly associated to assets classified as held for sale

Trade and other payables                                                         ��170,245
Deferred income tax liabilities                                                         33,346
Borrowings                                                         603,021
Total                                                         806,612

 

Schedule I (Continued)
 
    Initial Costs Subsequent Costs Costs at year - end          
Name Encumbrances Plot of land Buildings, facilities and improvements (i) Improvements / Additions / Disposals / Transfers Plot Plot of land Buildings, facilities and improvements (i) Total Accumulated depreciation Net book value Date of construction Date of acquisition Useful life as of 06.30.016
Office buildings and Other Rental Properties Portfolio: 
                        
Maipú 1300 - 2 15  (5) 2 10 12 (6) 6 n/a n/a n/a
Suipacha 664 - 3 12 2 3 14 17 (5) 12 n/a n/a n/a
Bank Boston Tower - 78 56 - 78 56 134 (4) 130 - Aug-2007 25
República Building - 111 87 1 111 89 200 (9) 191 - Apr-2008 24
Constitución 1111 - - 1 - - 1 1 (1) - n/a n/a n/a
Santa María del Plata - 13 - - 13 - 13 - 13 n/a n/a n/a
Paseo del Sol - - 7 - - 7 7 - 7 n/a n/a n/a
Centro operaciones Israel:                        
Tivoli - 171 1,241 - 124 1,969 2,093 (46) 2,047 apr-2011 Oct-2015 35
Kiryat Ono Mall - 316 696 8 502 1,115 1,617 (19) 1,598 nov-2007 Oct-2015 72
Shopping Center Modi’in A - 223 289 - 354 459 813 (8) 805 aug-2005 Oct-2015 81
HSBC - 5,471 2,148 (370) 8,337 2,962 11,299 (74) 11,225 1927-1984 Oct-2015 35
Matam park - Haifa - 544 2,685 480 910 4,842 5,752 (90) 5,662 1979-2015 Oct-2015 63
Caesarea - Maichaley Carmel - 142 230 - 226 365 591 (8) 583 jun-1905 Oct-2015 76
Herzeliya North - 777 1,025 856 1,498 2,662 4,160 (35) 4,125 1996-2015 Oct-2015 89
Gav-Yam Center - Herzeliya - 748 817 - 1,187 1,297 2,484 (35) 2,449 1997-2006 Oct-2015 64
Neyar Hadera Modi’in - 186 248 - 295 393 688 (8) 680 jun-1905 Oct-2015 84
Gav yam park - Beer Sheva - 34 402 16 54 658 712 (12) 700 jul-1905 Oct-2015 97
Hazomet Kfar Saba - - 74 - - 117 117 - 117 jun-1905 Oct-2015 50
Bilu - - 54 - - 86 86 - 86 jun-1905 Oct-2015 35
Mazkeret Batia - - 69 - - 109 109 - 109 jul-1905 Oct-2015 50
Netania - - 525 23 - 861 861 (12) 849 jun-1905 Oct-2015 31
Rishon Le Zion - - 44 - - 70 70 - 70 may-1905 Oct-2015 35
Rehovot - - 69 13 - 125 125 - 125 jun-1905 Oct-2015 35
Mizpe Sapir - - 88 (10) - 128 128 (4) 124 jun-1905 Oct-2015 35
Holon - 191 15 - 303 24 327 - 327 jan-1969 Oct-2015 25
Haifa - 15 - - 24 - 24 - 24 jan-1970 Oct-2015 25
Others - 1,781 3,938 195 3,018 5,830 8,848 (89) 8,759 n/a Oct-2015 n/a
Total Office buildings and Other Rental Properties Portfolio:   10,871 15,150 1,181 17,104 24,536 41,640 (548) 41,092      
F-268

F- 195
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



45.  Subsequent events

·Schedule I On July 13, 2015, Cresud took a loan granted by Banco Provincia in(Continued)
    Initial Costs Subsequent Costs Costs at year - end          
Name Encumbrances Plot of land Buildings, facilities and improvements (i) Improvements / Additions / Disposals / Transfers Plot Plot of land Buildings, facilities and improvements (i) Total Accumulated depreciation Net book value Date of construction Date of acquisition Useful life as of 06.30.016
Undeveloped parcels of lands:                        
Centro operaciones Argentina:                        
Building Annexed to Dot - 25 - - 25 - 25 - 25 - Nov-2006  -
Lujan plot of land - 42 (18) - 42 (18) 24 - 24 - May-2012  -
Caballito - Ferro - 46 4 - 46 4 50 - 50 - Nov-1997  -
Intercontinental plot of land Tower B - 2 - - 2 - 2 - 2 - - -
Santa María del Plata - 159 64 - 159 64 223 - 223 - Jul-1997  -
Pilar - 2 1 - 2 1 3 - 3 - -  -
Otros - 3 2 - 3 2 5 - 5 - - -
Centro operaciones Israel:                        
Tivoli - 15 - - 24 - 24 - 24 apr-2011 Oct-2015 -
Queensridge Towers - 294 - (71) 467 (201) 266 - 266 apr-2011 Oct-2015 -
Zarchini Raanana - - 49 - - 78 78 - 78 - Oct-2015 -
Kurdani - - - - - - - - - - Oct-2015 -
Others - 1,076 5 (20) 1,801 (16) 1,785 (8) 1,777 n/a Oct-2015 n/a
Total Undeveloped parcels of lands: - 1,664 107 (91) 2,571 (86) 2,485 (8) 2,477      
                         
Properties under development                        
Centro operaciones Argentina:                        
PH Office Park - - - 7 - 7 7 - 7 in progress - -
Catalinas Norte - 42 - 6 42 6 48 - 48 in progress Dec-1999 -
Centro operaciones Israel:                        
Tivoli - - 1,170 103 - 1,981 1,981 - 1,981 in progress Oct-2015 -
Ispro Planet – Beer Sheva – Phase 1 - 154 294 296 245 817 1,062 - 1,062 in progress Oct-2015 -
Others - 149 1,124 (879) 191 689 880 - 880 in progress Oct-2015 n/a
Total Properties under development - 345 2,588 (467) 478 3,500 3,978 - 3,978      
Total - 13,097 20,598 1,530 20,370 31,610 51,980 (2,223) 49,757      
(i)
The breakdown of investment properties as of June 30, 2016, not includes leased farmlands for the amount of Ps. 839 million. Principal shall accrue interest at a fixed rate of 23%. The interests will be paid monthly. Principal will be settled within 6 months.

·On August 12, 2015, Cresud issued Class XI Non-Convertible Notes for an aggregate principal amount of up to Ps. 150 million, which may be extended for up to Ps. 700 million in two classes:
 
-Class XXI Non-Convertible Notes, for a face value of Ps. 192.2 million and falling due 18 months after the issuance date, will accrue interest at mixed rate. Fixed rate of 27.5% during the first 9 months and floating rate (Badlar plus 375 basis points). Interest will be payable quarterly in arrears whereas the principal will be amortized in one payment at due date. The issuance price was 100.0% of the nominal value.

-Class XXII Non-Convertible Notes, for a face value of US$ 22.7 million, with an issuance price of 97.65% of the nominal value resulting US$ 22.2 equivalent to Ps. 204.3 million and falling due 48 months after the issuance date, will accrue interest at fixed annual rate of 4%. Interest will be payable quarterly in arrears whereas the principal will be amortized in two payments.

·Regarding the allocation of the Hilton quota for fiscal year 2015 - 2016 Carnes Pampeanas S.A. has made the presentation of all documentation required by the Assessment and Coordination Unit of subsidies for domestic consumption (UCESI, as per its spanich acronym), under the Ministry of Economy and Public Finance. Although we do not have information about the allocation of that quota for the period before mentioned as of the date of these financial statements. 

·As described in Note 7, on August 28, 2015, Carnes Pampeanas S.A.’s shareholders decided to increase the Company’s capital stock by swapping a receivable from Cresud in the amount of Ps. 36,308,250 for equity in order to offset its negative shareholder’s equity as of June 30, 2015.

·On July 10, 2015, the Group through IRSA signed the transfer deed for the sale of the 16th floor of the building Maipú 1300. The transaction Price was set at Ps. 13.9 million, which will result in an approximately Ps. 12.0 million gain before tax.
·On July 24, 2015, the Group through IRSA signed the transfer deed for the sale of the 4th floor of the building Maipú 1300. The transaction Price was set at Ps. 21.7 million, which will result in an approximately Ps. 19.7 million gain before tax.


F- 196
F-269

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

Schedule II

45.
Subsequent events (Continued)

·On JulyAs at June 30, 2015 ourand 2014, IDBD was considered a significant associate Tarshop S.A. issued non-convertible notes Class XXII for a nominal valuepursuant to SEC rule 3-09, set out below is summarized financial information of Ps. 126,666. On July 21, 2015, this issuance was authorized by the Issue Activity DepartmentIDBD as of the CNV, for a total nominal value of Ps. 20,000 that can be extended up to the total authorized amount of Ps. 300,000. CN Class XXII will accrue interest from the date of issue at a nominal fixed annual rate of 29%, until the end of the sixth month, and at a nominal floating annual rate equal to BADLAR Private rate plus 500 basis points, beginning on the seventh month until its maturity date. Payment dates of mentioned interests will be: October 30, 2015, January 30, 2016, April 30, 2016, July 30, 2016, October 30, 2016 and January 30, 2017. The payment date of the principal will be: January 30, 2017.

·On July 31, 2015, the Group through IRSA signed the transfer deed for the sale of the 18th floor of the building Maipú 1300. The price of the transaction was Ps. 14.9 million. Such transaction will generate a gain before tax of approximately Ps. 12.6 million.

·On July 31, 2015, the Group through Dolphin, granted a loan to IFISA in the amount of US$7.2 million, with maturity one year after beginning date. The loan accrues interest at 1-month Libor plus a 3% margin.

·On August 24, 2015, the Group through IRSA signed the transfer deed for the sale of the 3rd floor of the building Maipú 1300. The price of the transaction was Ps. 13.4 million. Such transaction will generate a gain before tax of approximately Ps. 11.6 million.

·On August 25, 2015, the Group, through IRSA, acquired Class V Non-convertible Notes nominal value 113,762,000 for an amount of Ps. 120.5 million.

·On September 3, 2015, the Group through IRSA signed the transfer deed for the sale of the "Isla Sirgadero" plot of land. The price of the transaction was Ps. 10.7 million. Such transaction will generate a gain before tax of approximately Ps. 6.0 million.

·On September 10, 2015 the Group signed the transfer deed for the sale of 5,963 square meters corresponding to seven offices floors, 53 parking units and 3 storage rooms of Intercontinental Plaza building, remaining 7,159 sqm of the building under the society ownership. The amount of the transaction was Ps. 324.5 million, which has already been paid in full by the purchaser. Such transaction will generate a gain before tax of approximately Ps. 297.7 million to be recognized in our financial statements during the first quarter of 2016.

·On September 18, 2015, the Group through IRSA CP issued Series I Notes under our Global Note Program for up to the sum of USD 500,000 for an amount of Ps.407,260 (equivalent to USD 43,441). Series I Notes have a maturity of 18 months from its issue date, and will bear a mixed interest rate of 26,5% per year during the first three months, and Private Badlar Rate (Tasa Badlar Privada) plus 400 bps per year during the remaining period, playable on a quarterly basis.


those dates:
 
Summarized statements of financial position
  
IDBD
(in millions of pesos)
  
June 30,
 2015
June 30,
2014
Assets   
Non- Current Assets   
Investment in associates 8,8669,118
Other investments and derivative financial instruments 8335,856
Property, plant and equipment 13,45012,791
Investment properties 27,29924,317
Intangible assets 11,41912,580
Other non-current assets 3,0683,375
Total non-current assets 64,93568,037
Current Assets   
Other investments and derivative financial instruments 5,2518,354
Trade and other receivables 6,1016,878
Cash and cash equivalents 8,37510,829
Other current assets 10,6175,762
Total current assets 30,34431,823
Total assets 95,27999,860
Liabilities   
Non-Current Liabilities   
Obligations 41,96145,756
Bank loan and other financial liabilities 7,5536,747
Financial instruments 7,2748,072
Other non-current liabilities 4,8964,767
Total non-current liabilities 61,68465,342
Current Liabilities   
Obligations 7,0027,899
Bank loan and other financial liabilities 5,3386,340
Trade payables 6,0535,923
Other current liabilities 5,8166,502
Total current liabilities 24,20926,664
Total liabilities 85,89392,006
Net assets 9,3867,854
Non-controlling interest 8,5268,643
Net assets of the Parent company 860(789)
F-270
F- 197

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



45.  
Subsequent events (Continued)

  ·Schedule IIOn October 9, 2015, the Group through IRSA, granted a loan to IFISA in the amount of US$ 40 million, with maturity one year after beginning date. The loan accrues interest at 1-month Libor plus a 3% margin. As a guaranty of the loan, 73.169.991 common shares of IDBD owned by IFISA were pledged.(Continued)

·During October 2015, the escrow deposit related to the sale of the Madison Building was released and delivered to the parties: the Group, though Rigby, received US$ 0.91 millon, the buyer received US$ 0.06 million, and the remaining balance was used for some costs related to the transaction.

·On October 30, 2015, the Company’s Annual Shareholders’ Meeting corresponding to fiscal year ended June 30, 2015, appointed the new members of the Supervisory Committee and Boards of Directors; approved the Board´s compensation, decided not to pay compensation to the Supervisory Committee; approved the amount to pay related to the Shareholder´s property tax, delegated to the Board of Directors the implementation of a new Shared Service Agreement, approved the Board of Directors capacity related to the Global Program for issuing Non Convertible Notes, with ot without guaranty or guaranted by third parties; and for a maximum amount of up to US$ 300 million. It was decided to put on hold until November 26th 2015 to consider the following: (i) consideration of the year’s results, (ii) consideration of the Especial Financial Statements of merger / merger-demerger.
 
·On October 30, 2015, our subsidiary IRSA CP in the Annual Shareholder´s Meeting corresponding to the fiscal year ended June 30, 2015, decided, among others, the following issues: (i) destinate Ps 283.580 to pay cash dividends; (ii) approved the advance dividend approved by the June 13, 2015 Shareholders´ Meeting in the amountSummarized statements of Ps 298.500; (iii) approved the Board of Directors compensation in the amount of Ps 76.440 and (iv) approved the increase of the amount of the Global Program for issuing Non Convertible Notes for a maximum amount of up to US$ 500 million, for an additional amount of up to US$ 100 million.

·On November 5, 2015, the Group through IRSA signed the transfer deed for the sale of the 7th and 8th floor of the building Maipú 1300. The price of the transaction was US$ 3.0 million. Such transaction will generate a gain before tax of approximately Ps. 25.9 million.

        · As of the date of issuance of these financial statements, Cresud have sold, through various market transactions, 410,181 ADR´s of IRSA, representing 10 common shares of IRSA (N.V. Ps. 1 per share) for the amount of US$ 7.1 million. Thus, the Group’s investment in IRSA would decrease by 1.1%.comprehensive income
 

 
IDBD (in millions of pesos)  
 
June 30,
2015
(period of
twelve months)
June 30,
2014
(period of
six months)
Gross profit7,3169,564
Profit before Income Tax9451,013
Income tax(232)(592)
Profit from continuing operations713421
Profit from discontinued operations-144
Net Profit for the period713565
Other comprehensive income(562)221
Total comprehensive income for the period151786
Profit attributable to non-controlling interest140833
 

Summarized statements of cash flows
 
 
IDBD (in millions of pesos)  
 
June 30,
2015
(period of
twelve months)
June 30,
2014
(period of
six months)
Net cash generated by operating activities2,9093,346
Net cash generated by investing activities1,3894,228
Net cash used in financing activities(4,505)(11,805)
Net decrease in cash and cash equivalents(207)(4,231)
   
Net decrease in cash and cash equivalents from continuing operations(207)(6,935)
Net increase in cash and cash equivalents from discontinued operations-2,704
Net decrease in cash and cash equivalents(207)(4,231)
   
Cash and cash equivalents at beginning of period8,48011,870
Foreign exchange gain on cash and cash equivalents1072,846
Changes in cash included in assets classified as held for sale(5)344
Cash and cash equivalents at end of year8,37510,829
F-271
F- 198

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



45.
Subsequent events (Continued)

IDBD

On July 9 and 16, 2015, as mentioned in Note 9 to these Financial Statements, Dolphin submitted clarifications on the Proposal to IDBD and DIC dated June 29, 2015.
 
On July 9, 2015,Schedule III
The following is condensed financial information of Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria (“CRESUD” or the main clarifications were as follows:Company), the parent Company, prepared in accordance with SEC Regulation S-X 12-04:
 
-The termination or expirationStatements of the Proposal to IDBDFinancial Position
as of June 30, 2016 and DIC would not repeal the commitments undertaken by Dolphin under the proposal submitted by Dolphin to IDBD on May 6, 2015 (described in Note 9 to these Financial Statements) always provided that such commitments continued in full force and effect subject to the proposed terms, or Dolphin’s remaining commitment to inject NIS 8.5 million in IDBD pursuant to its irrevocable proposal dated December 29, 2014.
 
-A further condition would be added to the Proposal to IDBD and DIC whereby if Dolphin’s interest in the rights public offering were lower than NIS 8.5 million, Dolphin would remain obliged vis-à-vis IDBD to inject the remaining amount arising from subtracting NIS 8.5 million and the amount effectively injected at this instance by Dolphin.
 06.30.16 06.30.15
ASSETS   
Non-current assets   
Investment properties9 11
Property, plant and equipment488 471
Intangible assets17 18
Biological assets477 346
Investments in subsidiaries, associates and joint ventures2,560 2,501
Deferred income tax assets757 447
Income tax credit50 52
Total Non-current assets4,358 3,846
Current assets   
Biological assets442 113
Inventories491 337
Income tax credit34 8
Trade and other receivables388 410
Derivative financial instruments15 -
Investment in financial assets22 53
Cash and cash equivalents11 18
Total Current assets1,403 939
TOTAL ASSETS5,761 4,785
SHAREHOLDERS’ EQUITY   
Share capital495 495
Treasury stock 7 7
Inflation adjustment of share capital and treasury stock65 65
Share premium659 659
Additional paid-in capital from treasury stock16 13
Legal reserve83 -
Other reserves1,086 579
Accumulated deficit(1,390) (245)
TOTAL SHAREHOLDERS’ EQUITY1,021 1,573
LIABILITIES   
Non-current liabilities   
Trade and other payables1 1
Borrowings3,150 2,078
Provisions 10 10
Total Non-current liabilities3,161 2,089
Current liabilities   
Trade and other payables305 149
Payroll and social security liabilities85 58
Borrowings1,166 911
Derivative financial instruments23 3
Provisions - 2
Total Current liabilities1,579 1,123
TOTAL LIABILITIES4,740 3,212
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES5,761 4,785
 
-IDBD would replace its commitment to exercise DIC’s Series 1 warrants for NIS 92.5 million with the commitment to exercise the Series 1 warrants for at least the amount that results from subtracting (a) the Capital Contribution Amount (as defined in Note 9 toThe accompanying notes are an integral part of these Financial Statements); minus (b) NIS 100 million, always provided that such amount does not exceed NIS 92.5 million.condensed financial information.
 
On July 13, 2015, Dolphin extended the maturity of the Proposal to IDBD and DIC until July 16, 2015.
In addition, on July 16, 2015, Dolphin submitted additional clarifications on the Proposal to IDBD and DIC dated June 29, 2015 and July 9, 2015, which provided as follows:
-  Dolphin agrees that the new shares to be acquired by Dolphin or any entity controlled by Eduardo Sergio Elsztain under the public offering of shares to be made by IDBD during October 2015 (as disclosed in note 3 to these Financial Statements) would not grant to it the right to participate in the Tender Offer (as such term is defined in note 3 to these Financial Statements) always provided that such new shares are still held by Dolphin or an entity controlled by Eduardo Sergio Elsztain. Notwithstanding, nothing will prevent Dolphin and/or the entity controlled by Eduardo Sergio Elsztain that holds such new shares to be acquired under the public offering to be made in October 2015 by IDBD from freely disposing of them.

F- 199
F-272

 

45.
Subsequent events (Continued)

On July 16, 2015, IDBD’s Board of Directors approved a capital increase by means of a public offering pursuant to the terms proposed by Dolphin in the Proposal to IDBD and DIC, and to exercise DIC’s warrants, all based on Dolphin’s irrevocable commitment to participate in the referred capital increase. IDBD plans to carry out the public offering between October 1 and November 15 2015, subject to the company’s corporate approvals, other statutory consents required and the fact that the exercise of DIC’s warrants can be made pursuant to the terms and conditions set forth in Dolphin’s proposal.

On July 16, 2015, DIC’s Board of Directors accepted the Proposal to IDBD and DIC and instructed its management to take such steps as necessary in order to make a rights offering pursuant to Dolphin’s proposal. On August 27, 2015, DIC published a shelf offering report for the issuance of rights to its shareholders. On September 6, 2015, DIC completed the rights offering process, issuing four series of warrants to its shareholders, which are exercisable into DIC shares. As of the date of these financial statements, IDBD has not completed the capital injection in DIC.

On August 16, 2015, the Arrangement Trustees submitted a petition to the  Tel Aviv Jaffo Court for it to determine that: (a) IFISA would be subject to the commitments in the Arrangement jointly and severally with  Dolphin; (b) the shares held by any other company controlled by Eduardo Sergio Elsztain (including Dolphin) would not be eligible to take part in the Tender Offer; and (c) the shares held by any company controlled by any of the controlling shareholders of IDBD, including any corporations controlled by Eduardo Sergio Elsztain (including Dolphin) and transferred to other entities would not be eligible to take part in the Tender Offer.

On August 31, 2015, the competent court asked the Arrangement Trustees to make a supplementary filing to the one dated August 16, 2015, identifying the parties to whom such request was addressed, which filing was made on the above mentioned date. On September 7, 2015 the court dismissed the Arrangement Trustees' filing for failure to submit the supplementary filing requested by the competent court on August 31, 2015.

On August 17, 2015, the Arrangement Trustees submitted to IDBD, its Board of Directors, Dolphin and ETH (among others) and alternative scheme to the one proposed by Dolphin  on May 27,2015 as part of Dolphin’s and ETH’s obligations under the Tender Offer (the “Trustees' Proposal”) which was filed with the competent court. The Trustees’ Proposal provided as follows:

-       Replacement of the obligation to carry out Tender Offers for a total of NIS 512 million with the obligation by Dolphin and ETH (and/or their related parties) to inject NIS 512 million in IDBD against the issuance of bonds. The NIS 512 million would be injected in two tranches of NIS 256 million each (the “First Tranche” and the “Second Tranche”, respectively).


F-273

Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



45.
Subsequent eventsSchedule III (Continued) (Continued)

Statements of Operations
The First Tranche would be completed by December 31,for the fiscal years ended June 30, 2016, 2015 and against its injection IDBD would issue in favor of such investors other than Dolphin, ETH and/or any of their related parties (the “Minority Investors”) bonds for a principal amount of NIS 256 million, by reopening Series 9 (“Series 9”), or by issuing a new series of bonds under terms and conditions replicating those of Series 9 (“IDBD’s New Bonds”).2014
 06.30.16 06.30.15 06.30.14 
Revenues1,079 754 609 
Costs(1,543) (1,282) (985) 
Initial recognition and changes in the fair value of biological assets and agricultural produce at the point of harvest1,164 697 662 
Changes in net realizable value of agricultural produce after harvest207 (29) (5) 
Gross profit907 140 281 
General and administrative expenses(151) (109) (116) 
Selling expenses(214) (149) (93) 
Other operating results, net(53) (3) (6) 
Profit / (Loss) from operations   489 (121) 66 
Share of (loss) / profit of subsidiaries, associates and joint ventures(429) 121 (528) 
Profit / (Loss) before financing and taxation   60 - (462) 
Finance income102 31 132 
Finance costs(1,766) (490) (1,109) 
Other financial results237 14 101 
Financial results, net(1,427) (445) (876) 
Loss before Income tax(1,367) (445) (1,338) 
Income tax gain329 195 270 
Loss for the year(1,038) (250) (1,068) 
       
       
(Loss) / Profit per share for the year:      
Basic(3.82) 0.36 (2.15) 
Diluted(3.82)(i)0.32 (2.15)(i)
The Second Tranche would be completed by January 31, 2016 and against its injection the Minority Investors would receive IDBD’s New Bonds for a principal amount of NIS 256 million.
(i)
Following the exercise of the First Tranche and Second Tranche, Minority Investors would deliver 64 million sharesDue to the obligors underloss for the Tender Offer.year, there is no diluted effect on this result.
In addition, on January 31, 2016, Dolphin and ETH (or anyThe accompanying notes are an integral part of their related parties) would purchase the remaining shares held by the Minority Investors for a total of NIS 90 million, payable on that same date.

-  If the sale of Clal is consummated, IDBD will carry out a partial bond repurchase offering at par value among all series of bonds.
these condensed financial information.
 
-  The Trustees’ Proposal would be carried out before IDBD launches a new issuance of shares or rights or, alternatively, each new share or right issued would not be part of the proposal as submitted.
-  The Trustees’ Proposal hasn´t been already approved by the Minority Investors; and such approval would be sought after the proposal is accepted by IDBD, Dolphin and ETH.

On August 30, 2015, IDBD sent a request on Dolphin and ETH for them to express their position on the Trustees’ Proposal, without setting a specific date for their response.
On September 3, 2015 Dolphin rejected the Trustees' Proposal and, therefore, it is not valid as of the date of issuance of these Financial Statements.
On August 19, 2015, the Arrangement Trustees filed with the competent court an application for it to order an attachment or lien on any funds receivable by ETH from Dolphin by operation of the BMBY clause, and for it to order the transfer of such funds to the Arrangement Trustees as security for the performance of ETH’s joint and several obligations under the Tender Offers.

On August 26, 2015, the Arrangement Trustees and ETH executed an agreement in connection with the item mentioned in the previous paragraph whereby it was agreed that the Arrangement Trustees would suspend the above mentioned application until the arbitration decision concerning the BMBY; to such end, ETH promised to give notice to the Arrangement Trustees as soon as the arbitrator rules on the subject. Notice has been given to the competent court of the referred agreement between ETH and the Arrangement Trustees.
F- 200
F-274

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)



45.
Subsequent events (Continued)

       On September 9, 2015, The Arrangement Trustees filed to the Tel Aviv District Court an amended application for instructions (the “Application of the Arrangement Trustees”), to which Dolphin, IFISA, ETH and others were added as parties, requesting the Court to instruct that: (i) IFISA is obligated to all the Investors' obligations under the Arrangement; (ii) the IDBD shares held by any entity controlled by Mr. Elsztain (including Dolphin) are not entitled to participate in the Tender Offers; and (iii) IDBD shares held by Mr. Elsztain and Mr Ben Moshe and/or by any other entity controlled by them, and were transferred or will be transferred to others, are also not entitled to participate in the Tender Offers.
 
On September 24, 2015, the arbitrator rendered an arbitration award concerning the BMBY process according to which Dolphin and IFISA are the buyers in the BMBY process, and ETH is the seller. ETH is committed to sell all the shares of the Company that it holds at the price proposed in the BMBY proposal (NIS 1.64 per share). Dolphin will pledge in favor of the Arrangement Trustees all the shares used as collateral for the performance of the Tender Offers, and Dolphin has to perform ETH’s obligations included in the Arrangement, including the commitment to carry out Tender Offers and the obligation to participate in rights offerings.
 
On October 11, 2015, the BMBY process concluded and IFISA purchased all ETH’s shares in IDBD (92,665,925 shares), at a price per share of NIS 1.64, for a total consideration of approximately NIS 152 million (equivalent to US$ 39.7 million as of the date of the transaction). Upon the closing of the transaction, all ETH’s directors in IDBD presented their irrevocable resignation to IDBD’s Board of Directors and the Shareholders Agreement automatically terminated in accordance with its terms. Furthermore, on the same date, Dolphin pledged additional shares as security of the performance of the Tender Offers, rising the number to 64,067,710 pledged shares.Schedule III (Continued)
 
On October 19,Statements of Comprehensive Income
for the fiscal years ended June 30, 2016, 2015 Dolphin and IFISA submitted their response to Court regarding the Application of the Arrangement Trustees in which, among other things, Dolphin clarified that as the offeror in the Tender Offers, it does not intent and will not participate as an offeree in the Tender Offers. Notwithstanding, according to  Dolphin’s position, it has the right to offer to any other shareholder of IDBD, including entities controlled by Eduardo S. Elsztain, to purchase shares within the Tender Offers and also to sell shares to third parties (including those controlled by Eduardo S. Elsztain), and the shares being sold are able to participate as offerees in the Tender Offers, without derogating from Dolphin’s undertakings according to which 106.6 million shares held by it will not participate in the Tender Offers, as long as they are held by entities controlled by Eduardo S. Elsztain).2014
 
 06.30.16 06.30.15 06.30.14
Loss for the year(1,038) (250) (1,068)
Other comprehensive income:     
Items that may be reclassified subsequently to profit or loss:     
Currency translation adjustment from subsidiaries, associates and joint ventures…422 (191) 631
Other comprehensive loss from share of changes in subsidiaries’ equity(30) - -
Other comprehensive income for the year (i) 392 (191) 631
Total comprehensive income for the year (646) (441) (437)
 
(i)
Components of other comprehensive income do not generate any impact on the income tax.
F-275

The accompanying notes are an integral part of these condensed financial information.
F- 201
 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)
 
45.
Subsequent eventsSchedule III (Continued) (Continued)
Statements of Changes in Shareholders’ Equity


   On October 20,for the fiscal years ended June 30, 2016, 2015 the Court decided to grant declaratory remedies requested in the Application of the Arrangement Trustees, according to which:and 2014
 
-  The shares held by Dolphin and any other company controlled by Eduardo S. Elsztain are not entitled to participate as offerees in the Tender Offers
 Share capitalTreasury sharesInflation adjustment of share capital and treasury shares (i)
Share
premium
Additional paid-in capital from Treasury SharesLegal reserve
Other
reserves
Accumulated
deficit
Total Shareholders’ equity


Balance as of June 30, 201549576565913-579(245)1,573
Loss for the year-------(1,038)(1,038)
Other comprehensive income for the year------392-392
Total comprehensive income for the year------392(1,038)(646)
As provided by Ordinary and Extraordinary Shareholders’ Meeting held on October 30, 2015 and on November 26, 2015:         
- Reserve for future dividends------31(31)-
- Legal reserve-----83-(83)-
Equity-settled compensation------17-17
Equity incentive plan granted----3-(4)1-
Changes in interest in subsidiaries------106-106
Cumulative translation adjustment for interest held before business combination------(58)-(58)
Share of changes in subsidiaries’ equity------23-23
Reimbursement of expired dividends-------66
Balance as of June 30, 201649576565916831,086(1,390)1,021
 
-  the shares held or that were held by Dolphin and/or by companies controlled by Mr. Elsztain and which were transferred or will be transferred by them to other parties, will not be entitled to participate in the Tender Offers
(i)
Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury Shares as of June 30, 2016 and 2015, respectively.
 
-  These remedies will not apply to shares which were acquired from the minority shareholders within the framework of the trade in the stock exchange and which came into the possession of IFISA.
On October 26, 2015, and following the court decision dated on October 20.1015 and the declaratory remedies submitted Dolphin and IFISA have sent a letter that, according to their position, and as detailed in the letter: (a) The reservation prescribed by the court vis-à-vis the shares which were acquired from the minority shareholders in trading on the stock exchange and which came into the possessionaccompanying notes are an integral part of IFISA, applies to the 127,441,396 shares of the Company held by IFISA and 131,600 shares of the Company held by Dolphin, which should be entitled to participate as offerees in the Tender Offers; and (b) with respect of the 51,760,322 additional shares of IDBD presently held by Dolphin, originating in acquisitions from minority shareholders in IDBD, DN and IFISA believe that, according to that state in the Court decision, these shares cannot participate as an offeree in the tender offers, so long as they are held by Dolphin, however Dolphin is not estopped from selling these shares to any third parties, and that in such a case, that third party shall have the right to participate in the Tender Offers for these shares.condensed financial information.
On October 29, 2015, the Arrangement Trustees filed an urgent application for a contempt of court order against Dolphin and IFISA and to enforce them to follow the court's instructions of October 20, 2015, alleging that the letter of Dolphin and IFISA, published by IDBD on October 27, 2015, which informed of the quantity of shares purchased from the minority shareholders within the framework of the trade in the stock exchange is contrary to the court's decision and thus Dolphin and IFISA are acting in contempt of court. The Arrangement Trustees further argued that since Dolphin and IFISA are ignoring the court's decision and since the damage to the public, including to the Arrangement creditors, accumulating daily, the court is requested to impose a fine, in a material amount set by the court, for each day that they ignore the court decision and as long as they do not take action that the Company will amend its reports so that they reflect the court decision. According the court's decision dated October 30, 2015, Dolphin and IFISA are requested to submit their response within three days.
On October 29, 2015, Dolphin and IFISA filed an appeal to the Supreme Court, with respect to the court decision of October 20, 2015, also requesting to hold an urgent hearing on the appeal. The hearing on the appeal was scheduled for December 16, 2015.
On November 2, 2015, Dolphin and IFISA submitted their response to the Application for Contempt, requesting court to dismiss the application as the Contempt of Court Ordinance does not apply to declaratory remedies and as Dolphin and IFISA did not violate any court order.
On November 4, 2015, the Arrangement Trustees filed a rejoinder to Dolphin´s and IFISA's response to the Application for Contempt, requesting the Court to clarify that the Reservation (as defined below) determined in the Court's decision dated October 20, 2015 shall apply exclusively in the case the following


F- 202
F-276

 
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria

Notes to the Consolidated Financial Statements(Continued)
(All amounts in thousandsmillions of Argentine Pesos, except shares and per share data and as otherwise indicated)

 
45.
Schedule III (Continued)
Statements of Changes in Shareholders’ Equity
for the fiscal years ended June 30, 2016, 2015 and 2014
 Share capitalTreasury sharesInflation adjustment of share capital and treasury shares (i)Share premiumAdditional paid-in capital from Treasury SharesShare warrants
Legal
reserve
Special reserveOther reservesAccumulated deficitTotal Shareholders’ equity
Balance as of June 30, 20144911165773-10682634851(1,066)1,947
Profit for the year---------(250)(250)
Other comprehensive loss for the year--------(191)-(191)
Total comprehensive income for the year--------(191)(250)(441)
As provided by Shareholders’ Meeting held on November 14, 2014:           
- Share Distribution6(6)---------
- Share premium   (221)-----221-
- Legal reserve------(82)--82-
- Reserve for new developments--------(17)17-
- Other reserves-------(634)-634-
- Reserve for repurchase of shares--------(113)113-
- Exercise of warrants---1------1
Equity-settled compensation--------28-28
Purchase of treasury shares(3)3------(32)-(32)
Maturity of share warrants---106-(106)-----
Equity incentive plan granted1(1)--13---(16)3-
Changes in interest in subsidiaries--------69-69
Reimbursement of expired dividends---------11
Balance as of June 30, 201549576565913---579(245)1,573
(i)Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury hares as of June 30, 2015 and 2014, respectively.
The accompanying notes are an integral part of these condensed financial information.
F- 203
Subsequent events (Continued)
 
conditions apply: (1) that the shares were acquired in the market from the public; (2) the acquisition was made within the framework of trading on the TASE; and (3): that the shares are currently held by IFISA; accordingly, the Court was requested to clarify that the Dolphin´s and IFISA's position as filed in the letter dated October 26, 2015 is not and cannot be the correct interpretation of the Judgment.
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
 
On November 4, 2015, Dolphin and IFISA filed their responseNotes to the rejoinderConsolidated Financial Statements(Continued)
(All amounts in millions of the Arrangement Trustees, requesting the Court to dismiss the Arrangement Trustees' request to clarify the judgment.Argentine Pesos, except otherwise indicated)
 
 On November 5,
Schedule III (Continued)
Statements of Changes in Shareholders’ Equity
for the fiscal years ended June 30, 2016, 2015 the Court decided to deny the Application for Contempt filed by Arrangement Trustees. However, the Court stated that Dolphin and IFISA's interpretation of the Reservation in the Decision dated October 20, 2015, within Dolphin and IFISA's letter, stand in contradiction insofar as with regard to the scope of the Reservation.
On November 5, 2015, the Arrangement Trustees sent a letter to Dolphin and IFISA, demanding them, in light of the Court's decision of the same day, to amend Dolphin and IFISA's letter and to inform the Securities Authority and IDBD that all the tender offers will be addressed to the minority shareholders of IDBD and that Dolphin and/or IFISA and any corporation under the control of Mr. Elsztain, will not be offerees in the tender offers and that every share which will be transferred by them to third party, if transferred, will also not be entitled to be an offeree in the tender offer.
On November 5, 2015, the Arrangement Trustees sent a letter to IDBD, demanding it, in light of the Court's decision of the same day, to amend Dolphin and IFISA's letter and to inform the public and the Securities Authority immediately that Dolphin and IFISA's Letter as published by  IDBD, is inconsistent with the court's decision and that all the shares held by Dolphin and IFISA or any corporation within the Elsztain Group or which shall be purchased from those corporations, shall not carry a right to participate in the tender offers as an offeree.
On November 10, 2015, following the request of the ISA to IDBD, IDBD approached Dolphin and IFISA in order to obtain their position with regard to the amount of shares held by corporations controlled by Mr. Eduardo Sergio Elsztain and which are entitled to participate in the Tender Offers according to the Reservation in the Court's decision dated October 20, 2015 (the "First Decision"; the "Reservation") and following the Court's decision dated November 5, 2015 (the "Second Decision"). In response to this request, Dolphin and IFISA notified IDBD that their position, as expressed in Dolphin and IFISA's letter, remains unchanged.
On November 10, 2015, Dolphin and IFISA filed an application to the Supreme Court to schedule the hearing on the appeal, which was scheduled for December 16, 2015, to an earlier date, due to the fact that Dolphin has to publish a Tender Offer by December 31, 2015, in order to have a high level of certainty regarding the legal situation as soon as possible.2014
 
 On November 12,
 Share capitalTreasury sharesInflation adjustment of share capital and treasury shares (i)Share premiumShare warrants
Legal
reserve
Special reserveOther reservesAccumulated deficitTotal Shareholders’ equity
Balance as of June 30, 201349756577310647696326(27)2,488
Loss for the year--------(1,068)(1,068)
Other comprehensive income for the year-------631-631
Total comprehensive income for the year-------631(1,068)(437)
As provided by Shareholders’ Meeting held on October 31, 2013:          
- Legal reserve-----35(35)---
- Other reserves------(27)-27-
- Cash dividends-------(120)-(120)
Equity-settled compensation-------63-63
Changes in interest in subsidiaries-------7-7
Purchase of treasury shares(6)6-----(55)-(55)
Cancellation of BrasilAgro warrants-------(1)-(1)
Reimbursement of expired dividends--------22
Balance as of June 30, 2014491116577310682634851(1,066)1,947
(i)
Includes Ps. 1 and Ps. 1 of inflation adjustment of Treasury Shares as of June 30, 2014 and 2013, respectively.
The accompanying notes are an integral part of these condensed financial information.
F- 204
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
Statements of Cash Flows
for the fiscal years ended June 30, 2016, 2015 IDBD reported that,and 2014
 06.30.16 06.30.15 06.30.14
Operating activities:     
Cash used in operations(97) (232) (158)
Net cash used in operating activities(97) (232) (158)
Investing activities:     
Acquisition of subsidiaries, associates and joint ventures- (20) -
Capital contribution to subsidiaries, associates and joint ventures(20) (1) (7)
Proceeds from sale of interest in companies86 183 -
Purchases of investment properties(1) (4) (2)
Purchases of property, plant and equipment(33) (60) (38)
Proceeds from sale of investment properties1 - -
Proceeds from sale of property, plant and equipment1 2 1
Proceeds from sale of farmlands- 162 -
Purchase of investment in financial assets(1,227) (1,778) (2,200)
Proceeds from disposals of Investment in financial assets1,340 2,145 2,238
Loans granted to subsidiaries, associates and joint ventures(3) (8) (52)
Proceeds from loans granted to subsidiaries, associates and joint ventures80 55 243
Cash incorporated by merger net of cash paid- 1 -
Dividends received85 43 15
Net cash generated from investing activities309 720 198
Financing activities:     
Repurchase of equity interest- (32) (55)
Proceeds from issuance of non-convertible notes390 803 834
Payment of non-convertible notes(186) (1,079) (603)
Repurchase of non-convertible notes(88) (305) (24)
Dividend payments- - (120)
Borrowings852 523 118
Proceeds from derivative financial instruments142 (122) -
Borrowings from subsidiaries, associates and joint ventures102 - 23
Payments of borrowings(1,114) (102) (12)
Payments of borrowings from subsidiaries, associates and joint ventures(8) - -
Payment of seller financing(1) - -
Payments of warrants- - (1)
Proceeds from warrants- 1 -
Interest paid(310) (210) (185)
Net Cash flows used in financing activities(221) (523) (25)
Net (decrease) / increase in cash and cash equivalents(9) (35) 15
Cash and cash equivalents at beginning of the year18 53 37
Currency translation adjustment on cash and cash equivalents2 - 1
Cash and cash equivalents at end of the year11 18 53
The accompanying notes are an integral part of these condensed financial information.
F- 205
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
1.          Basis of preparation and summering of the significant accounting policies
The Financial Statements of the Company for the years ended June 30, 2016 and 2015 have been prepared in accordance with the Technical Resolution N° 26 of the Argentine Federation of Professional Councils in Economic Sciences ("FACPCE", as per its Spanish acronym), adopted by the National Securities Commission ("CNV", as per its Spanish acronym). This Technical Resolution differs from International Accounting Standard ("IAS") 1 “Presentation of Financial Statements” issued by the International Accounting Standards Board ("IASB"), in reference to the accounting measurement criteria of the investments in subsidiaries, joint ventures and associates, which are accounted for under the equity method described by IAS 28 “Investments in Associates”. This criterion differs from the provisions of paragraph 38 of IAS 27 “Separate Financial Statements”, whereby such investments are measured at cost or fair value. The Company adopted IFRS in the fiscal year beginning on July 1st, 2012, being its request, Dolphin extendedtransition date July 1st, 2011.
The CNV, through General Resolutions N° 562/09 and 576/10, has provided for the validityapplication of Technical Resolution N° 26 and its commitment with regardamendment Technical Resolution N° 29 of the FACPCE, which adopt the International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”), for companies subject to the public offering soregime ruled by Law 17,811, due to the listing of their shares or corporate notes, and for entities that it willhave applied for authorization to be performed no later than November 17, 2015listed under the mentioned regime.
 

The principal accounting policies adopted of these Financial Statements are included in Note 2 to the Audited Consolidated Financial Statements except for the accounting measurement criteria of the investments in subsidiaries, joint ventures and associates explained in the paragraph above.
F- 206
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
2.
Investment in subsidiaries, associates and joint ventures
Set out below are the changes in Company’s investment in subsidiaries, associates and joint ventures for the fiscal years ended June 30, 2016 and 2015:
 
June 30,
2016
 
June 30,
2015
 
Beginning of the year2,493 2,901 
Balance incorporated by merger with Cactus- (63) 
Acquisition of subsidiaries (i)66 (5) 
Capital contribution127 1 
Disposal of interest in subsidiaries(22) (34) 
Share of (loss) / profit(429) 121 
Other comprehensive loss from share of changes in subsidiaries’ equity(30) - 
Currency translation adjustment364 (191) 
Equity-settled compensation10 14 
Dividends distributed(55) (53) 
Reimbursement of expired dividends6 1 
Intergroup transactions 3 (199) 
Share of changes in subsidiaries’ equity24 - 
End of the year2,557(ii)2,493(ii)
(i)
    Includes the effect of changes in subsidiaries as consequence of repurchase of equity interest.
(ii) Includes a balance of Ps. (3) and Ps. (8) reflecting interests in companies with negative equity as of June 30, 2016 and 2015, which is reclassified to “Provisions”
F- 207
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
3.
Borrowings
Company´s borrowings as of June 30, 2016 and 2015 are as follows:
           Value as of
 Secured / unsecured Currency Fixed / Floating 
Effective
interest rate %
 
 Nominal value
(in millions)
 
June 30,
2016
 
June 30,
2015
Non-current             
CRESUD NCN Class XIV due 2018 (i)Unsecured US$ Fixed 1.50 % 32 481 290
CRESUD NCN Class XVI due 2018 (ii)Unsecured US$ Fixed 1.50 % 109 1,649 999
CRESUD NCN Class XVIII due 2019 (iii)Unsecured US$ Fixed 4.00% 34 510 308
CRESUD NCN Class XIX due 2016Unsecured Ps. Floating Badlar + % + 350 bps 187 - 186
CRESUD NCN Class XX due 2017 (iv)Unsecured US$ Fixed 2.5 % 18.2 - 168
CRESUD NCN Class XXII due 2019 (v)Unsecured US$ Fixed 4.00% 22 335 -
Loan from Banco CiudadUnsecured US$ Floating Libor + 300 bps or 6% (the higher) 15 172 117
Loan from Banco de La PampaUnsecured Ps. Floating Rate Survey PF 30-59 days 20 3 10
Non-current borrowings          3,150 2,078
           Value as of
 Secured / unsecured Currency Fixed / Floating 
Effective
interest rate %
 
 
Nominal value
(in millions)
 
June 30,
2016
 
June 30,
2015
Current             
CRESUD NCN Class XV due 2015Unsecured Ps. Floating 23.67 % 176 - 121
CRESUD NCN Class XVI due 2018 (ii)Unsecured US$ Fixed 1.50 % 109 10 5
CRESUD NCN Class XVII due 2016Unsecured Ps. Floating Badlar + 250 bps 176 - 173
CRESUD NCN Class XVIII due 2019 (iii)Unsecured US$ Fixed 4.00% 34 2 1
CRESUD NCN Class XIX due 2016Unsecured Ps. Floating Badlar + 250 bps 187 189 1
CRESUD NCN Class XX due 2017 (iv)Unsecured US$ Fixed 2.50% 18 278 3
CRESUD NCN Class XXI due 2017Unsecured Ps. Floating Badlar + 375 bps 192 197 -
Loan from Banco CiudadUnsecured US$ Floating Libor + 300 bps or 6% (the higher) 15 28 10
Loan from Banco de La PampaUnsecured Ps. Floating Rate Survey PF 30-59 days 20 7 7
Loan from Banco de la Provincia de Buenos AiresUnsecured Ps. Fixed 15.01% 24 17 7
Loan from Banco de la Provincia de Buenos AiresUnsecured US$ Fixed 3.50% 15 225 -
Related parties borrowings (Note 32)Unsecured US$ Fixed 4.21% 5 99 -
Bank overdraftsUnsecured Ps. Fixed 29.17% - 114 583
Current borrowings          1,166 911
Total borrowings          4,316 2,989
(i)
    Includes an outstanding balance of Ps. 28 with ERSA as of 06.30.2016.
(ii)
    Includes an outstanding balance of Ps. 12, Ps. 133 and Ps. 16 with ERSA, IRSA CP and PAMSA, respectively, as of 06.30.16.
(iii)
   Includes an outstanding balance of Ps. 8 with IRSA CP as of June 30, 2016.
(iv)
   Includes an outstanding balance of Ps. 35, Ps. 21 and Ps. 99 with ERSA, IRSA CP and PAMSA, respectively as of 06.30.16 and include Ps. 22 and Ps. 92 with ERSA and PAMSA, respectively, as of 06.30.15.
(v)
   Includes an outstanding balance of Ps. 15 with IRSA CP as of June 30, 2016.
F- 208
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
3.
Borrowings (Continued)
Borrowings also include liabilities under finance leases where the Company is the lessee and which therefore have to be measured in accordance with IAS 17 “Leases”.
The maturity of the Company’s borrowings (excluding finance leases) and the Company's exposure to fixed and variable interest rates was as follows:
 
June 30,
2016
 
June 30,
2015
Do accrue interest:   
Less than one year1,135 890
Between 1 and 2 years1,339 373
Between 2 and 3 years458 810
Between 3 and 4 years1,291 670
Between 4 and 5 years23 181
More than 5 years34 35
 4,280 2,959
Do not accrued interest   
Less than one year31 21
Between 1 and 2 years5 4
Between 2 and 3 years- 4
Between 3 and 4 years- 1
 36 30
 4,316 2,989
The fair value of current borrowings at fixed-rate and current and non-current borrowings at floating-rate equals their carrying amount, as the impact of discounting is not significant. The fair value of all debts that are not quoted in the market are valued at their technical value that is nominal value plus accrued interest.
F- 209
Cresud Sociedad Anónima,
Comercial, Inmobiliaria, Financiera y Agropecuaria
Notes to the Consolidated Financial Statements(Continued)
(All amounts in millions of Argentine Pesos, except otherwise indicated)
Schedule III (Continued)
3.
Borrowings (Continued)
The fair value of current and non-current borrowings for the years ended June 30, 2016 and 2015 is as follows:
 
June 30,
2016
 
June 30,
2015
CRESUD Class XIV NCN due 2018481 261
CRESUD Class XV NCN due 2015- 121
CRESUD Class XVI NCN due 20181,649 889
CRESUD Class XVII NCN due 2016- 173
CRESUD Class XVIII NCN due 2019510 -
CRESUD Class XIX NCN due 2016189 189
CRESUD Class XX NCN due 2017278 166
CRESUD Class XXI NCN due 2017197 -
CRESUD Class XXII NCN due 2019335 -
Bank loans452 151
Bank overdrafts114 583
Related parties99 -
Total4,304 2,533
 F- 210
F-277

 
 
45.
Subsequent events (Continued)

(instead of the original date of November 15, 2015), which was further extended until December 1, 2015. There is no certainty at this time for the execution of the offering or to its terms. In addition, IDBD was notified by Dolphin, that discussions are being held between Dolphin and the Arrangement Trustees for a potential amendment to the Arrangement with regard to the Tender Offers. IDBD further reported that the Arrangement Trustees sent a letter stating that the amendments to the Arrangement regarding the Tender Offers are not acceptable for the bondholders, and that the bondholders may convoke a bondholders´ meeting to discuss such issues if IDBD´s Board of Directors do not disapprove such proposal.
      The Company is assessing its defense strategy, as well as the impact of the closing of the BMBY process with IFISA as the purchaser of the shares of IDBD by Extra.
              On November 11, the lock-up under the TASE regulations expired, and therefore there are no shares restricted under this item as of the date of issuance of these financial statements.
       Condor

On July 23, 2015, RES, IRSA and Condor entered into an agreement in relation to a potential exchange of preferred shares Series A, Series B and Series C for ordinary shares.

RES has accepted that, if Condor gets acceptance of at least 80% of the preferred shares Series A and B, then RES will convert pro rata its convertible preferred shares Series C.

The agreement specifies that the conversion price for preferred shares A and B into ordinary shares is US$ 2.3254 per share, while the price for Series C is US$ 1.60 per share. Furthermore, in consideration for cumulative unpaid dividends, holders of such shares will receive an amount of additional ordinary shares at a share price of US$ 2.3254.
F-278

45.
Subsequent events (Continued)

The agreement further provides that, if the exchange is carried out, Condor’s bylaws will be amended upon prior approval of shareholders in order to:

•       eliminate the limitation that bans RES from holding more than 34% of issued and outstanding ordinary shares;
•       eliminate the obligation to exchange preferred shares Series B if a person or group holds more than 35% of voting shares of Condor; and
•       Authorize the issuance of non-voting ordinary shares.

As regards warrants previously issued to RES, 50% would be extended till January 31, 2018, and the other 50% until January 31, 2019.
RES would receive a combination of voting and non-voting shares so that its voting power in no event exceeds 49%.
On August 31, the exchange process was extended until October 12, 2015.

On September 2015, Condor terminated its offer to exchange preferred shares to common and cancelled its special meeting of shareholders scheduled for October 8, 2015 to obtain shareholder approvals to the conditions of the exchange offer.

·On July 20, 2015 Brazil Federal Revenue Office approved and refunded Brasilagro for the amount included in the petition in relation to CSLL accumulated receivables with negative balance for calendar year 2012 and the income tax negative balance for fiscal year 2013 in the amount of Rs. 239 (Ps. 700) and Rs. 1,600 (Ps. 4,688), respectively, and the value of Rs. 165 (Ps. 483) regarding the request made by its controlled company Jaborandi Agrícola. In addition, on July 20, 2015 Brazil Federal Revenue Office approved and refunded the value included in the petition related to cumulative receivables related to PIS and COFINS (Social Integration Program and Social Security Financing Lev in November 2014. Total sum of money refunded by the Federal Revenue Office amounted to Rs. 39 (Ps. 114) and is available in the current account of Brasilagro.

·Pursuant to share repurchase program, Brasilagro may repurchase up to 698,310 shares or 2% of the ordinary shares issued and outstanding. In July 2015, total shares repurchased by Brasilagro was 209,200 shares for a total amount of Rs. 2,334 (Ps. 6,839).

F-279

45.
Subsequent events (Continued)

·Brasilagro and Jaborandi Ltda. will pay the rural harvest financing agreements entered into with Banco do Nordeste – BNB, after the balance sheet date (June 30, 2015). On July 31 2015, principal was repaid in the amount of Rs. 23,733 (Ps. 69,538) and on August 1, 2015 interest was paid in an amount of Rs. 2,022 (Ps. 5,924).

·On August 7, 2015, the directors of Brasilagro exercised their call options for 233,689 shares at an exercise price of Rs. 2,006 (Ps. 5,878) referring to the First Share Option Program.


F-280



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
BancoHipotecarioBanco Hipotecario S.A.

We have audited the accompanying consolidated balance sheets of BancoHipotecarioBanco Hipotecario S.A. and its subsidiaries (collectively referred to as the “Bank”) as of June 30, 20152016 and 20142015 and the related consolidated statements of income, of changes in shareholders' equity and of cash flows for each of the three twelve-month periods in the period ended June 30, 2015.2016. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BancoHipotecarioBanco Hipotecario S.A. and its subsidiaries atas of June 30, 20152016 and 2014,2015, and the results of their operations and their cash flows for each of the three twelve-month periods in the period ended June 30, 20152016 in conformity with accounting rules prescribed by the Banco Central de la República Argentina (the “BCRA”).

The Bank’s consolidated financial statements have been prepared in accordance with Argentine Banking GAAP, which differs in certain significant respects from U.S. GAAP. Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and regulations of the SEC. These consolidated financial statements include solely a reconciliation of net income and shareholders’ equity to U.S. GAAP. Pursuant to Item 17 of Form 20-F, this reconciliation does not include disclosure of all information that would be required by U.S. GAAP and regulations of the SEC. Information relating to the nature and effect of the differences between accounting rules prescribed by the BCRA and U.S. GAAP is presented in Note 34 to the consolidated financial statements.
Buenos Aires, Argentina
August 7, 2015, except for notes 34 and 36 as to which the date is November 17, 2015
 Price Waterhouse & Co. S.R.L.
Buenos Aires, Argentina
August 10, 2016, except for notes 37 and 39 as to which the date is October 31, 2016
 
    
Price Waterhouse & Co S.R.L.
By:
/s/ Marcelo Trama 
  Name Marcelo Trama 
By:/s/ Diego Sisto
 Title Partner 
Diego Sisto

Partner

    
 
 

 
 
F- 211
F-281

 


BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of June 30, 20152016 and 20142015
(Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

 June 30, 
 2015 2014 
ASSETS     
       
Cash and due from banks Ps.492,233  Ps.610,106 
Banks and correspondents  2,709,342   2,398,062 
   3,201,575   3,008,168 
         
Government and corporate securities (Note 4)  5,271,583   3,395,192 
         
Loans (Note 5)        
Mortgage loans  2,413,401   2,197,336 
Credit card loans  8,500,601   5,950,266 
Other loans  8,334,879   7,277,967 
   19,248,881   15,425,569 
Plus: Accrued interest receivable  218,089   150,676 
Less: Allowance for loan losses (Note 6)  (433,825)  (356,267)
   19,033,145   15,219,978 
         
Other receivables from financial transactions (Note 7)        
Collateral receivable under repurchase agreements  35,621   60,196 
Amounts receivable under derivative financial instruments  4,785   45,817 
Loans in trust pending securitization  10,301   10,776 
Amounts receivable under reverse repurchase agreements of government and corporate securities  94,597   498,000 
Other (Note 7)  3,247,013   1,961,678 
   3,392,317   2,576,467 
Plus:  Accrued interest receivable  8,440   8,165 
Less: Allowance for Other receivables from financial transactions  (22,611)  (11,189)
   3,378,146   2,573,443 
         
Assets under financial leases  125,461   71,907 
         
Investments in other companies  70,806   19,241 
         
Miscellaneous receivables (Note 8)  1,559,217   1,117,890 
         
Bank premises and equipment (Note 9)  186,320   150,489 
         
Miscellaneous assets (Note 10)  60,413   50,483 
         
Intangible assets (Note 11)  426,148   244,540 
         
Items pending allocation  8,542   4,254 
         
Total Assets Ps.33,321,356  Ps.25,855,585 
 June 30,
 2016 2015
ASSETS    
      
Cash and due from banks…………………………………………...Ps.607,656 Ps.492,233
Banks and correspondents………………………………………….. 2,694,184  2,709,342
  3,301,840  3,201,575
      
Government and corporate securities (Note 4)…………………….. 5,269,499  5,271,583
      
Loans (Note 5)     
Mortgage loans…………………………………………………... 2,429,322  2,413,401
Credit card loans…………………………………………………. 10,573,083  8,500,601
Other loans……………………………………………………….. 9,203,915  8,334,879
  22,206,320  19,248,881
Plus: Accrued interest receivable………………………………… 240,885  218,089
Less: Allowance for loan losses (Note 6)……………………..…. (493,536)  (433,825)
  21,953,669  19,033,145
      
Other receivables from financial transactions (Note 7)     
Collateral receivable under repurchase agreements……………… 75,695  35,621
Amounts receivable under derivative financial instruments..…… 54,281  4,785
Loans in trust pending securitization ……………………………. 8,390  10,301
Amounts receivable under reverse repurchase agreements of government and corporate securities …………..……...……….. 541,283  94,597
Other (Note 7)..……………….………………………….………. 6,177,987  3,247,013
  6,857,636  3,392,317
Plus: Accrued interest receivable………………………………... 7,577  8,440
Less: Allowance for Other receivables from financial transactions…………………………………………….………. (23,624)  (22,611)
  6,841,589  3,378,146
      
Assets under financial leases……………………………………….. 135,302  125,461
      
Investments in other companies……………………………………. 129,698  70,806
      
Miscellaneous receivables (Note 8)..………..…….……………….. 1,748,707  1,559,217
      
Bank premises and equipment (Note 9)..……..….………………… 317,098  186,320
      
Miscellaneous assets (Note 10)……..…………….………………... 253,467  60,413
      
Intangible assets (Note 11)…….…………………..……………….. 552,755  426,148
      
Items pending allocation……………………………………...……. 23,705  8,542
      
Total Assets…………………...……..………………………….
Ps.40,527,329 Ps.33,321,356

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


F- 212
 
F-282

 

BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET – (Continued)
As of June 30, 20152016 and 20142015
(Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

  June 30 
  2015  2014 
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
LIABILITIES      
Deposits      
Checking accounts Ps. 3,151,296  Ps. 2,800,899 
Saving accounts  2,953,065   1,662,444 
Time deposits  11,898,186   9,049,574 
Other deposit accounts  188,604   178,426 
   18,191,151   13,691,343 
Plus:  Accrued interest payable  237,680   215,811 
   18,428,831   13,907,154 
Other liabilities from financial transactions        
Other banks and international entities (Note 14)  297,357   558,449 
Bonds (Note 15)  4,926,694   3,501,712 
Argentine Central Bank  115   81 
Amounts payable under derivative financial instruments  334,874   300,099 
Borrowings under repurchase agreements collateralized by government securities  93,660   384,117 
Obligation to return securities acquired under reverse repurchase agreements of government and corporate securities (Note 13)  34,481   140,804 
Other  1,867,191   1,083,892 
   7,554,372   5,969,154 
Plus:  Accrued interest payable  135,471   97,156 
   7,689,843   6,066,310 
         
Miscellaneous liabilities        
Taxes  326,154   352,988 
Sundry creditors (Note 20)  1,468,191   724,210 
Other (Note 20)  272,415   178,649 
   2,066,760   1,255,847 
         
Reserve for contingencies (Note 12)  221,950   152,789 
         
Subordinated bonds (Note 16)  100,452   - 
         
Items pending allocation  44,847   208,293 
         
Non-controlling interest  67,957   59,849 
         
Total Liabilities  28,620,640   21,650,242 
         
SHAREHOLDERS' EQUITY        
         
Common stock  1,463,365   1,463,365 
Treasury stock  54,149   54,149 
Paid in capital  834   834 
Inflation adjustment on common stock  699,601   699,601 
Reserves  1,842,198   1,292,226 
Retained earnings  640,569   695,168 
Total Shareholders' Equity  4,700,716   4,205,343 
Total Liabilities and Shareholders' Equity Ps. 33,321,356  Ps. 25,855,585 
 June 30
 2016 2015
     
LIABILITIES AND SHAREHOLDERS' EQUITY     
LIABILITIES     
Deposits     
Checking accounts…………………………………………………Ps.1,564,438 Ps.3,151,296
Saving accounts…………………………………………………… 2,848,403  2,953,065
Time deposits……………………………………………………… 12,908,292  11,898,186
Other deposit accounts…………………………………………….. 178,137  188,604
  17,499,270  18,191,151
Plus: Accrued interest payable……………………………………. 294,263  237,680
  17,793,533  18,428,831
Other liabilities from financial transactions     
Other banks and international entities (Note 14)………………….. 276,006  297,357
Bonds (Note 15)…………………………………………………… 9,270,847  4,926,694
Argentine Central Bank…………………………………………… 113  115
Amounts payable under derivative financial instruments.……..… 669,472  334,874
Borrowings under repurchase agreements collateralized by government securities……...……………………………………. 66,973  93,660
Obligation to return securities acquired under reverse repurchase agreements of government and corporate securities (Note 13)…. 590,154  34,481
Other……….………………………………………………….…... 3,216,262  1,867,191
  14,089,827  7,554,372
Plus: Accrued interest payable……………………………………. 358,364  135,471
  14,448,191  7,689,843
      
Miscellaneous liabilities     
Taxes……………………………………………………………… 511,106  326,154
Sundry creditors (Note 20)………………………………………... 945,888  1,468,191
Other (Note 20)……………………………………………………. 384,410  272,415
  1,841,404  2,066,760
      
Reserve for contingencies (Note 12)………………………………... 300,059  221,950
      
Subordinated bonds (Note 16)……………………..………………. 121,245  100,452
      
Items pending allocation………………………………………..…... 76,448  44,847
      
Non-controlling interest …………………………………………….
 130,207  67,957
      
Total Liabilities………………..……………………………….
 34,711,087  28,620,640
      
SHAREHOLDERS' EQUITY     
      
Common stock………………………………………………………. 1,463,365  1,463,365
Treasury stock……………………………………………………….. 54,149  54,149
Paid in capital……………………………………………………….. 834  834
Inflation adjustment on common stock……………………………... 699,601  699,601
Reserves……………………………………………………………... 2,059,361  1,842,198
Retained earnings…………………….....………………...…………. 1,538,932  640,569
Total Shareholders' Equity…………….……………………...
 5,816,242  4,700,716
Total Liabilities and Shareholders' Equity………………..…
Ps.40,527,329 Ps.33,321,356

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

 

F- 213
 
F-283

 

BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
(Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

  June 30, 
  2015  2014  2013 
Financial income         
Interest on loans and other receivables from financial transactions Ps.4,326,324  Ps.3,779,073  Ps.1,961,272 
Income from government and corporate securities.  1,191,396   904,985   456,004 
Other  6,250   12,186   6,906 
   5,523,970   4,696,244   2,424,182 
Financial expenses            
Interest on deposits and other liabilities from financial transactions  2,801,201   2,063,512   1,120,480 
Contributions and taxes on financial income  442,814   339,676   163,794 
   3,244,015   2,403,188   1,284,274 
             
Gross brokerage margin Ps.2,279,955  Ps.2,293,056  Ps.1,139,908 
             
Provision for loan losses (Note 6)  375,270   303,348   233,376 
Income from services            
Insurance premiums  1,255,436   895,129   417,368 
Commissions (Note 21)  1,295,325   866,616   670,213 
Other (Note 21)  733,262   356,153   307,398 
   3,284,023   2,117,898   1,394,979 
Expenses for services            
Insurance claims  149,871   174,715   57,583 
Commissions (Note 21)  540,542   446,257   194,064 
Contributions and taxes on income from services  78,457   61,666   39,261 
   768,870   682,638   290,908 
Administrative expenses            
Salaries and social security contributions  1,775,548   1,284,840   844,965 
Advertising expenses  179,542   118,277   88,538 
Value added tax and other taxes  167,249   113,917   115,353 
Directors’ and Syndics’ fees  65,788   71,027   31,774 
Fees for administrative services  406,690   258,668   189,428 
Maintenance and repairs  96,821   53,981   37,186 
Electricity and communications  116,907   71,942   56,515 
Depreciation of bank premises and equipment  35,267   20,992   15,830 
Rent  97,482   69,774   49,895 
Other  425,595   277,361   182,718 
   3,366,889   2,340,779   1,612,202 
             
Net income from financial transactions Ps.1,052,949  Ps.1,084,189  Ps.398,401 
  June 30,
  2016 2015 2014
Financial income      
Interest on loans and other receivables from financial transactions………………………….
 
Ps.
6,520,816Ps.4,326,324Ps.3,779,073
Income from government and corporate securities. 2,584,524 1,191,396 904,985
Other……………………………………….…….. 13,177 6,250 12,186
  9,118,517 5,523,970 4,696,244
Financial expenses      
Interest on deposits and other liabilities from financial transactions.………………………… 5,008,083 2,801,201 2,063,512
Contributions and taxes on financial income….…. 682,258 442,814 339,676
  5,690,341 3,244,015 2,403,188
       
Gross brokerage margin…….....................................
Ps.3,428,176Ps.2,279,955Ps.2,293,056
       
Provision for loan losses (Note 6)……..…..….……. 356,492 375,270 303,348
Income from services      
Insurance premiums………………..…………….. 1,831,371 1,255,436 895,129
Commissions (Note 21)……………..…………… 1,783,121 1,295,325 866,616
Other (Note 21)……………………..……………. 824,753 733,262 356,153
  4,439,245 3,284,023 2,117,898
Expenses for services      
Insurance claims…………………………………. 59,077 149,871 174,715
Commissions (Note 21)………………………….. 917,622 540,542 446,257
Contributions and taxes on income from services……………………………………….. 112,991 78,457 61,666
  1,089,690 768,870 682,638
Administrative expenses      
Salaries and social security contributions….…..…. 2,337,388 1,775,548 1,284,840
Advertising expenses……………………….…..… 167,040 179,542 118,277
Value added tax and other taxes………………….. 242,738 167,249 113,917
Directors’ and Syndics’ fees……………….…..…. 102,926 65,788 71,027
Fees for administrative services………………….. 622,664 406,690 258,668
Maintenance and repairs..………………….……... 135,876 96,821 53,981
Electricity and communications...………………... 177,198 116,907 71,942
Depreciation of bank premises and equipment…... 59,031 35,267 20,992
Rent……………………..………………….……... 132,311 97,482 69,774
Other……………………………………….…..…. 514,293 425,595 277,361
  4,491,465 3,366,889 2,340,779
       
Net income from financial transactions…….............Ps.1,929,774Ps.1,052,949Ps.1,084,189

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

 

F- 214
 
F-284

 

BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME – (Continued)
For the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


  June 30, 
  2015  2014  2013 
          
Miscellaneous income         
Penalty interest  86,874   59,281   54,833 
Loans recoveries  171,781   82,104   100,834 
Other (Note 22)  58,875   47,543   37,755 
   317,530   188,928   193,422 
Miscellaneous expenses            
Provision for other contingencies and miscellaneous receivables  132,614   67,564   31,058 
Other (Note 22)  336,720   220,430   130,966 
   469,334   287,994   162,024 
             
Income before income taxes and Non-controlling interest Ps.901,145  Ps.985,123  Ps.429,799 
             
Income taxes (Note 24)  377,613   369,127   76,529 
Non-controlling interest  13,658   11,031   (14,148)
Net income for the period Ps.537,190  Ps.627,027  Ps.339,122 
  June 30,
  2016 2015 2014
       
Miscellaneous income      
Penalty interest….…………………………………… 96,964 86,874 59,281
Loans recoveries.…….……………………………… 320,934 171,781 82,104
Other (Note 22)……………….……………………... 128,645 58,875 47,543
  546,543 317,530 188,928
Miscellaneous expenses      
Provision for other contingencies and miscellaneous receivables………………………………………... 290,563 132,614 67,564
Other (Note 22)……………………………………..... 377,835 336,720 220,430
  668,398 469,334 287,994
       
Income before income taxes and Non-controlling interest..…………………………………………......Ps.1,807,919Ps.901,145Ps.985,123
       
Income taxes (Note 24)……………………………..…. 698,387 377,613 369,127
Non-controlling interest………………………..……..... 5,998 13,658 11,031
Net income for the period……..………………….Ps.1,115,530Ps.537,190Ps.627,027

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




 
F- 215
F-285

 

BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

  
Common stock
(Note 26)
 Paid in capital (Note 26) 
 
 
Treasury stock (Note 26)
 
Inflation adjustment of common stock
(Note 26)
Reserves Retained earnings Total shareholders’ equity
 
Legal
(Note 26)
 
Voluntary
(Note 26)
                 
Balance as of June 30, 2013……………...Ps.1,463,365Ps.834Ps.54,149Ps.699,601Ps.526,828Ps.367,601Ps.495,938Ps.3,608,316
                 
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 08/23/13
 - - - - 68,721 244,886 (343,607) (30,000)
                 
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/24/14
 - - - - 84,190 - (84,190) -
                 
Net income for the period - - - - - - 627,027 627,027
                 
Balance as of June 30, 2014……………...Ps.1,463,365Ps.834Ps.54,149Ps.699,601Ps.679,739Ps.612,487Ps.695,168Ps.4,205,343
                 
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/24/14. Approval of BCRA on 12/23/14
 - - - - - - (41,817) (41,817)
                 
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 03/21/15.
 - - - - 109,994 439,978 (549,972) -
                 
Net income for the period - - - - - - 537,190 537,190
                 
Balance as of June 30, 2015……………...Ps.1,463,365Ps.834Ps.54,149Ps.699,601Ps.789,733Ps.1,052,465Ps.640,569Ps.4,700,716
                 
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/13/16
 - - - - 217,163 - (217,163) -
                 
Net income for the period - - - - - - 1,115,530 1,115,530
                 
Balance as of June 30, 2016……………...Ps.1,463,365Ps.834Ps.54,149Ps.699,601Ps.1,006,896Ps.1,052,465Ps.1,538,936Ps.5,816,242
 
           Reserves      
   Common stock (Note 26) Paid in capital (Note 26)  Treasury stock (Note 26)  Inflation adjustment of common stock (Note 26)  
Legal
(Note 26) 
 
Voluntary
(Note 26) 
 Retained earnings    Total shareholders' equity 
Balance as of June 30, 2012 Ps.1,463,365 Ps.834 Ps.54,149 Ps.699,601 Ps.526,828 Ps.367,601 Ps.256,816  Ps.3,369,194 
                           
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/13/11. Approval of BCRA on 09/20/12
  -  -  -  -  -  -  (100,000)  (100,000)
                           
Net income for the period  -  -  -  -  -  -  339,122   339,122 
                           
Balance as of June 30, 2013 Ps.1,463,365 Ps.834 Ps.54,149 Ps.699,601 Ps.526,828 Ps.367,601 Ps.495,938  Ps.3,608,316 
                           
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 08/23/13
  -  -  -  -  68,721  244,886  (343,607)  (30,000)
                           
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/24/14
  -  -  -  -  84,190  -  (84,190)  - 
                           
Net income for the period  -  -  -  -  -  -  627,027   627,027 
                           
Balance as of June 30, 2014 Ps.1,463,365 Ps.834 Ps.54,149 Ps.699,601 Ps.679,739 Ps.612,487 Ps.695,168  Ps.4,205,343 
                           
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 04/24/14. Approval of BCRA on 12/23/14
  -  -  -  -  -  -  (41,817)  (41,817)
                           
Distribution of retained earnings approved by the General Shareholders’ Meeting held on 03/21/15.
  -  -  -  -  109,994  439,978  (549,972)  - 
                           
Net income for the period  -  -  -  -  -  -  537,190   537,190 
                           
Balance as of June 30, 2015 Ps.1,463,365 Ps.834 Ps.54,149 Ps.699,601 Ps.789,733 Ps.1,052,465 Ps.640,569  Ps.4,700,716 

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

 

F- 216
 
F-286

 

BANCO HIPOTECARIO SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
(Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

  2015  2014  2013 
Cash flows from operating activities:         
Net income Ps.537,190  Ps.627,027  Ps.339,122 
Adjustments to reconcile net income to net cash provided by Cash Flows from operating activities:
            
Provision for loan losses and for contingencies and miscellaneous receivables, net of reversals  258,567   273,423   163,600 
Net gain on investment government securities  (179,430)  (89,484)  (8,802)
Gain / (loss) on derivative financial instruments  (63)  -   (46)
Depreciation and amortization  114,799   66,103   39,152 
Net gain on sale of premises and equipment and miscellaneous assets  (578)  (2,944)  (1,160)
Net Indexing (CER and CVS) and interest of loans and deposits incurred but not paid  (177,558)  (19,112)  (127,277)
Non-controlling interest  (13,658)  (11,031)  14,148 
Net change in trading securities  1,269,136   (858,189)  907,867 
Net change in other assets  (2,850,499)  (661,376)  (136,396)
Net change in other liabilities  1,179,439   1,391,036   (482,324)
Net cash (used in) operating activities  137,345   715,453   707,884 
             
Cash flows from investing activities:            
(Increase)/Decrease in loans, net  (4,502,150)  (5,780,425)  (2,692,773)
Proceeds from securitization of consumer loans  401,331   749,589   380,415 
Proceeds from maturities of available for sale securities  808,876   81,100   345,961 
Purchases of investments in other companies  (45,000)  (10,013)  (5,012)
Proceeds from sales, net of payments for purchases, of available for sale securities  (2,082,693)  (1,166,729)  25,697 
Proceeds from sale of premises and equipment  8,491   1,874   1,029 
Purchases of premises and equipment, miscellaneous and intangible assets  (350,659)  (212,026)  (117,240)
Net cash provided by investing activities  (5,761,804)  (6,336,630)  (2,061,923)
             
Cash flows from financing activities:            
Increase in deposits, net  4,499,808   4,792,123   2,093,107 
Principal payments on bonds, notes, and other debts  (626,754)  (853,108)  (584,601)
Proceeds from issuance of bonds, notes and other debts  1,934,019   1,435,183   653,781 
Payments of debt issuance cost  (19,406)  (12,855)  (8,425)
Distribution of dividends  (41,817)  (29,968)  (99,895)
(Decrease)/Increase in borrowings, net  (23,518)  806,185   89,175 
Net cash provided by financing activities  5,722,332   6,137,560   2,143,142 
             
Net increase/(decrease) in cash and cash equivalents  97,873   516,383   789,103 
Cash and cash equivalents at the beginning of the period  3,008,168   2,217,327   1,352,474 
Effect of foreign exchange changes on cash and cash equivalents  95,534   274,458   75,750 
Cash and cash equivalents at the end of the period Ps.3,201,575  Ps.3,008,168  Ps.2,217,327 
             
Supplemental disclosure of cash flow information:            
    Cash paid for interest Ps.2,525,829  Ps.1,555,976  Ps.939,573 
    Cash paid for presumptive minimum income tax and income tax.  343,504   113,576   71,481 
    Non-cash transactions involving securitizations  151,576   165,249   87,925 
  2016 2015 2014
Cash flows from operating activities:      
Net income..……...………………………….………………………Ps.1,115,530Ps.537,190Ps.627,027
Adjustments to reconcile net income to net cash provided by Cash Flows from operating activities:
      
Provision for loan losses and for contingencies and miscellaneous receivables, net of reversals………………………………...…….. 326,121 258,567 273,423
Net gain on investment government securities………………...….... (642,081) (179,430) (89,484)
Gain / (loss) on derivative financial instruments……..……..……… - (63) -
(Gain) / loss on equity investments………........................................ (34,644) (6,641) -
Depreciation and amortization……………………………………... 191,298 114,799 66,103
Net gain on sale of premises and equipment and miscellaneous assets………………………………….…………………………... (3,562) (578)  (2,944)
Net Indexing (CER and CVS) and interest of loans and deposits incurred but not paid…………………………………..……..……... (318,632) (177,558) (19,112)
Non-controlling interest…………………………………………...... (5,998) (13,658) (11,031)
Net change in trading securities…………………………………..... (756,478) 1,269,136 (858,189)
Net change in other assets……………..…………………………… (2,981,939) (2,843,858) (661,376)
Net change in other liabilities………….…………………………… 1,939,825 1,179,439 1,391,036
Net cash (used in) operating activities…………………………....
 (1,170,560) 137,345 715,453
       
Cash flows from investing activities:      
(Increase)/Decrease in loans, net………………….………………... (4,403,465) (4,502,150) (5,780,425)
Proceeds from securitization of consumer loans………………….... 894,363 401,331 749,589
Proceeds from maturities of available for sale securities.…...…....... 417,797 808,876 81,100
Purchases of investments in other companies, net of sales………… (19,500) (45,000) (10,013)
Proceeds from sales, net of payments for purchases, of available for sale securities…………………………………………………… 657,857 (2,082,693) (1,166,729)
Proceeds from sale of premises and equipment……………………. (3,890) 8,491 1,874
Purchases of premises and equipment, miscellaneous and intangible assets………………………………………………....... (637,847) (350,659) (212,026)
Net cash provided by investing activities……………………........
 (3,094,685) (5,761,804) (6,336,630)
       
Cash flows from financing activities:      
Increase in deposits, net…………………...………………………... (691,881) 4,499,808 4,792,123
Principal payments on bonds, notes, and other debts………………. (3,737,599) (626,754) (853,108)
Proceeds from issuance of bonds, notes and other debts…………… 8,103,404 1,934,019 1,435,183
Payments of debt issuance cost…………………………………….. (90,494) (19,406) (12,855)
Distribution of dividends……………………………………...……. - (41,817) (29,968)
(Decrease)/Increase in borrowings, net…………………………….. 68,283 (23,518) 806,185
Net cash provided by financing activities………………………...
 3,651,713 5,722,332 6,137,560
       
Net increase/(decrease) in cash and cash equivalents……………… (613,532) 97,873 516,383
Cash and cash equivalents at the beginning of the period………….. 3,201,575 3,008,168 2,217,327
Effect of foreign exchange changes on cash and cash equivalents.... 713,797 95,534 274,458
Cash and cash equivalents at the end of the period……………
Ps.3,301,840Ps.3,201,575Ps.3,008,168
       
Supplemental disclosure of cash flow information:      
    Cash paid for interest…………………………………………..…Ps.4,078,196Ps.2,525,829Ps.1,555,976
    Cash paid for presumptive minimum income tax and income tax. 523,373 343,504 113,576
    Non-cash transactions involving securitizations……………….... 372,198 151,576 165,249


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


 

F- 217
F-287

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



1.
General

General
a. Description of business

Banco HipotecarioSA (herein after referred to as the “Bank” or “BHSA”), is a commercial bank, organized under the laws of Argentina.

The Bank historically has provided general banking services, focused on individual residential mortgage loans and construction-project loans directly to customers as well as indirectly through selected banks and other financial intermediaries throughout Argentina. In 2004, as part of its business diversification strategy, the Bank resumed the mortgage lending and expanded its product offerings, beginning to offer personal loans, credit card loans and also engaging in mortgage loan securitizations, mortgage loan servicing, other corporate loans and mortgage-related insurance in connection with its lending activities.

b. Basis of presentation

The consolidated financial statements of the Bank have been prepared in accordance with the rules of Banco Central de la República Argentina (“Argentine Central Bank” or “BCRA”) which prescribe the accounting reporting and disclosure requirements for banks and financial institutions in Argentina (“Argentine Banking GAAP”). Argentine Banking GAAP differ in certain significant respects from generally accepted accounting principles in the United States of America (“U.S. GAAP”). Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and regulations of the Securities and Exchange Commission (“SEC”). These consolidated financial statements include solely a reconciliation of net income and shareholders’ equity to U.S. GAAP. Pursuant to Item 17 of Form 20-F, this reconciliation does not include disclosure of all information that would be required by U.S. GAAP and Regulation S-X of the SEC. See note 34 for details.

Certain disclosures required by the Argentine Banking GAAP have not been presented herein since they are not required under U.S. GAAP or the SEC and are not considered to be relevant to the accompanying consolidated financial statements taken as a whole.

Certain reclassifications of prior year’s information have been made to conform to current year presentation. Such reclassifications do not have a significant impact on the Bank financial statements.

c. Principles of consolidation

The consolidated financial statements include the accounts of the Bank and its subsidiaries over which the Bank has effective control. The percentages directly or indirectly held in those companies’ capital stock as of June 30, 20152016 and 20142015 are as follows:
Issuing CompanyJune 30,
20162015
BHN Sociedad de Inversión Sociedad Anónima99.99%99.99%
BHN Seguros Generales Sociedad Anónima (a)99.99%99.99%
BHN Vida Sociedad Anónima (a)99.99%99.99%
BACS Banco de Crédito y Securitización Sociedad Anónima87.50%87.50%
BACS Administradora de activos S.A. S.G.F.C.I.85.00%85.00%
Tarshop S.A. (b)80.00%80.00%
BH Valores SA100.00%100.00%


  June 30, 
Issuing Company 2015  2014 
BHN Sociedad de Inversión Sociedad Anónima  99.99%  99.99%
BHN Seguros Generales Sociedad Anónima  99.99%  99.99%
BHN Vida Sociedad Anónima  99.99%  99.99%
BACS Banco de Crédito y Securitización Sociedad Anónima  87.50%  87.50%
BACS Administradora de activos S.A. S.G.F.C.I.  85.00%  85.00%
Tarshop S.A. (*)  80.00%  80.00%
BH Valores SA  100.00%  100.00%



F- 218
F-288

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


(*)
(a) On October 22, 2014,December 2, 2015, the Bank took notice of an observation raised by the Superintendent of Financial Institutions reporting to the Argentine Central Bank with regard to the insurance business developed by Banco Hipotecario S.A. through BHN Vida S.A. and BHN Seguros Generales S.A.
The observation requires the enforcement of the credit scoring regulations, which impose a 12.5% limit on interests in the capital stock and voting rights of other companies.
In reply, the Bank has claimed that such observation should be revised, in that the Bank is allowed to conduct the business in question pursuant to the Privatization Law No. 24,855 and its regulations, in particular Decree No. 1394/98, as continuing company of Banco Hipotecario Nacional.
(b) On September 11, 2015, November 4, 2015 and June 23,2016, the Board of Directors of Banco Hipotecario S.A. unanimously approved an irrevocable capital contribution to Tarshop S.A. in the amount of Ps. 110,000Ps.52,500, Ps.52,500 and Ps.250,000, respectively, to be made by shareholders Banco Hipotecario S.A. and IRSA Propiedades Comerciales S.A. (continuing company after Alto Palermo S.A.’s change of corporate name) pro rata of their shareholdings so that Tarshop S.A. should have sufficient resources for its operationaloperating activities, and to be able to execute its 2015 Business Plan. On December 15, 2014,in line with the General and Extraordinary Shareholder's Meeting unanimously approved such capitalization program previously approved.

All significant intercompany accounts and transactions have been eliminated in consolidation.

d. Presentation of financial statements in constant argentine pesos

The financial statements have been adjusted for inflation in conformity with the guidelines set in Communication “A” 551 of the Argentine Central Bank up to the financial year ended December 31, 1994, and prepared in accordance with the standards laid down by CONAU 1 Circular. As from January 1, 1995, and according to the authorization accorded by Resolution N° 388 of the Argentine Central Bank's Superintendency of Financial and Exchange Institutions, the Bank discontinued the adjustment for inflation of its financial statements until December 31, 2001. As from January 1, 2002, as a result of the application of Communication “A” 3702 which established the repeal of any legal and regulatory rule that did not allow companies to restate their accounting balances at period-end currency values, the Bank resumed the application of the adjustment for inflation in accordance with the rules issued in due time by the Argentine Central Bank using the adjustment coefficient derived from the domestic wholesale price index published by the National Statistics and Census Institute (INDEC). Furthermore, it has been considered that the accounting measurements derived from the changes in the purchasing power of the currency between December 31, 1994 and 2001 are stated in the currency value as of the latter date.

On March 25, 2003, the Executive Branch issued Decree 664 establishing that the financial statements for years ending as from that date are to be stated in nominal currency. Consequently, in accordance with Communication “A” 3921 of the BCRA, the restatement of the financial statements was discontinued as from March 1, 2003.
Pursuant to the Argentine professional accounting standards in effect in the City of Buenos Aires, the financial statements must be stated in constant currency. The restatement method and the need to apply it arise from requirements contained in Technical Pronouncements No. 6 and No. 17 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), as amended by Technical Pronouncement No. 39 issued by the referred entity on October 4, 2013 and approved by the Professional Council in Economic Sciences of the City of Buenos Aires on April 16, 2014. These standards provide that the effects of inflation should be recognized in the financial statements in the event that certain conditions in the Argentine economy are met


F- 219
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
As of June 30, 2016, the cumulative inflation rate for three consecutive years endede on such dates could not be calculated on the basis of official data provided by the Argentine Institute of Statistics and Census since, in October 2015, the referred entity discontinued the calculation of the Wholesale Domestic Price Index (IPIM), and resumed it in January 2016.
This circumstance should be taken into account when analyzing and interpreting these financial statements, which have been prepared in line with the accounting standards issued by the Argentine Central Bank for application by financial institutions.
2. Significant Accounting Policies
The following is a summary of significant accounting policies used in the preparation of the consolidated financial statements.

2.1. Foreign Currency Assets and Liabilities

US dollar assets and liabilities have been valued at the rate of exchange between the peso and the US dollar published by the Argentine Central Bank. Assets and liabilities valued in foreign currencies other than the US dollar were converted into the latter currency using the swap rates communicated by the Argentine Central Bank’s operations desk, in force at the close of operations on the last business day of the fiscal period end.

Foreign currency transactions net gains or losses are recorded within “Financial income” or “Financial expenses” in the accompanying unaudited consolidated statements of income.

2.2. Interest accruals and adjustments of principal amounts (CER and CVS)

Interest accruals were determined using the exponential method for all lending and certain borrowing transactions in local and foreign currency, and interest accruals for loans overdue more than ninety days were discontinued.

 

F-289

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Adjustments of principal amounts from application of the CER (Reference Stabilization Index), and CVS were accrued as established by Argentine Central Bank regulations, and interest accruals on loans overdue more than ninety days were discontinued.

2.3. Government and Corporate Securities

Securities classified as "Holdings booked at fair market value", "Investment in listed corporate securities" and "Securities issued by the BCRA" with volatility published by the BCRA, have been valued at period-end or year-end market quotation.

As of June 30, 2016 and 2015, the Bank maintains in its portfolio overdue income coupons from the DICY and PARY bonds to be collected.

Securities classified as “Holdings booked at cost plus return” and “Securities issued by the BCRA” with no volatility published by the BCRA or with volatility but which the Entity decides to book under the first category, have been valued at their acquisition cost subject to an exponential increase based on the internal rate of return, net of contra accounts, if applicable.

2.4. Loans

The portfolio of performing loans and loans due ninety days or less has been valued in terms of the principal amounts actually lent, plus capitalized interest, net of principal amortization collected and
F- 220
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
debt balance refinancing, plus adjustments (from the application of the CER, and CVS where applicable) and accrued interest receivable and less the estimated reserve for loan losses.

Other loans to the public sector:

i)i. those loans were valued at cost plus return, taking as cost their book value as of December 31, 2010.

ii)ii. those originally granted in foreign currency have been converted into Ps. at the exchange rate of $1.40 per US dollar, as established by Law 25561, Decree 214 and complementary rules and amendments. Since February 3, 2002, the CER has been applied to the amount of those loans and maximum rates have been established, in accordance with Decree 1579/02, if those assets were subjected to the Exchange of Provincial Public Debt.

Loans to the non-financial private sector originally granted in foreign currency have been converted into pesos at the exchange rate of $1.00 per US dollar, as established by Law 25561, Decree 214 and complementary rules and amendments. Since February 3, 2002, the CER and CVS have been applied to the amount of those loans and maximum rates have been established, depending on the borrower.

2.5. Other receivables for financial transactions

The individual mortgage loans the trustee ownership of which was transferred by the Bank and recorded in this caption have been valued and converted into pesos following the criterion described in points 2.2. and 2.4.

The rights arising from currency swap transactions have been valued at the quotation of that currency following the criterion described in point 2.1.

The financial trust participation certificates have been valued according to the equity method of accounting. Financial trust debt securities have been stated at cost plus return, index-adjusted by applying the CER to the appropriate instruments.

 

F-290

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

The interest rate swap transactions carried out for the purposes of hedging assets and liabilities with fixed and floating rates have been valued in accordance with the unsettled balances of agreed upon lending and borrowing interests rates.

Interest rate swaps for agreed-upon fixed rate have been valued in accordance with the balances pending settlement. Futures transactions agreed upon that are mainly closed as hedging for the position in foreign currency have been valued in accordance with the balances pending settlement. Changes in these values, for all derivative instruments, are recognized as a gain or loss under the caption “Financial Income – Interest on loans and other receivables from financial transactions” or “Financial Expenses – Interest on deposits and other liabilities from financial transactions”, respectively.

Unlisted negotiable obligations have been valued at acquisition cost exponentially increased according to the internal rate of return.

The Bank holds Negotiable Obligations in its own portfolio, measured at their residual value plus interest accrued.
Securities issued by the BCRA and government securities held as collateral for OTC transactions are valued as explained in item 2.3 of this note.

Repo transactions are carried at the value originally agreed upon, plus accrued premiums.

2.6. Receivables for financial leases

Receivables for financial leases are carried at the current value of the periodic installments and the residual value previously agreed upon, calculated as per the conditions set forth in the respective lease agreements, applying the internal rate of return and net of allowances for loan losses.

2.7. Investments in Other Companies


F- 221
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
Permanent equity investments in companies where corporate decision are not influenced, are accounted for the lower of cost and the equity method. As of June 30, 20152016 and December 31, 20142015 these investments were recorded at cost.

This caption mainly includes the equity investments held in: Mercado Abierto Electrónico Sociedad Anónima, ACH Sociedad Anónima, Mercado de Valores de Buenos Aires Sociedad Anónima, and SUPER–CARD S.A..

Additionally the Bank has participations as protecting partner in mutual guarantee companies and has made contributions to the companies’ risk fund. These companies are: Confederar NEA S.G.R., Don Mario S.G.R., Los Grobos S.G.R. and Intergarantías S.G.R.

2.8. Miscellaneous receivables

Miscellaneous receivables have been valued at the amounts actually transacted, plus interest accrued and net of allowances for loan losses or impairment, if applicable.

2.9. Bank Premises and Equipment and Miscellaneous Assets

Bank premises and equipment are recorded at cost, adjusted for inflation (as described in note 1.d), less accumulated depreciation.

Depreciation is computed under the straight-line method over the estimated useful lives of the related assets. The estimated useful lives for bank premises and equipment are as follows:
 
F-291

Buildings50 years
Furniture and fixtures10 years
Machinery and equipment  5 years
Other  5 years

The cost of maintenance and repairsof these properties is charged to expense as incurred. The cost of significant renewals and improvements is added to the carrying amount of the respective assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of income.

The Bank has recorded under Miscellaneous assets” - properties received in lieu of payment of loans. These assets are initially recognized at the lower of market value or the value of the loan, net of allowances and subsequently, adjusted for inflation (as described in note 1.d), and depreciation. Depreciation of Miscellaneous assets is also computed under the straight-line method over the estimated useful of the related assets.

2.10. Intangible Assets, Net

Software expenses as well as start-up costs are carried at cost, adjusted for inflation (as described in note 1.d), less accumulated amortization. These intangible assets are amortized under the straight-line method over their estimated useful life.

Goodwill is recorded by the difference between the purchase price and the book value of the net assets acquired in accordance with Argentine Central Bank rules, and subsequently amortized in a straight line basis over the estimated useful life of 60 months.

Given BHSA’s role as Trustee of the PROCREAR Administrative and Financial Trust, the Bank has capitalized increased direct expenses incurred in the mortgage loan origination process, which
F- 222
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
disbursements would not have been incurred by it had it not been for the grant of the related loans in accordance with the provisions of Communication “A” 5392. Such origination expenses are amortized in 60 monthly installments.

2.11 Housing, life and unemployment insurance premiums in lending transactions and other transactions originated in its capacity of insurer, in accordance with the franchise granted by the privatization law

The Bank's policy is to recognize the premium income when the corresponding loan installment accrues, except for those loans that are more than ninety days in arrears, and allocate the expenditures for claims to the net income/(loss) for the year in which they occur.

The Bank has set up an insurance claim reserve for Ps.1,181 as of June 30, 2015 and 2014, which is shown in the "Provisions" caption under Liabilities.

2.12. Deposits

Deposits have been valued at their placement value, plus adjustments from application of the CER and accrued interest, where applicable. The fixed return on each transaction is accrued on an exponential basis, while the variable return on time deposits adjusted by applying the CER and included in "Investment Accounts" is accrued at the pro rata agreed upon rate of return based on the improvement in the price of the financial asset or financial asset indicator, between the time the transaction is arranged and the end of the month.

2.13. Other liabilities from financial transactions


 
F-292

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Unsubordinated negotiable obligations have been valued at their residual value plus accrued interest.

Foreign currency-denominated obligations under swapFutures transactions carried outagreed upon that are mainly closed as a hedge have been converted into Argentine pesos according to the criterion described in note 2.1.

The interest rate swap transactions carried outhedging for the purposes of hedging assets and liabilities with fixed and floating rates have been valuedposition in accordance with the unsettled balances of agreed upon lending and borrowing interests rates. In addition, following a prudent criterion, the Bank creates provisions for these transactions when the value stated above exceeds its fair value.

Interest rate swaps for agreed-upon fixed rateforeign currency have been valued in accordance with the balances pending settlementsettlement. Changes in these values, for all derivative instruments, are recognized as a gain or loss under the caption “Financial Income – Interest on loans and other receivables from financial transactions” or “Financial Expenses – Interest on deposits and other liabilities from financial transactions”, respectively.
Repo transactions are carried at the value originally agreed upon plus any accrued premium amounts.
Reverse repo transactions are carried at the book value of the agreed-upon lending and borrowing interest rates.underlying securities in the manner discussed in note 2.3.

2.14. Miscellaneous liabilities

They are valued at the amounts actually transacted, plus accrued interest as of fiscal period or year end.

2.15. Provisions

The Bank estimates contingencies and records them in Provisions, under Liabilities, if applicable according to the estimated likelihood of occurrence. These provisions cover various items, such as insurance risk, provisions for lawsuits, provisions for taxes, other contingencies, etc..

In addition, the Bank has created the allowance required under Communication “A” 5689 issued by the Argentine Central Bank in order to provide for the total amount of administrative and/or


F- 223
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
disciplinary sanctions and criminal penalties supported by first instance rulings, applied or pursued by the Argentine Central Bank, the Financial Information Unit, the Argentine Securities Commission and the Argentine Superintendence of Insurance.

2.16. Dismissal indemnities

The Bank does not set up any provisions to cover the risk of dismissal indemnities involving the staff. The disbursements in respect thereof are charged to the results for the period or year in which they occur.

2.17. Personnel benefits

The Bank has set up provisions for its employees' retirement plans.

2.18. Subordinated Bonds

Subordinated negotiable obligations have been recorded at their residual value plus interests accrued.

2.19. Non-controlling interest

The breakdown of supplementary equity interests recorded in “Non-controlling interest” in the accompanying consolidated balance sheets is as follows:
 
 June 30,
 2016 2015
      
BACS Banco de Crédito y Securitización SA………………….Ps.42,228 Ps.32,610
Tarshop S.A………………………….……..…………………. 87,979  35,347
      TotalPs.130,207 Ps.67,957
 
F-293


 June 30, 
 2015 2014 
       
BACS Banco de Crédito y Securitización S.A. Ps.32,536  Ps.28,383 
BHN Sociedad de Inversión S.A.  74   63 
Tarshop S.A.  35,347   31,403 
      Total Ps.67,957  Ps.59,849 

2.20. Income Tax

Pursuant to Article 28 of Law 24855, Banco Hipotecario Sociedad Anónima is subject to income tax, except for all the housing loan transactions carried out prior to October 23, 1997, date of registration of its by-laws with the Superintendence of Corporations.

The Bank charges to income and sets up a provision under Liabilities for the income tax determined on its taxable transactions in the fiscal year in which those transactions are carried out.

The Bank recognizes income tax charges and liabilities on the basis of the tax returns corresponding to each fiscal year at the statutory tax rates. For all the periods contemplated in these financial statements, the corporate tax rate was 35%. Under Argentine Banking GAAP the Bank does not recognize deferred income taxes.

2.21. Minimum notional income tax

In view of the option granted by the BCRA by means of Communication "A" 4295, as of June 30, 2015 the Bank capitalized as a minimum notional income tax credit the tax amount paid in fiscal year 2012, on2012. Such credit was recovered upon filing the basis of projections prepared andincome tax return for the possibility of recovering it and raising allowances when appropriate.fiscal year 2015.

2.22. Shareholders' Equity

a.  Capital stock, treasury shares, non-capitalized contributions, reserves, and capital adjustment:


F- 224
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
Capital stock, treasury shares, non-capitalized contributions, reserves, and capital adjustment:
The Shareholders' Equity account activity and balances prior to December 31, 1994 have been stated in the currency values prevailing at that date, following the method mentioned in this Note. The transactions carried out subsequent to that date have been recorded in currency values of the period or year to which they correspond. The balances of the Shareholders’ Equity accounts as of June 30, 20152016 have been restated up to February 28, 2003 as explained in the third paragraph. The adjustment derived from the restatement of the balance of "Capital Stock" was allocated to "Equity Adjustments". The issued treasury shares added due to the termination of Total Return Swap transaction are carried at nominal value.

b.  Results:
a.

Results:
Income and expenses have been recognized against the results for the fiscal year, regardless of whether they have been collected or paid.

The preparation of the financial statements requires that the Bank’s Board of Directors perform estimates affecting assets and liabilities, the net income/ (loss) for the fiscal period or year and the determination of contingent assets and liabilities at the date thereof, such as allowances for loan losses and impairment, the recoverable value of assets and provisions. Since these estimates involve value judgments regarding the probability of occurrence of future events, the actual net income/ (loss) may differ from the estimated amount and thus generate losses or profits affecting subsequent periods or years. All legal and regulatory rules in force at the date of presentation of these financial statements have been considered.

 

F-294

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The financial statement figures for the previous fiscal period or year, presented for comparative purposes, include certain reclassifications and adjustments that contemplate specific disclosure criteria so as to present them on a consistent basis with those of the current fiscal period or year.

2.23. Statements of Cash Flows

The consolidated statements of cash flows were prepared using the measurement methods prescribed by the BCRA, but in accordance with the presentation requirements of ASC 230.

For purposes of reporting cash flows, “Cash and cash equivalents” include “Cash and due from banks”.

2.24. Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the financial statement dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include those required in the accounting of allowances for loan losses and the reserve for contingencies. Since management’s judgment involves making estimates concerning the likelihood of future events, the actual results could differ from those estimates which would have a positive or negative effect on future period results.

3. Restricted Assets

Certain of the Bank's assets are pledged or restricted from use under various agreements. The following assets were restricted at each balance sheet date:

 

F- 225
F-295

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

 
 June 30, 
 2015 2014 
Banco Hipotecario S.A.      
Securities issued by the BCRA as collateral for OCT transactions Ps.70,464  Ps.- 
Government securities as collateral for OCT transactions  40,200   275,370 
Deposits in pesos as collateral for visa credit card transactions  117,723   59,610 
Securities issued by the BCRA as collateral for the custody of securities  162,759   - 
Government securities as collateral for the custody of securities.  -   173,600 
Deposits in pesos and in U$S as collateral for leases  754   1,028 
  Ps.391,900  Ps.509,608 
         
Tarshop S.A.        
Deposits in pesos and in U$S as collateral for leases Ps.505  Ps.497 
Certificates of participation in Financial Trusts granted as commercial pledge for a loan received  32,203   32,202 
Time deposits pledged for tax obligations arising from Financial Trusts  4,891   3,736 
Deposits in pesos related to Financial Trusts transactions  16,182   24,542 
Receivable in trust to secure a syndicated loan received  -   83,229 
Deposits in pesos as collateral for visa credit card transactions  512   - 
Government securities as collateral for visa credit card transactions  1,038   - 
  Ps.55,331  Ps.144,206 
         
BACS Banco de Crédito y Securitización S.A.        
Deposits in pesos as collateral for repurchase agreements Ps.-  Ps.4,170 
  Ps.-  Ps.4,170 
         
BH Valores S.A.        
Mercado de Valores de Buenos Aires SA’s share pledged on behalf of Chubb Argentina de Seguros SA. Ps.4,000  Ps.4,000 
         
         
      Total Ps.451,231  Ps.661,984 
 
 
June 30,
 
 
 
2016
 
 
2015
 
Banco Hipotecario S.A. 
 
 
 
 
 
 
 
Securities issued by the BCRA as collateral for OCT transactions………………….…………………………………..Ps.
  138,376 
Ps.
  70,464 
Government securities as collateral for OCT transactions……… 
  335,135 
 
  40,200 
Deposits in pesos as collateral for visa credit card transactions... 
  289,199 
 
  117,723 
Securities issued by the BCRA as collateral for the custody of securities………………………………………………………. 
  - 
 
  162,759 
Government securities as collateral for the custody of securities. 
  14,350 
 
  - 
Deposits in pesos and in U$S as collateral for leases…………... 
  1,316 
 
  754 
Other collaterals………………………………………………... 
  810 
 
  2 
Ps.
  779,186 
Ps.
  391,902 
 
    
 
    
Tarshop S.A. 
    
 
    
Deposits in pesos and in U$S as collateral for leases…………...Ps.
  686 
Ps.
  505 
Certificates of participation in Financial Trusts granted as commercial pledge for a loan received…………………………. 
  32,202 
 
  32,203 
Time deposits pledged for tax obligations arising from Financial Trusts……………………………………………………………. 
  6,531 
 
  4,891 
Deposits in pesos related to Financial Trusts transactions……… 
  149,578 
 
  16,182 
Receivables in trust to secure an overdraft facility received……. 
  79,069 
 
    
Loans to secure the future issuance of Financial Trust….....……. 
  70,747 
 
    
Deposits in pesos as collateral for visa credit card transactions... 
  9,679 
 
  512 
Government securities as collateral for visa credit card transactions……………………………………………………... 
  9,930 
 
  1,038 
Ps.
  358,422 
Ps.
  55,331 
 
    
 
    
BACS Banco de Crédito y Securitización S.A. 
    
 
    
Receivables in pledge loans to secure a loan received……….…..Ps.
  39,889 
Ps.
  - 
Securities and pesos as collateral for OTC transactions………… 
  15,713 
 
  - 
Ps.
  55,602 
Ps.
  - 
 
    
 
    
BH Valores S.A. 
    
 
    
Mercado de Valores de Buenos Aires SA’s share pledged on behalf of Chubb Argentina de Seguros SA……………………Ps.
  20,900 
Ps.
  4,000 
 
    
 
    
 
    
 
    
      TotalPs.
  1,214,110 
Ps.
  451,233 

4. Government and Corporate securities

Government and Corporate Securities held by the Bank consist of the following balances:

 June 30, 
 2015 2014 
Holding booked at fair value      
Government securities in pesos Ps.1,581,383  Ps.439,798 
Government securities in US$  340,053   844,014 
Bills issued by Provincial Governments in US$  297,137   - 
Bills issued by Provincial Governments in pesos  7,133   - 
  Ps.2,225,706  Ps.1,283,812 
         
 
 
June 30,
 
 
 
2016
 
 
 
2015
 
Holding booked at fair value
 
 
 
 
 
 
 
Governmentsecurities inpesos…………………….Ps.
  666,815 
Ps.
  1,581,383 
Government securities in US$..............................
  1,835,746 
 
  340,053 
Government securities in Euros..............................
  292,729 
 
  - 
Bills issued by Provincial Governments in US$.....
  263,586 
 
  297,137 
Bills issued by Provincial Governments in pesos.....
  25,890 
 
  7,133 

 

F- 226
F-296

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



Holding booked at cost plus return      
Government securities in pesos Ps.-  Ps.29,275 
Bills issued by Provincial Governments in pesos  66,916   - 
Bills issued by Provincial Governments in US$  125,862   39,573 
  Ps.192,778  Ps.68,848 
         
Investment in listed corporate securities        
Corporate securities denominated in pesos Ps.430,855  Ps.345,565 
  Ps.430,855  Ps.345,565 
         
Securities issued by the BCRA        
Quoted bills and notes issued by the BCRA Ps.672,239  Ps.354,542 
Unquoted bills and notes issued by the BCRA  1,750,005   1,342,425 
  Ps.2,422,244  Ps.1,696,967 
         
Total Ps.5,271,583  Ps.3,395,192 
 Ps.3,084,766 Ps.2,225,706
      
Holding booked at cost plus return     
Bills issued by Provincial Governments in pesos...Ps.166,342 Ps.66,916
Bills issued by Provincial Governments in US$.…... 240,995  125,862
 Ps.407,337 Ps.192,778
      
Investment in listed corporate securities     
Corporate securities denominated in pesos….......…Ps.490,538 Ps.430,855
 Ps.490,538 Ps.430,855
      
Securities issued by the BCRA     
Quoted bills and notes issued by the BCRA………..Ps.278,519 Ps.672,239
Unquoted bills and notes issued by the BCRA…….. 1,017,050  1,750,005
 Ps.1,295,569 Ps.2,422,244
      
AllowancesPs.(8,711) Ps.-
      
TotalPs.5,269,499 Ps.5,271,583

As of June 30, 2015,2016, several bonds sold under repurchase agreements amounted to Ps. 9,624Ps.75,695 and were recorded under the caption “Other Receivables from Financial Transactions”.

The bank recorded in their financial statements income from government and corporate securities for an amount of Ps. 1,191,3962,584,524 and Ps. 904,9851,191,396 as of June 30, 20152016 and 2014,2015, respectively.

5. Loans

Descriptions of the categories of loans in the accompanying balance sheets include:

·  Mortgage loans:

Mortgage loans:
·  
Construction project loans - loans made to various entities for the construction of housing units
Individual residential mortgage loans - mortgage loans made to individuals to finance the acquisition, construction, completion, enlargement, and/or remodeling of their homes
Other loans:
Certain financial and non-financial sector loans including loans to credit card holders and to individuals
Public Loans – loans to National Government and Provinces
Construction project loans - loans made to various entities for the construction of housing units

·  
Individual residential mortgage loans - mortgage loans made to individuals to finance the acquisition, construction, completion, enlargement, and/or remodeling of their homes

·  Other loans:

·  Certain financial and non-financial sector loans including loans to credit card holders and to individuals

·  Public Loans – loans to National Government and Provinces

Under Argentine Central Bank regulations, the Bank must disclose the composition of its loan portfolio by non-financial public, financial and non-financial private sector. Additionally, the Bank must disclose the type of collateral pledged on non-financial private sector loans. The breakdown of the Bank’s loan portfolio in this regard is as follows:

 

F- 227
F-297

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 June, 
 2015 2014 
       
Non-financial public sector
 Ps.89,132  Ps.129,023 
Financial sector  348,549   373,078 
Non-financial private sector        
With preferred guarantees (a)  2,413,401   2,197,328 
Without preferred guarantees        
Personal loans  2,650,127   2,040,282 
Credit Card Loans  8,500,601   5,950,266 
Overdraft facilities  685,978   1,139,629 
Other loans (b)  4,561,093   3,595,963 
Accrued interest receivable  218,089   150,676 
Reserve for loan losses (see note 6)  (433,825)  (356,267)
Total Ps.19,033,145  Ps.15,219,978 
 June 30,
 2016 2015
      
Non-financial public sector………………………………………
Ps.160,847 Ps.89,132
Financial sector………………………………………………….. 462,776  348,549
Non-financial private sector     
With preferred guarantees (a)…………………………………. 2,429,322  2,413,401
Without preferred guarantees ....………………………………     
Personal loans……………………………………………… 3,149,503  2,650,127
Credit Card Loans …..……………………………………… 10,573,083  8,500,601
Overdraft facilities…………………………………………. 890,819  685,978
Other loans (b)……………………………………………… 4,539,970  4,561,093
Accrued interest receivable……………………………………… 240,885  218,089
Reserve for loan losses (see note 6)..…………………………… (493,536)  (433,825)
TotalPs.21,953,669 Ps.19,033,145
______________
(a)
Preferred guarantees include first priority mortgages or pledges, cash, gold or public sector bond collateral, certain collateral held in trust, or certain guarantees by the Argentine government.
(b)  Comprised of:
Preferred guarantees include first priority mortgages or pledges, cash, gold or public sector bond collateral, certain collateral held in trust, or certain guarantees by the Argentine government.
(b)
Comprised of:
 June 30,
 2016 2015
      
Short term loans in pesos …..…………………………....Ps.2,464,250 Ps.2,729,892
Short term loans in US dollars………………………… 646,036  692,190
Loans for the financing of manufacturers……………….. 89,944  61,234
Export prefinancing …………………….………………. 581,880  406,621
Other loans….…………………...……………………… 757,860  671,156
TotalPs.4,539,970 Ps.4,561,093
 
 June 30, 
 2015 2014 
       
Short term loans in pesos Ps.2,729,892  Ps.2,256,595 
Short term loans in US dollars  692,190   693,809 
Loans for the financing of manufacturers  61,234   24,805 
Export prefinancing  406,621   278,720 
Other loans  671,156   342,034 
Total Ps.4,561,093  Ps.3,595,963 


6. Allowance for loan losses

The activity in the allowance for loan losses for the periods presented is as follows:

 June 30, 
 2015 2014 
       
Balance at beginning of period Ps.356,267  Ps.296,633 
Provision charged to income  375,270   303,348 
Loans charged off  (297,712)  (243,714)
Balance at end of period Ps.433,825  Ps.356,267 
 June 30,
 2016 2015
      
Balance at beginning of period…………………………………..Ps.433,825 Ps.356,267
Provision charged to income …………………………………… 356,492  375,270
Loans charged off………………………………………………... (296,781)  (297,712)
Balance at end of period………………………………………….Ps.493,536 Ps.433,825

7. Other receivables from financial transactions

The breakdown of other receivables from financial transactions, by type of guarantee for the periods indicated, is as follows:

 

F- 228
F-298

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



June 30, June 30,
2015 2014 2016 2015
Preferred guarantees, including deposits with the           
Argentine Central Bank Ps.434,689  Ps.507,836 
Unsecured guarantees (a)  2,966,068   2,076,796 
Argentine Central Bank……….……………………………..Ps.766,485 Ps.434,689
Unsecured guarantees (a)……………………………………… 6,098,728  2,966,068
Subtotal  3,400,757   2,584,632  6,865,213  3,400,757
Less: Allowance for losses  (22,611)  (11,189)
Less: Allowance for losses……....……………………………… (23,624)  (22,611)
Total Ps.3,378,146  Ps.2,573,443 Ps.6,841,589 Ps.3,378,146

(a) Includes Ps. 4,78554,281 and Ps. 45,8174,785 of Amounts receivable under derivative financial instruments, as of June 30, 20152016 and 2014,2015, respectively, and Ps. 35,62175,695 and Ps. 60,19635,621 of Amounts receivable under repurchase agreements, as of June 30, 20152016 and 2014,2015, respectively.

The breakdown of the caption “Other” included in the balance sheet is as follows:

 June 30, 
 2015 2014 
       
Subordinated bonds (a) Ps.1,452,436  Ps.424,548 
Certificates of participation (see note 19)  388,250   330,855 
Bonds held in the Bank’s portfolio (b)  -   46,036 
Bonds unquoted  192,621   333,330 
Collateral for OTC transactions  114,034   275,370 
Amounts receivable from spot and forward sales pending settlement  524,785   202,617 
Other  574,887   348,922 
      Total Ps.3,247,013  Ps.1,961,678 
 June 30,
 2016 2015
      
Subordinated bonds (a)…….……………….………………….Ps.2,651,744 Ps.1,452,436
Certificates of participation (see note 19)……………………… 946,515  388,250
Bonds held in the Bank’s portfolio (b).……..…………………. 42,384  -
Bonds unquoted……………………………………………….... 215,149  192,621
Collateral for OTC transactions………………………………… 488,237  114,034
Amounts receivable from spot and forward sales pending settlement……………………………………………………….. 780,400  524,785
Other……………………………………………………………. 1,053,558  574,887
      TotalPs.6,177,987 Ps.3,247,013

(a) Includes Ps. 269,2432,158,130 and Ps. 268,111269,243 of debt securities related to securitizations made by the bank and described in note 19, as of June 30, 20152016 and 2014,2015, respectively.
(b) The Bank carries some of its negotiable obligations as of June 30, 2014.2016.

8. Miscellaneous receivables

Miscellaneous receivables are comprised of the following for the periods indicated:
 June 30,
 2016 2015
      
Withholdings, credits and prepaid income tax…………………Ps.45,503 Ps.33,812
Recoverable expenses, taxes, and advances to third parties…… 62,291  60,935
Attachments for non-restructured ON…………………………. 23,484  7,526
Guarantee deposit (*)………………………………………….. 32,293  171,891
Guarantee deposit for credit card transactions………………….. 289,199  117,723
Presumptive minimum income – Credit tax (see note 25)……... 77,041  61,561
Receivables from master servicing activities………………….. 838  787
Other Directors fees……………………………………………. 36,379  13,749
Loans to Bank staff…………………………………………….. 188,177  179,588
Other…………………………………………………………… 1,004,313  925,623
Subtotal 1,759,518  1,573,195
Less: Allowance for collection risks…………………………… (10,811)  (13,978)
TotalPs.1,748,707 Ps.1,559,217
 
 June 30, 
 2015 2014 
       
Withholdings, credits and prepaid income tax Ps.33,812  Ps.21,569 
Recoverable expenses, taxes, and advances to third parties  60,935   58,414 
Attachments for non-restructured ON  7,526   8,703 
Guarantee deposit (*)  171,891   179,296 
Guarantee deposit for credit card transactions  117,723   59,610 
Presumptive minimum income – Credit tax (see note 25)  61,561   183,668 
Receivables from master servicing activities  787   899 
Other Directors fees  13,749   11,323 
Loans to Bank staff  179,588   178,260 
Other  925,623   430,126 
Subtotal  1,573,195   1,131,868 
Less: Allowance for collection risks  (13,978)  (13,978)
Total Ps.1,559,217  Ps.1,117,890 



 

F- 229
F-299

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


(*) As of June 30, 20152016 and 20142015 includes Ps. 162,75914,350 and Ps. 173,600162,759 as collateral for the custody of securities.

9. Bank Premises and Equipment

The book values of major categories of bank premises and equipment and total accumulated depreciation as of the periods indicated are as follows:

 June 30, 
 2015 2014 
       
Land and buildings Ps.117,090  Ps.117,090 
Furniture and fixtures  63,915   49,421 
Machinery and equipment  185,369   145,416 
Other  40,106   25,007 
Accumulated depreciation  (220,160)  (186,445)
Total Ps.186,320  Ps.150,489 
 June 30,
 2016 2015
      
Land and buildings……………………………………………….Ps.186,599 Ps.117,090
Furniture and fixtures……………………………………………. 79,259  63,915
Machinery and equipment……………………………………….. 278,772  185,369
Other……………………………………………………………... 50,059  40,106
Accumulated depreciation……………………………………….. (277,591)  (220,160)
TotalPs.317,098 Ps.186,320

10. Miscellaneous assets

Miscellaneous assets consist of the following as of the end of each period:

 June 30, 
 2015 2014 
       
Properties held for sale Ps.33,587  Ps.30,297 
Assets leased to others  22,656   19,947 
Stationery and supplies  23,349   18,244 
Other  1,688   2,164 
Accumulated depreciation  (20,867)  (20,169)
Total Ps.60,413  Ps.50,483 
 June 30,
 2016 2015
      
Properties held for sale…………………………………………...Ps.40,884 Ps.33,587
Assets leased to others…………………………………………... 26,339  22,656
Stationery and supplies………………………………………….. 30,848  23,349
Advances for purchase of goods (*)…………………………… 176,551   
Other……………………………………………………………... 1,949  1,688
Accumulated depreciation……………………………………….. (23,104)  (20,867)
TotalPs.253,467 Ps.60,413

(*) On April 20, 2016, by means of a public auction conducted by the government of the City of Buenos Aires, we acquired the building known as “Edificio del Plata” to be our corporate headquarters and a branch, for approximately US$68 million. As of June 30, 2016, we have paid 15% of the acquisition price and according to Article 3 of Decree 208/16, we are required to pay the remaining 85% when executing the public deed and entering into possession of the building, which should occur within 365 days of the public auction.
11. Intangible Assets

Intangible assets, net of accumulated amortization, as of the end of periods indicated are as follows:

 June 30, 
 2015 2014 
       
Third parties fees, re-engineering, restructuring and capitalized software costs Ps.131,714  Ps.79,064 
Goodwill (*)  18,508   21,938 
Mortgage loan origination expenses related to Pro.Cre.Ar (see note 31)  275,926   143,538 
Total Ps.426,148  Ps.244,540 
 June 30,
 2016 2015
      
Third parties fees, re-engineering, restructuring and capitalized software costs.................................................................................Ps.187,204 Ps.131,714
Goodwill (*)………………......…………………………………. 15,078  18,508
Mortgage loan origination expenses related to Pro.Cre.Ar (see note 31)………………………………………………………… 350,473  275,926
TotalPs.552,755 Ps.426,148

(*) Goodwill is mainly related to the acquisition of Tarshop, which has been allocated to the Credit card segment - Tarshop.

 


 
F-300

F- 230
 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



12.Reserve for contingencies

12. 
Reserve for contingencies
The reserve for contingencies as of the end of each period is as follows:

 June 30, 
 2015 2014 
       
Legal Contingencies (a) Ps.78,863  Ps.79,559 
Incurred but not reported and pending insurance claims (b)  1,181   1,181 
Contingency risks  112,043   47,292 
Tax Provision  11,401   11,912 
Bonds subject to lawsuits (c)  14,290   12,845 
Allowance for administrative-disciplinary-criminal penalties (d).  4,172   - 
       Total Ps.221,950  Ps.152,789 
 June 30,
 2016 2015
      
Legal Contingencies (a)…………………………………………Ps.172,264 Ps.78,863
Incurred but not reported and pending insurance claims (b)..…... -  1,181
Contingency risks …..…………………………………………… 93,494  112,043
Tax Provision…………………………………………….……... 9,238  11,401
Bonds subject to lawsuits (c)…..………..……………….……. 24,463  14,290
Allowance for administrative-disciplinary-criminal penalties ...... 600  4,172
       TotalPs.300,059 Ps.221,950

(a) Includes legal contingencies and expected legal fees.
(b) As of June 30, 2015 and 2014, it is composed of: Debts(b) As of June 30, 2015 it is composed of debts to insured for Ps. 1,181 (outstanding claims for Ps. 559 and IBNR for Ps. 622).
 (c) Includes negotiable obligations past due whose holders did not enter to the comprehensive financial debt restructuring which ended on January, 2004.
 (c) Includes negotiable obligations past due whose holders did not enter to the comprehensive financial debt restructuring which ended on January, 2004.
(d) Includes a charge relating to a sanction for Ps. 4,040 imposed on BHSA by the Superintendent of Financial and Foreign Exchange Institutions through Resolution No. 685 in connection with the Financial Summary Proceedings No. 1320 (Note 30). At the close of these Financial Statements, this amount was deposited as resolved by the Executive Committee and the Bank’s Board of Directors.

13. Other Liabilities from Financial Transactions - Obligation to return securities acquired under reverse repurchase agreements of government and corporate securities

The amounts outstanding corresponding to the Obligation to return securities acquired under reverse repurchase agreements of government and corporate securities, as of the end of the twelve-month periods are as follows:

 June 30, 
 2015 2014 
       
Reverse repurchase agreements collateralized by securities issued by the BCRA (*) Ps.11,114  Ps.13,078 
Reverse repurchase agreements collateralized by other government securities (*)  23,367   127,726 
Total Ps.34,481  Ps.140,804 
 June 30,
 2016 2015
      
Reverse repurchase agreements collateralized by securities issued by the BCRA (*)………………………………………………………………..Ps.126,200 Ps.11,114
Reverse repurchase agreements collateralized by other government securities (*)………………………….………….……………………… 463,954  23,367
TotalPs.590,154 Ps.34,481

(*) The transactions’ maturity date is July, 2015.2016.

14. Other Liabilities from Financial Transactions - Other Banks and International Entities

The breakdown of the bank debt is as follows:

Description
 
Average Annual
interest rate
 Average Maturity date 2015  2014 
Average Annual
interest rate
Average Maturity date 2016  2015
                
Interbank loans in pesos  23.02%August, 2015 Ps.297,357  Ps.558,449 
Interbank loans in pesos…...….……...38.11%August, 2016Ps.276,006 Ps.297,357
Total      Ps.297,357  Ps.558,449   Ps276,006 Ps.297,357


   

15. Other Liabilities from Financial Transactions – Negotiable obligations
 

F-301


F- 231
 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


15. Other Liabilities from Financial Transactions – Negotiable obligations

The balance of the negotiable obligations has been included in the “Other liabilities for financial transactions” caption. The residual face values of the different negotiable obligation series issued are as follows:

    June 30, 

   
 
June 30,
 
Issue dateMaturity date 2015 
Annual
interest rate
 2014 Issue dateMaturity date
 
Annual interest rate (a)
 
 
2016
 
 
2015
 
Banco Hipotecario S.A.          
 
 
 
Series 5 (US$ 250,000 thousand)04/27/0604/27/16  a 9.750%  1,914,484   1,709,848 04/27/0604/27/16
  9.750%
  - 
  1,914,484 
Series IX (Ps. 258,997)04/25/1301/25/15  b/c Badlar +280bp  -   202,413 
Series X (Ps. 34,523)08/14/1308/09/14  a 22.0%  -   32,465 
Series XI (Ps. 146,137)08/14/1305/14/15  b/c Badlar +375bp  -   130,998 
Series XII (US$. 44,508 thousand)08/14/1308/14/17  a 3.95%  358,989   361,970 08/14/13
08/14/17
 
  3.95%
  439,845 
  358,989 
Series XIII (Ps. 55,510)11/11/1311/06/14  a 23.50%  -   55,510 
Series XIV (Ps. 115,400)11/11/1311/11/15  b/c Badlar +375bp  115,400   115,400 11/11/13
11/11/15
 
 
Badlar +375bp
 
  - 
  115,400 
Series XV (Ps. 12,340)01/31/1401/26/15  a 27.00%  -   12,340 
Series XVI (Ps. 89,683)01/31/1401/31/16  b/c Badlar +425bp  89,683   89,683 01/31/1401/31/16
 
Badlar +425bp
 
  - 
  89,683 
Series XVIII (Ps. 20,046)05/16/1402/16/15  a 27.0%  -   20,046 
Series XIX (Ps. 275,830)05/16/1411/16/15  b/c Badlar +375bp  275,830   270,001 05/16/1411/16/15
 
Badlar +375bp
 
  - 
  275,830 
Series XXI (Ps. 222,345)07/30/1401/30/16  b/c Badlar +275bp  222,345   - 07/30/1401/30/16
 
Badlar +275bp
 
  - 
  222,345 
Series XXII (Ps. 253,152)11/05/1408/05/15  b/d LEBACx0.95  253,152   - 11/05/1408/05/15
 
LEBACx0.95
 
  - 
  253,152 
Series XXIII (Ps. 119,386)11/05/1405/08/16  b/c Badlar +325bp  119,386   - 11/05/1405/08/16
 
Badlar +325bp
 
  - 
  119,386 
Series XXIV (Ps. 27,505)02/05/1501/31/16  b LEBACx0.95  27,505   - 02/05/1501/31/16
 
LEBACx0.95
 
  - 
  27,505 
Series XXV (Ps. 308,300)02/05/1508/05/16  a/b Mixed (e)  298,496   - 02/05/1508/05/16
 
9 months 27.5% and then Badlar +450bp
 
  298,413 
  298,496 
Series XXVII (Ps. 281,740)05/22/1511/22/16  a/b Mixed (e)  260,096   - 05/22/1511/22/16
 
9 months 28.0% and then Badlar +450bp
 
  260,111 
  260,096 
Series XXIX (US$ 200,000 thousand)11/30/1511/30/20
  9.75%
  2,984,000 
  - 
Series XXIX -Tranche II (US$ 150,000 thousand)05/23/1611/30/20
  9.75%
  2,228,480 
  - 
Series XXX (Ps. 314,611)09/04/1503/04/17
 
9 months 28.25% and then Badlar +450bp
 
  314,611 
  - 
Series XXXI (US$ 14,730 thousand)09/04/1509/04/18
  2.00%
  219,772 
  - 
Series XXXII (Ps. 265,770)11/30/1505/30/17
 
3 months 27.0% and then Badlar +475bp
 
  265,770 
  - 
Series XXXIV (Ps. 264,030)02/10/1608/10/17
 
Badlar +400bp
 
  264,030 
  - 
Series XXXV (Ps. 235,970)02/10/1602/10/19
 
Badlar +499bp
 
  235,970 
  - 
Series XXXVI (Ps. 469,750)05/18/1611/18/17
 
Badlar +425bp
 
  469,750 
  - 
               
    
Tarshop S.A.                
    
Series VIII (Ps. 79,589)01/28/1307/30/14  b/c Badlar+445bp  -   74,007 
Series X (Ps. 72,592)05/23/1311/23/14  b/c Badlar+475bp  -   70,532 
Series XI (Ps. 10,837)05/23/1305/23/16  b/c Badlar+580bp  10,775   9,729 05/23/1305/23/16
 
Badlar+580bp
 
  - 
  10,775 
Series XII (Ps. 83,588)08/09/1308/09/15  a 15.0%  83,112   74,822 08/09/1308/09/15
  15.0%
  - 
  83,112 
Series XIV (Ps. 30,245)04/21/1401/21/15  a 30.0%  -   28,442 
Series XV (Ps. 119,755)04/21/1410/21/15  b/c Badlar+490bp  113,967   117,203 04/21/1410/21/15
 
Badlar+490bp
 
  - 
  113,967 
Series XVII (Ps. 41,066)11/26/1408/26/15  b/d LEBACx0.95  40,832   - 11/26/1408/26/15
 
LEBACx0.95
 
  - 
  40,832 
Series XVIII (Ps. 69,291)11/26/1405/26/16  b/c Badlar+425bp  68,896   - 11/26/1405/26/16
 
Badlar+425bp
 
  - 
  68,896 
Series XIX (Ps. 6,314)11/26/1411/26/17  b/c Badlar+525bp  6,280   - 11/26/1411/26/17
 
Badlar+525bp
 
  3,950 
  6,280 
Series XX (Ps. 69,100)04/24/1501/24/16  a 27.5%  68,707   - 04/24/1501/24/16
  27.5%
  - 
  68,707 
Series XXI (Ps. 80,500)v
04/24/1410/24/16  a 28.5%  80,043   - 04/24/1410/24/16
  28.5%
  79,932 
  80,043 
Series XXII (Ps. 126,667)v
07/30/1501/30/17
  29.0%
  125,772 
  - 
Series XXIII (Ps. 160,000)v
11/16/1505/16/17
 
Badlar+600bp
 
  158,870 
  - 
Series XXVI (Ps. 156,972)v
01/26/1607/26/17
 
Badlar+650bp
 
  155,863 
  - 
Series XXVII (Ps. 147,288)05/04/1611/04/17
 
Badlar+600bps
 
  146,248 
  - 
               
    
BACS Banco de Crédito y Securitización S.A.BACS Banco de Crédito y Securitización S.A.              BACS Banco de Crédito y Securitización S.A. 
    
Series I (Ps. 130,435)02/19/1408/19/15  b/c Badlar+450bp  130,435   126,303 02/19/1408/19/15
 
Badlar+450bp
 
  - 
  130,435 
Series III (Ps. 132,726)08/19/1405/19/16  b/c Badlar +275bp  132,726   - 08/19/1405/19/16
 
Badlar +275bp
 
  - 
  132,726 
Series IV (Ps. 105,555)11/21/1408/21/16  b/c Badlar +350bp  105,555   - 11/21/1408/21/16
 
Badlar +350bp
 
  35,192 
  105,555 
Series V (Ps. 150,000)04/17/1501/17/17  a/b Mixed (d)  150,000   - 04/17/1501/17/17
 
9 months 27.48% and then Badlar +450bp
 
  150,000 
  150,000 
               
         4,926,694   3,501,712 
Series VI (Ps. 141,666)07/23/1504/24/17
 
9 months 27.5% and then Badlar +450bp
 
  141,666 
  - 
Series VII (Ps. 142,602)02/18/1611/18/17
 
Badlar +475bp
 
  142,602 
  - 

Series VIII (Ps. 150,000)05/24/1611/24/17Badlar +439bp150,000-
(a)Fixed interest rate
(b)Variable interest rate.
(c)As of June 30, 2015 Badlar rate was 20.81%
(d)As of June 30, 2015 LEBAC rate was 26.04%
(e)Fixed rate on the first nine months (between 27.48% and 28.0%) and variable interest rate of Badlar+450bps from that moment on.

 
F- 232
F-302

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)









       
    9,270,847 4,926,694
(a)As of June 30, 2016 Badlar rate was 21.87%
The contractual maturities of the negotiable obligations are as follows as of June 30, 2015:2016:

June 30, 20162017……………………………..Ps.3,667,2361,830,337
June 30, 20172018…………………………….. 900,4691,772,288
 June 30, 20182019…………………………….. 358,989455,742
 ThereafterThereafter………………………………... -5,212,480
TotalPs.4,926,6949,270,847

The General Shareholders' Meeting held on May 23, 2008, approved the creation of a new Global Program for issuing Negotiable Obligations, not convertible into shares, with or without collateral, for an amount of up to two billion US dollars (US$ 2,000,000,000) or the equivalent thereof in pesos.

On March 27, 2012, the General Ordinary Shareholders’ Meeting approved the extension of the Global Program for the issuance of notes referred above. In addition, the meeting resolved to delegate on the Board of Directors the broadest powers to determine the time, amount, as well as the other terms and conditions of each Series to be issued. Additionally, on April 24, 2014, the General Ordinary Shareholders’ Meeting renewed such delegation of powers.

On February 11, 2015 the Bank’s Board of Directors approved the increase in the Program amount for up to US Dollars seven hundred million (US$ 700,000,000) or its equivalent in pesos.

On May 6, 2015, the Bank’s Board of Directors approved the increase in the Program amount for up to US dollars eight hundred million (US$ 800,000,000) or its equivalent in pesos.

On November 30, 2015, the Bank issued Notes in the international capital markets for US Dollars two hundred million (US$ 200,000,000) at an interest rate of 9.75% per annum, due in 2020.
On December 1, 2015 and December 2, 2015, the Bank repurchased and retired Series 5 Notes for US Dollars one hundred and twenty two million four hundred ninety-seven thousand (US$ 122,497,000) and US Dollars one hundred and fifty-five thousand (US$ 155,000), respectively, for which it paid US Dollars one hundred two with fifty cents (US$ 102.50) for each US$ 100 in face value.
The General Ordinary Shareholders held on April 13, 2016, approved the extension of the Bank’s Global Program for the issuance of notes for up to US dollars eight hundred million (US$ 800,000,000) or its equivalent in pesos currently in force for a term of up to 5 years , or the longer period permitted by applicable law.
On June 15, 2016 the Bank’s Board of Directors approved the increase in the Program amount for up to US Dollars one billion (US$ 1,000,000,000) or its equivalent in pesos.
16. Subordinated Negotiable obligationsBonds

At the Extraordinary General Shareholders’ Meeting of BACS Banco de Crédito y Securitización S.A., dated December 12, 2013, the issuance of Convertible Subordinated Negotiable Obligations through private offering was approved for an amount of up to Ps.100,000.

On June 22, 2015, BACS issued negotiable obligations that are convertible into the Company’s ordinary and book-entry shares for a principal amount of Ps.100,000.

F- 233
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
The private offering of the convertible negotiable obligations was solely addressed to the Company’s shareholders. As of June 30, 2015, IRSA Inversiones y Representaciones Sociedad Anónima subscribed all the convertible negotiable obligations.

On June 21, 2016, BACS Banco de Crédito y Securitización S.A. took notice of IRSA Inversiones y Representaciones SA’s decision to exercise its conversion rights over the subordinated bonds convertible into common shares and the filings made before the Argentine Central Bank and the Argentine Securities Commission.
17. Level I American Depositary Receipts Program

On March 27, 2006 the US Securities and Exchange Commission (SEC) has made effective the Level I American Depositary Receipts, “ADR” program.

This program allows foreign investors to buy the Bank’s stock through the secondary market where ADRs are traded freely within the United States. The Bank of New York has been appointed as depositary institution.

18. Derivative Financial Instruments

The Bank has carried out its financial risk management through the subscription of several derivative financial instruments. Derivative instruments are recorded under the captions “Other receivable from financial transactions – Amounts receivable under derivative financial instruments” or Liabilities: “Other liabilities from financial transactions – Amounts payable under derivative financial instruments” in the Consolidated Balance Sheet, and the related gain or loss


F-303

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


under the captions “Financial Income – Interest on loans and other receivables from financial transactions” or: “Financial Expenses – Interest on deposits and other liabilities from financial transactions”, respectively, in the Consolidated Statement of Income.

The following are the derivative financial instruments outstanding as of June 30, 20152016 and 2014:

 
Type of Contract
 Notional amount  Net Book Value Asset/(Liabilities)  Fair Value 
  2015  2014  2015  2014  2015  2014 
                   
Forwards (1)(a)  -   427,849   -   34,670   -   33,794 
Futures (2)                        
Purchases (a)  2,405,951   3,540,782   (505)  (1,145)  (505)  (1,145)
Sales (a)  (1,519,307)  2,456,907 
Interest rate swaps (3)(b)  30,000   -   63   -   63   - 
           (442)  33,525   (442)  32,649 
2015:
 
 (a)Underlying: Foreign currency.
 
Type of Contract
 
 
Notional amount
 Net Book Value Asset/(Liabilities) 
 
Fair Value
  20162015 20162015 20162015
          
Forwards (1)(a) -- -- --
Futures (2)         
Purchases (a) 9,671,3212,405,951 12,773(505) 12,773(505)
Sales (a) (7,020,174)(1,519,307)  
Interest rate swaps (3)(b) -30,000 -63 -63
     12,773(442) 12,773(442)
 (b)Underlying: Interest rate.
 (a)Underlying: Foreign currency.

 (b)Underlying: Interest rate.
1.Forwards: US dollar forward transactions have been carried out, the settlement of which, in general, is made without delivery of the underlying asset but by means of the payment in Pesos of currency differences. These transactions were performed mainly as hedge for foreign currency positions. Transactions with settlement in Pesos were made upon maturity.

1. 
Forwards: US dollar forward transactions have been carried out, the settlement of which, in general, is made without delivery of the underlying asset but by means of the payment in Pesos of currency differences. These transactions were performed mainly as hedge for foreign currency positions. Transactions with settlement in Pesos were made upon maturity.
For these transactions, as of June 30, 2016 and 2015 the Bank has recognized losses for Ps.179,085 and Ps. 34,646, respectively.
2. 
Futures: Future currency transactions have been carried out through which the forward purchase and sale of foreign currencies (US dollar) was agreed upon. These transactions were
F- 234
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
performed as hedge for foreign currency position. Settlement is carried on a daily basis for the difference.
For these transactions, as of June 30, 2016 and 2015, the Bank has recognized gains for Ps.753,373 and losses for Ps. 51,899, respectively.
3.
On February 18, 2015, OTC Transactions – Badlar rate swaps for agreed upon fixed interest rate were conducted. These are settled by paying the difference in Pesos.
For these transactions, as of June 30, 2015, and 2014 the Bank has recognized losses for Ps. 34,646 and Ps. 12,593, respectively.

2.Futures: Future currency transactions have been carried out through which the forward purchase and sale of foreign currencies (US dollar) was agreed upon. These transactions were performed as hedge for foreign currency position. Settlement is carried on a daily basis for the difference.

For these transactions, as of June 30, 2015 and 2014, the Bank has recognized losses for Ps.51,899 and gains for Ps. 657,996,391, respectively.

3.  On February 18, 2015, OTC Transactions – Badlar rate swaps for agreed upon fixed interest rate were conducted. These are settled by paying the difference in Pesos. Income has been accounted for in the amount of Ps. 391 as of June 30, 2015.

19. Securitization of mortgage loans, consumer loans and credit card loans

The Bank created separate trusts under its US securitization program and “Cédulas Hipotecarias Argentina – program”; and a consumer trust under BACS’s Global Trust Securities Program. For each mortgage or consumer trust, the Bank transfers a portfolio of mortgages or consumer loans originated by banks and other financial institutions in trust to the relevant trustee. The trustee then issues Class A senior Bonds, Class B subordinated bonds and certificates of participation. The trust’s payment obligations in respect of these instruments are collateralized by, and recourse is limited to, the trust’s assets consisting of the portfolio of mortgage or consumer loans and any reserve fund established by the Bank for such purpose. The securitizations were recorded as sales, and accordingly, the mortgage and consumer loans conveyed to the trusts are no longer recorded as assets of the Bank.

At the date of these financial statements the following trust funds are outstanding:


 
Debt Securities
Class A1/AV
Debt Securities
Class A2/AF
Debt Securities
Class B
Certificates of
Participation
 
Total
      
BACS III – Issued on 12.23.2005     
Face value in Ps.77,600 1,2001,20080,000
Declared Maturity Date03.20.2013 09.20.201308.20.2015 
      
BACS Funding I Issued on 11.15.2001 (*)     
Face value in Ps.---29,90729,907
Declared Maturity Date   11.15.2031 
      
BACS Funding II Issued on 11.23.2001 (*)     
Face value in Ps.---12,10412,104
Declared Maturity Date   11.23.2031 
      
BHSA I Issued on 02.01.2002     
Face value in Ps.---43,41243,412
Declared Maturity Date   02.01.2021 
      
CHA VI Issued on 04.07.2006     
Face value in Ps.56,702--12,44769,149
Declared Maturity Date12.31.2016  12.31.2026 
      
CHA VII Issued on 09.27.2006     
Face value in Ps.58,527--12,84871,375
Declared Maturity Date08.31.2017  02.28.2028 
      
CHA VIII Issued on 03.26.2007     
Face value in Ps.61.088--13,40974.497
Declared Maturity Date08.31.2024  08.31.2028 
      
CHA IX Issued on 08.28.2009     
Face value in Ps.192,509--10,132202,641
Declared Maturity Date02.07.2027  07.07.2027 
      
CHA X Issued on 08.28.2009     
Face value in Ps.---17,22417,224
Face value en US$85,001---85,001
Declared Maturity Date01.07.2027  06.07.2028 
      
CHA XI Issued on 12.21.2009     
Face value in Ps.204,250--10,750215,000
Declared Maturity Date03.10.2024  10.10.2024 
      
CHA XII Issued on 07.21.2010     
Face value in Ps.259,932--13,680273,612
Declared Maturity Date11.10.2028  02.10.2029 
      
CHA XIII Issued on 12.02.2010     
Face value in Ps.110,299--5,805116,104
Declared Maturity Date12.10.2029  04.10.2030 
      
CHA XIV Issued on 03.18.2011     
Face value in Ps.119,876--6,309126,185
Declared Maturity Date05.10.2030  08.10.2030 
      
 (*)Trusts subject to the pesification of foreign currency assets and liabilities at the $1.00=US$1 rate established by Law 25561 and Decree 214, as they were created under Argentine legislation. Certain holders of Class A debt securities have started declarative actions against the trustee pursuant to the application of the pesification measures set forth in Law 25561 and Decree 214, in order to maintain the currency of origin of said securities. In these declarative actions, the Bank acted together with BACS as third party. The trustee has duly answered to this claim, being the final resolution to this situation is still pending.
 

F- 235
F-304

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



  
Debt Securities
Class A1/AV
  
Debt Securities
Class A2/AF
  
Debt Securities
Class B
  
Certificates of
Participation
  
 
Total
 
                
BHN II – Issued on 05.09.97 (*)               
Face value in Ps.  44,554   51,363   3,730   6,927   106,574 
Declared Maturity Date  03.25.2001   07.25.2009   03.25.2012   05.25.2013     
                     
BHN III – Issued on 10.29.97 (*)                    
Face value in Ps.  14,896   82,090   5,060   3,374   105,420 
Declared Maturity Date  05.31.2017   05.31.2017   05.31.2018   05.31.2018     
                     
BHN IV – Issued on 03.15.00 (*)                    
Face value in Ps.  36,500   119,500   24,375   14,625   195,000 
Declared Maturity Date  03.31.2011   03.31.2011   01.31.2020   01.31.2020     
                     
BACS I – Issued on 02.15.2001 (*)                    
Face value in Ps.  30,000   65,000   12,164   8,690   115,854 
Declared Maturity Date  05.31.2010   05.31.2010   06.30.2020   06.30.2020     
                     
BACS III – Issued on 12.23.2005                    
Face value in Ps.  77,600       1,200   1,200   80,000 
Declared Maturity Date  03.20.2013       09.20.2013   08.20.2015     
                     
BACS Funding I Issued on 11.15.2001 (*)                    
Face value in Ps.  -   -   -   29,907   29,907 
Declared Maturity Date              11.15.2031     
                     
BACS Funding II Issued on 11.23.2001 (*)                    
Face value in Ps.  -   -   -   12,104   12,104 
Declared Maturity Date              11.23.2031     
                     
BHSA I Issued on 02.01.2002                    
Face value in Ps.  -   -   -   43,412   43,412 
Declared Maturity Date              02.01.2021     
                     
CHA VI Issued on 04.07.2006                    
Face value in Ps.  56,702   -   -   12,447   69,149 
Declared Maturity Date  12.31.2016           12.31.2026     
                     
CHA VII Issued on 09.27.2006                    
Face value in Ps.  58,527   -   -   12,848   71,375 
Declared Maturity Date  08.31.2017           02.28.2028     
                     
CHA VIII Issued on 03.26.2007                    
Face value in Ps.  61.088   -   -   13,409   74.497 
Declared Maturity Date  08.31.2024           08.31.2028     
                     
CHA IX Issued on 08.28.2009                    
Face value in Ps.  192,509   -   -   10,132   202,641 
Declared Maturity Date  02.07.2027           07.07.2027     
                     
CHA X Issued on 08.28.2009                    
Face value in Ps.  -   -   -   17,224   17,224 
Face value en US$  85,001   -   -   -   85,001 
Declared Maturity Date  01.07.2027           06.07.2028     
                     
CHA XI Issued on 12.21.2009                    
Face value in Ps.  204,250   -   -   10,750   215,000 
Declared Maturity Date  03.10.2024           10.10.2024     
                     
CHA XII Issued on 07.21.2010                    
Face value in Ps.  259,932   -   -   13,680   273,612 
Declared Maturity Date  11.10.2028           02.10.2029     
                     
CHA XIII Issued on 12.02.2010                    
Face value in Ps.  110,299   -   -   5,805   116,104 
Declared Maturity Date  12.10.2029           04.10.2030     
                     
CHA XIV Issued on 03.18.2011                    
Face value in Ps.  119,876   -   -   6,309   126,185 
Declared Maturity Date  05.10.2030           08.10.2030     
                     


 


 
F-305

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


 (*)Trusts subject to the pesification of foreign currency assets and liabilities at the $1.00=US$1 rate established by Law 25561 and Decree 214, as they were created under Argentine legislation. Certain holders of Class A debt securities have started declarative actions against the trustee pursuant to the application of the pesification measures set forth in Law 25561 and Decree 214, in order to maintain the currency of origin of said securities. In these declarative actions, the Bank acted together with BACS as third party. The trustee has duly answered to this claim, being the final resolution to this situation is still pending.

Tarshop SA has created several financial trusts under its securitization program (“Valores Fiduciarios Tarjeta Shopping – Global program”) destined to assure its long-term financing accessing directly to the capital market. The assets included in the trusts relate to credit card coupons and advances in cash. The table below presents the trusts issued and outstanding as of June 30, 2015:2016:
 Debt Securities
Certificates of
Participation
Total
    
Series LXXXIII– Issued on 05.27.15I  
Face value in Ps.111,22242,591153,813
    
Series LXXXIV– Issued on 03.12.15   
Face value in Ps.104,86539,019143,884
    
Series LXXXV– Issued on 05.20.15   
Face value in Ps.128,500  47,800176,300
    
Series LXXXVI– Issued on 06.29.15   
Face value in Ps.126,050  48,168174,218
    
Series LXXXVII– Issued on 10.01.15   
Face value in Ps.141,066  57,091198,157
    
Series LXXXVIII– Issued on 04.01.16   
Face value in Ps.148,489  65,472213,961
    
Series LXXXIX–Issued on 05.17.16   
Face value in Ps.143,530  63,282206,812
    
Series XC– Issued on 06.28.16   
Face value in Ps.150,025  66,162216,187
    
Series XCI– Privately issued on 05.15.16   
Face value in Ps.102,581  39,893142,474
    
Series XCII– Privately issued on 06.15.16   
Face value in Ps.82,622  32,131114,753
    
Tarshop Privado Series 1 - Privately issued on 08.21.15   
Face value in Ps.1,162,400  329,3621,491,762
    
Tarshop Privado Series 1I - Privately issued on 12.23.15   
 
  Debt Securities  
Certificates of
Participation
  Total 
          
Series LXXVIII– Issued on 01.22.14         
Face value in Ps.  153,087   49,100   202,187 
Estimated Maturity Date  06.05.2015   06.05.2015     
             
Series LXXIX– Issued on 03.18.14            
Face value in Ps.  151,750   49,659   201,409 
Estimated Maturity Date  08.05.2015   08.05.2015     
             
Series LXXXI– Issued on 10.17.14            
Face value in Ps.  81,450   28,231   109,681 
Estimated Maturity Date  09.10.2015   09.10.2015     
             
Series LXXXII– Issued on 01.19.15            
Face value in Ps.  87,450   33,489   120,939 
Estimated Maturity Date  03.07.2016   03.07.2016     
             
Series LXXXIII– Issued on 05.27.15   I        
Face value in Ps.  111,222   42,591   153,813 
Estimated Maturity Date  08.05.2016   08.05.2016     
             
Series LXXXIV– Privately issued on 03.15.15            
Face value in Ps.  61,273   23,829   85,102 
Estimated Maturity Date  09.15.2016   09.15.2016     
             
Series LXXXV– Privately issued on 06.15.15            
Face value in Ps.  60,265   23,436   83,701 
Estimated Maturity Date  12.15.2016   12.15.2016     
             
             

F- 236
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
Face value in Ps.1,396,300  535,5711,931,871
    
Tarshop Series 1 - Privately issued on 09.15.15   
Face value in Ps.77,799  27,201105,000
    
BACS Banco de Crédito y Securitización S.A. (BACS) has created separate trusts which have personal loans, primary originated by cooperatives and later acquired by BACS, as assets. The mentioned trusts have been issued under the “Fideicomisos Financieros BACS – Global program" for the securitization for a face value up to Ps. 300,000. As of June 30, 20152016 and 20142015 there are no trusts outstanding.
 
As of June 30, 20152016 and 2014,2015, the Bank held in its portfolio the following securities corresponding to the abovementioned trusts:

 

F- 237
F-306

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)




 June 30,
 2016 2015
      
Class B debt securities – BHN IIPs.- Ps.7,000
Class B debt securities – BHN III -  7,203
Class B debt securities – BHN IV -  79,351
Class A debt securities – BHN IV -  44
Class A debt securities – CHA VI to CHA XIV 103,829  75,417
Class A debt securities – BACS I -  20,234
Class B debt securities – BACS I -  1,081
Debt securities – BACS III 14,411  15,768
Debt securities – Tarshop Series LXXIX -  2,042
Debt securities – Tarshop Series LXXXII -  7,198
Debt securities – Tarshop Series LXXXIII 998  13,530
Debt securities – Tarshop Series LXXXIV -  20,927
Debt securities – Tarshop Series LXXXV -  19,448
Debt securities – Tarshop Series LXXXVII 27,260  -
Debt securities – Tarshop Series XC 14,796  -
Debt securities – Tarshop Series XCI 19,525  -
Debt securities – Tarshop Privado Series I 98,453  -
Debt securities – Tarshop Privado Series II 656,071  -
Debt securities – Tarshop Series I 1,222,787  -
SubtotalPs.2,158,130 Ps.269,243
 June 30, 
 2015 2014 
       
Class B debt securities – BHN II Ps.7,000  Ps.- 
Class B debt securities – BHN III  7,203   7,203 
Class B debt securities – BHN IV  79,351   79,351 
Class A debt securities – BHN IV  44   45 
Class A debt securities – CHA VI to CHA XIV  75,417   53,549 
Class A debt securities – BACS I  20,234   20,234 
Class B debt securities – BACS I  1,081   1,081 
Debt securities – BACS III  15,768   18,107 
Debt securities – Tarshop Series LXXV  -   88,541 
Debt securities – Tarshop Series LXXIX  2,042   - 
Debt securities – Tarshop Series LXXXII  7,198   - 
Debt securities – Tarshop Series LXXXIII  13,530   - 
Debt securities – Tarshop Series LXXXIV  20,927   - 
Debt securities – Tarshop Series LXXXV  19,448   - 
Subtotal Ps.269,243  Ps.268,111 

 June 30,
 2016 2015
      
Certificates of participation – BHN IIPs.- Ps.41,722
Certificates of participation – BHN III -  14,970
Certificates of participation – CHA VI 13,737  13,592
Certificates of participation – CHA VII -  953
Certificates of participation – CHA IX 10,181  10,677
Certificates of participation – CHA X 26,578  26,085
Certificates of participation – CHA XI 11,935  14,488
Certificates of participation – CHA XII 14,440  18,298
Certificates of participation – CHA XIII 4,277  5,330
Certificates of participation – CHA XIV 4,173  5,401
Certificates of participation – BHSA I 8,949  9,192
Certificates of participation – BACS III 1,003  1,003
Certificates of Participation – Tarshop Series LXXIX -  48,523
Certificates of Participation – Tarshop Series LXXX -  47,053
Certificates of Participation – Tarshop Series LXXXI -  23,782
Certificates of Participation – Tarshop Series LXXXII -  24,551
Certificates of Participation – Tarshop Series LXXXIII 22,045  34,032
Certificates of Participation – Tarshop Series LXXXIV 19,797  23,486
Certificates of Participation – Tarshop Series LXXXV 23,094  25,112
Certificates of Participation – Tarshop Series LXXXVI 24,817  -
Certificates of Participation – Tarshop Series LXXXVII 32,074  -
Certificates of Participation – Tarshop Series LXXXVIII 42,178  -
Certificates of Participation – Tarshop Series LXXXIX 41,048  -
Certificates of Participation – Tarshop Series XC 48,088  -
Certificates of Participation – Tarshop Series XCI 33,284  -
Certificates of Participation – Tarshop Series XCII (920)  -
 June 30, 
 2015 2014 
       
Certificates of participation – BHN II Ps.41,722  Ps.41,722 
Certificates of participation – BHN III  14,970   14,970 
Certificates of participation – CHA VI  13,592   13,708 
Certificates of participation – CHA VII  953   4,427 
Certificates of participation – CHA VIII  -   2,769 
Certificates of participation – CHA IX  10,677   11,493 
Certificates of participation – CHA X  26,085   24,908 
Certificates of participation – CHA XI  14,488   14,613 
Certificates of participation – CHA XII  18,298   19,198 
Certificates of participation – CHA XIII  5,330   5,985 
Certificates of participation – CHA XIV  5,401   6,404 
Certificates of participation – BHSA I  9,192   7,013 
Certificates of participation – BACS III  1,003   1,003 
Certificates of Participation – Tarshop Series LXXIV  -   15,844 
Certificates of Participation – Tarshop Series LXXV  -   25,282 
Certificates of Participation – Tarshop Series LXXVI  -   21,779 
Certificates of Participation – Tarshop Series LXXVII  -   30,996 
Certificates of Participation – Tarshop Series LXXVIII  -   39,885 
Certificates of Participation – Tarshop Series LXXIX  48,523   12,065 
Certificates of Participation – Tarshop Series LXXX  47,053   16,791 
Certificates of Participation – Tarshop Series LXXXI  23,782   - 
Certificates of Participation – Tarshop Series LXXXII  24,551   - 
Certificates of Participation – Tarshop Series LXXXIII  34,032   - 
Certificates of Participation – Tarshop Series LXXXIV  23,486   - 
Certificates of Participation – Tarshop Series LXXXV  25,112   - 
Subtotal Ps.388,250  Ps.330,855 
Total Ps.657,493  Ps.598,966 


 

F- 238
F-307

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



Certificates of Participation – Tarshop Privado Series I 8,288  -
Certificates of Participation – Tarshop Privado Series II 175,214  -
Certificates of Participation – Tarshop Series I 382,235  -
SubtotalPs.946,515 Ps.388,250
TotalPs.3,105,151 Ps.657,493
20. Miscellaneous Liabilities

Sundry creditors and other miscellaneous liabilities consist of the following as of the end of each period:

 June 30, 
 2015 2014 
Sundry creditors:      
Accrued fees and expenses payable Ps.1,291,772  Ps.655,475 
Summary proceedings in financial matters N° 1320 (*)  53,632   - 
Unallocated collections  9,464   14,845 
Withholdings and taxes payable  96,350   39,347 
Other  16,973   14,543 
Total Ps.1,468,191  Ps.724,210 
 June 30,
 2016 2015
Sundry creditors:     
Accrued fees and expenses payable …….…………….……...Ps.857,251 Ps.1,291,772
Summary proceedings in financial matters N° 1320 (*)…… -  53,632
Unallocated collections………………………………………. 12,116  9,464
Withholdings and taxes payable……………………………... 57,288  96,350
Other…………………………………………………………. 19,233  16,973
TotalPs.945,888 Ps.1,468,191

(*) At the close of these Financial Statements, theThe Bank’s Board of Directors granted its approval to the actions undertaken by the Executive Committee concerning the deposit of the penalties imposed on directors, former directors, managers, former managers and statutory auditors and the fact that such amounts were charged against the statement of income in the framework ofFinancial Summary Proceedings No. 1320 (Note 30).

 June 30, 
 2015 2014 
Other:      
Directors and Syndics accrued fees payable Ps.47,829  Ps.38,145 
Payroll withholdings and contributions  91,217   51,898 
Gratifications  68,810   39,166 
Salaries and social securities  64,559   49,440 
Total Ps.272,415  Ps.178,649 
 June 30,
 2016 2015
Other:     
Directors and Syndics accrued fees payable………………….Ps.57,109 Ps.47,829
Payroll withholdings and contributions…………………….... 99,962  91,217
Gratifications……………………………………………….... 180,553  68,810
Salaries and social securities…………………………………. 46,786  64,559
TotalPs.384,410 Ps.272,415

21. Income from Services and Expenses on Services

Income from Services

Commissions earned consist of the following for each period:

 June 30, 
 2015 2014 2013 
          
Loan servicing fees from third parties Ps.37,240  Ps.30,854  Ps.26,548 
Commissions from FONAVI  -   -   11,361 
Commissions for credit cards  1,048,855   705,143   555,128 
Other  209,230   130,619   77,176 
Total Ps.1,295,325  Ps.866,616  Ps.670,213 
 June 30,
 2016 2015 2014
         
Loan servicing fees from third parties…..………….Ps.50,844 Ps.37,240 Ps.30,854
Commissions for credit cards……...………………… 1,573,624  1,048,855  705,143
Other …..…………………………………………… 158,653  209,230  130,619
TotalPs.1,783,121 Ps.1,295,325 Ps.866,616


Other income from services is comprised of the following for each period:
June 30,
 

F- 239
F-308

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Other income from services is comprised of the following for each period:

 2016 2015 2014
         
Reimbursement of loan expenses paid by third parties………………………………………..………
 
Ps.
26,088 
 
Ps.
19,547 
 
Ps.
37,289
Income from services from PROCREAR (note 31)… 244,130  106,619  30,947
Other (*)….………………………………………… 554,535  607,096  287,917
TotalPs.824,753 Ps.733,262 Ps.356,153
 June 30, 
 2015 2014 2013 
          
Reimbursement of loan expenses paid by third parties  Ps.19,547  Ps.37,289  Ps.68,731 
Income from services from PROCREAR (note 31)  106,619   30,947   9,863 
Other (*)  607,096   287,917   228,804 
Total Ps.733,262  Ps.356,153  Ps.307,398 

(*)For the twelve-month periods ended June 30, 2016, 2015 2014 and 2013,2014, includes Ps. 426,829, Ps. 525,516 and Ps. 235,379, and Ps. 191,680, respectively, related to other income services granted by Tarshop.

Expenses on Services

Commissions expensed consist of the following for each period:
 
 June 30,
 2016 2015 2014
         
Structuring and underwriting fees…………………..Ps.54,879 Ps.16,466 Ps.14,254
Retail bank originations……………………………... 12,073  7,690  6,327
Collections…………………………………………... 303  181  159
Aerolíneas Argentinas co-branding………………… 50,952  27,329  11,398
Services on loans…………………………………….. 754,359  452,188  373,412
Commissions paid to real estate agents……………. 45,056  36,688  40,707
TotalPs.917,622 Ps.540,542 Ps.446,257
   June 30,  
   2015    2014    2013 
Structuring and underwriting fees Ps.16,466  Ps.14,254  Ps.8,200 
Retail bank originations  7,690   6,327   1,958 
Collections  181   159   158 
Aerolíneas Argentinas co-branding  27,329   11,398   469 
Services on loans  452,188   373,412   154,930 
Commissions paid to real estate agents  36,688   40,707   28,349 
Total Ps.540,542  Ps.446,257  Ps.194,064 

 
22. Other Miscellaneous Income and Miscellaneous Expenses

Other miscellaneous income is comprised of the following for each period:

 June 30, 
 2015 2014 2013 
          
Income on operations with premises and equipment and miscellaneous assets Ps.578  Ps.2,944  Ps.1,158 
Rental income  2,267   2,290   1,603 
Interest on loans to bank staff  31,447   26,601   20,668 
Income from equity investments  6,641   -   - 
Other  17,942   15,708   14,326 
Total Ps.58,875  Ps.47,543  Ps.37,755 
 June 30,
 2016 2015 2014
         
Income on operations with premises and equipment and miscellaneous assets…………......................
 
Ps.
3,592 
 
Ps.
578 
 
Ps.
2,944
Rental income…………….……………………….. 2,976  2,267  2,290
Interest on loans to bank staff..……………………. 35,581  31,447  26,601
Income from equity investments.……………………. 34,644  6,641  -
Other…..………��…………………………………. 51,852  17,942  15,708
TotalPs.128,645 Ps.58,875 Ps.47,543


Other miscellaneous expenses are comprised of the following for each period:
 June 30,
 2016 2015 2014
         
Depreciation of miscellaneous assets………………..Ps.310 Ps.340 Ps.388
Gross revenue tax…………………………………… 9,206  7,126  4,395
Other taxes…………………………………………... 178,828  117,464  78,784
Debit card discounts………………………………… 24,718  20,624  14,285
Credit card and others discounts……………………. 59,807  40,577  43,422
Benefits prepayments……………………………….. 2,856  9,268  6,008
Donations…………………………………………… 51,026  39,842  24,325
 

F- 240
F-309

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Other miscellaneous expenses are comprised of the following for each period:

Amortization of goodwill…………………………… 3,430  3,430  3,430 
Payment Summary proceedings in financial matters N° 1320 (*)…………………………………………. -  53,632  - 
Other …..…………………………………………… 47,654  44,417  45,393 
TotalPs.377,835 Ps.336,720 Ps.220,430 
 June 30, 
 2015 2014 2013 
          
Depreciation of miscellaneous assets Ps.340  Ps.388  Ps.350 
Gross revenue tax  7,126   4,395   2,445 
Other taxes  117,464   78,784   23,835 
Debit card discounts  20,624   14,285   12,052 
Credit card and others discounts  40,577   43,422   55,130 
Benefits prepayments  9,268   6,008   4,166 
Donations  39,842   24,325   18,048 
Amortization of goodwill  3,430   3,430   3,429 
Payment Summary proceedings in financial matters N° 1320 (*)  53,632   -   - 
Other  44,417   45,393   11,511 
Total Ps.336,720  Ps.220,430  Ps.130,966 

 (*)At the close of these Financial Statements, During The fiscal year 2015, the Bank’s Board of Directors granted its approval to the actions undertaken by the Executive Committee concerning the deposit of the penalties imposed on directors, former directors, managers, former managers and statutory auditors and the fact that such amounts were charged against the statement of income in the framework of the Financial Summary Proceedings No. 1320 (Note 30).

23. Balances in Foreign Currency

The balances of assets and liabilities denominated in foreign currency (principally in US dollars and Euros) are as follows:


 US$EuroYenTotal
 (in Pesos)
Assets:    
Cash and due from banks…..………..………..1,222,42128,210101,250,641
Government and corporate securities..………..2,351,646292,729-2,644,375
Loans………………..………………………...1,435,021--1,435,021
Other receivables from financial transactions...1,011,013--1,011,013
Miscellaneous receivables………………….…136,90965-136,974
Items pending allocation………………..….…541--541
Total as of June 30, 20166,157,550321,004106,478,565
Total as of June 30, 20153,253,54918,59153,272,145
     
Liabilities:    
Deposits………………………………………2,458,279--2,458,279
Other liabilities from financial transactions….6,585,11149-6,585,160
Miscellaneous liabilities………………………12,66720-12,687
    Items pending allocation……………………..49631-527
Total as of June 30, 20169,056,553100-9,056,653
Total as of June 30, 20153,082,324101,490-3,183,814
  US$  Euro  Yen  Total 
  (in Pesos) 
Assets:            
Cash and due from banks  732,799   18,561   5   751,365 
Government and corporate securities  797,684   -   -   797,684 
Loans  1,223,758   -   -   1,223,758 
Other receivables from financial transactions  471,249   -   -   471,249 
Miscellaneous receivables  28,059   30   -   28,089 
Total as of June 30, 2015  3,253,549   18,591   5   3,272,145 
Total as of June 30, 2014  3,888,459   19,472   5   3,907,936 
                 
Liabilities:                
Deposits  609,328   -   -   609,328 
Other liabilities from financial transactions  2,470,533   101,460   -   2,571,993 
Miscellaneous liabilities  2,286   12   -   2,298 
    Items pending allocation  177   18   -   195 
Total as of June 30, 2015  3,082,324   101,490   -   3,183,814 
Total as of June 30, 2014  3,448,283   55,890   -   3,504,173 

24. Income Tax

In accordance with Section 28 of Law 24,855, Banco Hipotecario Sociedad Anónima is subject to income tax, except with respect to housing loan transactions made before October 23, 1997, the date of registration of its bylaws with the Superintendency of Corporations.

 

F-310

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The Bank records the charges to income, when applicable, and a provision in its liabilities for the tax applicable to its taxable transactions in the fiscal year to which they refer.

As of December 31, 20142015 and 2013,2014, the Bank estimated income tax by applying the 35% tax rate to its taxable income. The amount determined as income tax was charged against income for the fiscal period under “Income Tax”. The provision for income tax is recorded under “Miscellaneous Liabilities – Other”.

The Bank has a tax net operating loss carry forward of Ps. 56,690143,435 and Ps. 87,69259,690 at June 30, 20152016 and 2014,2015, respectively.

25. Presumptive Minimum Income Tax

F- 241
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
The Bank is subject to presumptive minimum income tax. Pursuant to this tax regime, the Bank is required to pay the greater of the income tax or the presumptive minimum income tax. Any excess of the presumptive minimum income tax over the income tax may be carried forward and recognized as a tax credit against future income taxes payable over a 10-year period. The presumptive minimum income tax provision is calculated on an individual entity basis at the statutory asset tax rate of 1% and is based upon the taxable assets of each company as of the end of the year, as defined by Argentine law. For financial entities, the taxable basis is 20% of their computable assets.

As of June 30, 2015 the Bank recorded the Ps. 61,561As of June 30, 2016 Tarshop recorded the Ps.76,144 tax credit.

26. Shareholders' Equity

The following information relates to the statements of changes in the Bank’sshareholders' equity.

(a)              
Common Stock

Prior to June 30, 1997, the Bank's capital stock consisted of assigned capital with no par value owned 100% by the Argentine government. In accordance with the by-laws approved as a result of the conversion of the Bank to a sociedad anónima, the Bank's capital stock was established at Ps.1,500,000 and divided into four classes of ordinary common shares.

As of June 30, 2015,2016, the Bank's capital stock consists of:

Shareholder
 
Class of
Shares
  
Number of
Shares
  
Total %
Ownership
 Voting Rights
Class of
Shares
Number of
Shares
 
Total %
Ownership
Voting Rights
Argentine government (through FFFRI) (b)  A   668,711,843   44.6%1 voteA665,499,426 44.4%1 vote
Banco Nación, as trustee for the Bank's Programa de Propiedad Participada (a)
  B   57,009,279   3.8%1 voteB57,009,279 3.8%1 vote
Argentine government (through FFFRI)  C   75,000,000   5.0%1 voteC75,000,000 5.0%1 vote
Public investors (c) (d)  D   699,278,878   46.6%3 votesD702,491,295 46.8%3 votes
      1,500,000,000   100.0%  1,500,000,000 100.0% 
_______________
(a)  
(a)
The Bank's Programa de Propiedad Participada (“PPP”) is the Bank's employee stock ownership plan. Under Decree 2127/2012 and Resolution 264/2013 issued by the Ministry of Economy and Public Finance, the PPP was implemented. Under this plan, in a first stage, out of a total of 75,000,000, 17,990,721 Class B shares were converted into Class A shares, to be allocated among the employees that have withdrawn from the Bank in accordance with the implementation guidelines. Upon delivery to the former employees, the 17,990,721 shares will become Class D shares. The shares allocated to the Bank’s current employees are designated as Class B shares, representing the PPP.
On December 2, 2015, the Bank took notice of an observation raised by the Superintendent of Financial Institutions reporting to the Argentine Central Bank with regard to the insurance business developed by Banco Hipotecario S.A. through BHN Vida S.A. and BHN Seguros Generales S.A.
The observation requires the enforcement of the credit scoring regulations, which impose a 12.5% limit on interests in the capital stock and voting rights of other companies.
In reply, the Bank has claimed that such observation should be revised, in that the Bank is allowed to conduct the business in question pursuant to the Privatization Law No. 24,855 and

 

F- 242
F-311

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


(b)  become Class D shares. The shares allocated to the Bank’s current employees are designated as Class B shares, representing the PPP.
its regulations, in particular Decree No. 1394/98, as continuing company of Banco Hipotecario Nacional, as set forth in the first paragraph of this Note.

(c)  Under the Bylaws, the affirmative vote of the holders of Class A Shares is required in order to effectuate: (i) mergers or spin-offs; (ii) an acquisition of shares (constituting a Control Acquisition or resulting in the Bank being subject to a control situation); (iii) the transfer to third parties of a substantial part of the loan portfolio of the Bank, (iv) a change in the Bank’s corporate purpose; (v) the transfer of the Bank’s corporate domicile outside of Argentina, and (vi) the voluntary dissolution of the Bank.
(b)

Under the Bylaws, the affirmative vote of the holders of Class A Shares is required in order to effectuate: (i) mergers or spin-offs; (ii) an acquisition of shares (constituting a Control Acquisition or resulting in the Bank being subject to a control situation); (iii) the transfer to third parties of a substantial part of the loan portfolio of the Bank, (iv) a change in the Bank’s corporate purpose; (v) the transfer of the Bank’s corporate domicile outside of Argentina, and (vi) the voluntary dissolution of the Bank.
(d)  For so long as Class A Shares represent more than 42% of the Bank’s capital, the Class D Shares shall be entitled to three votes per share, except that holders of Class D Shares will be entitled to one vote per share in the case of a vote on: (i) a fundamental change in the Bank’s corporate purpose; (ii) a change of the Bank’s domicile to be outside of Argentina; (iii) dissolution prior to the expiration of the Bank’s corporate existence; (iv) a merger or spin-off in which the Bank is not the surviving corporation; and (v) a total or partial recapitalization following a mandatory reduction of capital.

(c)
(e)  By reason of the expiration on January 29, 2009 of the Total Return Swap that had been executed and delivered on January 29, 2004, Deutsche Bank AG transferred to the Bank 71,100,000 ordinary Class “D” shares in Banco Hipotecario Sociedad Anónima with face value $ 1 each, which are available for the term and in the conditions prescribed by the Argentine Companies Law, in its Section 221. The General Ordinary Shareholders’ Meeting held on April 30, 2010 resolved to extend for a year, counted as from January 31, 2010, the term for realizing the treasury shares held by the Bank.
For so long as Class A Shares represent more than 42% of the Bank’s capital, the Class D Shares shall be entitled to three votes per share, except that holders of Class D Shares will be entitled to one vote per share in the case of a vote on: (i) a fundamental change in the Bank’s corporate purpose; (ii) a change of the Bank’s domicile to be outside of Argentina; (iii) dissolution prior to the expiration of the Bank’s corporate existence; (iv) a merger or spin-off in which the Bank is not the surviving corporation; and (v) a total or partial recapitalization following a mandatory reduction of capital.

(d)
By reason of the expiration on January 29, 2009 of the Total Return Swap that had been executed and delivered on January 29, 2004, Deutsche Bank AG transferred to the Bank 71,100,000 ordinary Class “D” shares in Banco Hipotecario Sociedad Anónima with face value $ 1 each, which are available for the term and in the conditions prescribed by the Argentine Companies Law, in its Section 221. The General Ordinary Shareholders’ Meeting held on April 30, 2010 resolved to extend for a year, counted as from January 31, 2010, the term for realizing the treasury shares held by the Bank.
On April 30, 2010, the General Extraordinary Shareholders’ Meeting resolved to delegate upon the Board of Directors the decision to pay with the treasury shares in portfolio the Stock Appreciation Rights (StAR) coupons resulting from the debt restructuring as advisable based on the contractually agreed valuation methods and their actual market value after allowing the shareholders to exercise their preemptive rights on an equal footing.

On June 16, 2010, the Board of Directors resolved to launch a preemptive offer to sell a portion of the Bank’s treasury shares, for a total of 36.0 million class D shares. The remaining shares would be delivered in payment to the holders of Stock Appreciation Rights (StAR) coupons arising from the debt restructuring, which fell due on August 3, 2010. On July 26, 2010, within the framework of the referred offer, the Bank sold approximately 26.9 million of the shares mentioned above.

On August 3, 2010 the proceeds of the offer and the balance of the shares referred in the preceding paragraph were made available to the holders of the Stock Appreciation Rights (StAR) coupons. With the above-mentioned offering, 999,312 Class D shares were sold in excess of those required to pay off the obligation previously mentioned. In connection with such excess sale, Ps. 554 thousand were recorded as retained earnings to reflect the addition of the shares to the entity’s equity, which took place on January 29, 2009 as detailed in this note, and a further Ps. 834 thousand were booked as Additional paid-in capital for the difference between the value as added to the entity’s equity and the sales value.

The General Ordinary Shareholders’ Meeting held on April 24, 2013 resolved to allocate 35,100,000 Class D shares held by the Bank to a compensation program for the personnel under the terms of Section 67 of Law 26831. This decision is pending approval of CNV.

On April 24, 2014 the General Ordinary Shareholders’ Meeting acknowledged the incentive or compensation program described in the preceding paragraph and its extension to the personnel


F-312

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


employed by the subsidiaries BACS Banco de Crédito y Securitización S.A., BH Valores S.A., BHN Sociedad de Inversión S.A., BHN Vida S.A. and BHN Seguros Generales S.A.

F- 243
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
The Class B shares have been set aside for sale to the Bank's employees in the future pursuant to the PPP on terms and conditions to be established by the Argentine government. Any Class B shares not acquired by the Bank's employees at the time the Bank implements the PPP will automatically convert into Class A shares. The Class C shares are eligible for sale only to companies engaging in housing construction or real estate activities. Any Class B shares transferred by an employee outside the PPP will automatically convert to Class D shares or Class C shares transferred to persons not engaged in construction or real estate activities will automatically convert into Class D shares.

(b)              
Distribution of profits

No profits may be distributed when any financial year does not produce profits.

Argentine Central Bank Communication “A” 4152 dated June 2, 2004 left without effect the suspension of the distribution of profits established by Communication “A” 3574. However, those banks that proceed to such distribution must be previously authorized by the Financial and Exchange Institutions Superintendency.

Through Communiqué “A” 4526 dated April 24, 2006, the BCRA established that when the Legal Reserve is used to absorb losses, earnings shall not be distributed until the reimbursement thereof. Should the balance prior to the absorption exceed 20% of the Capital Stock plus the Capital Adjustment, profits may be distributed once the latest value is reached.

For purposes of determining distributable balances, the net difference arising from the book value and the market quotation shall be deducted from retained earnings, in the event the Entity records government debt securities and/or debt securities issued by the BCRA not recorded at market prices, with volatility published by such entity.

Pursuant to its Communication “A” 5072, BCRA established that no dividend distribution shall be admitted in so far as: a) the amounts deposited as minimum cash requirements on average – in Pesos, foreign currency or in Government securities – were less than the requirements pertaining to the most recently closed position or the position as projected taking into account the effect of the distribution of dividends, and/or b) the amounts deposited as minimum capital requirements were less than the requirements recalculated as previously mentioned plus a 30% increase, and/or c) the Entity has received financial aid from the BCRA on grounds of illiquidity as set forth in Section 17 of BCRA’s Charter.

On January 27, 2012, the BCRA issued Communication “A” 5272 whereby it established that for the calculation of the minimum capital requirement, the minimum capital for operational risk shall be included. On the same date, Communication “A” 5273 was also issued, whereby the BCRA resolved to increase the percentage referred to in the preceding paragraph, subsection b), from 30% to 75%.

Communication “A” 5369 provided that as from January 1, 2013, for the purposes of calculating the position of minimum capitals, the capital requirement for credit risk due to securitizations must be computed over all the transactions outstanding as of the computation date.

On September 23, 2013 the Argentine Congress enacted Law N° 26,983 which amends the Income Tax Law and sets forth that dividends or earnings in money or in kind shall be levied with Income Tax at a 10% tax rate payable in a final and lump sum.


F-313

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The Ordinary General Shareholders’ Meeting, held on April 13, 2011, resolved to distribute the income for the year ended on December 31, 2010 as follows: Ps. 39,063 (20%), to be applied to the

F- 244
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
legal reserve Ps. 100,000 (61.59%), to be paid out as cash dividends on ordinary shares, and the balance, after the Board’s remuneration, to be maintained as retained earnings. On September 20, 2012, the BCRA reported that there were no objections against the Bank’s distribution of cash dividends for Ps. 100,000, thousand, as requested. For such reason, on October 10, 2012 such cash funds were made available to the shareholders.

The Ordinary General Shareholders’ Meeting, held on August 23, 2013, resolved to distribute the income for the year ended on December 31, 2012 as follows: Ps. 68,721, to be applied to the legal reserve; Ps. 30,000, to be paid out as cash dividends on ordinary shares; and Ps. 244,886 to be maintained as retained earnings. This decision has been approved by BCRA.

On April 24, 2014, the Ordinary General Shareholders’ Meeting resolved to distribute the income for the year ended on December 31, 2013 as follows: Ps. 84,190, to be applied to the legal reserve; Ps. 42,000, to be paid out as cash dividends on ordinary shares; and Ps. 294,760 to be maintained as retained earnings. Through Note 314/43/14 dated December 23, 2014, the Argentine Central Bank authorized the Bank to distribute cash dividends for Ps. 42,000. At its meeting dated January 7, 2015, the Board of Directors of Banco Hipotecario S.A. resolved that these dividends should be made available to the shareholders as of January 16, 2015.

On July 12, 2016 by means of Communication "A" 6013 the Argentine Central Bank published the updated text on “Distribution of profits” effective as from January 1, 2016 by means of Communication “A” 5827 and supplementary rules. The provisions of this communication aim at converging towards international principles and standards, among other changes, they stablish additional capital margins.
27. Employee Benefit Plan

The Bank is obligated to make employer contributions to the National Pension Plan System determined on the basis of the total monthly payroll. These expenses are recorded in “Salaries and social security contributions” under the “Administrative expenses” caption in the accompanying consolidated statements of income.

28. Financial Instruments with Off-Balance Sheet Risk

In the normal course of its business the Bank is party to financial instruments with off-balance sheet risk in order to meet the financing needs of its customers. These instruments expose the Bank to credit risk in addition to amounts recognized in the balance sheets. These financial instruments include commitments to extend credit.

 June 30, 
 2015 2014 
Commitments to extend credit      
Mortgage loans and other loans (a) Ps.291,342  Ps.132,180 
Credit card loans (b)  14,049,429   11,913,152 
Clearing items in process (c)  137,944   163,304 
Other guarantees (d)  57,739   46,646 
 June 30,
 2016 2015
Commitments to extend credit     
Mortgage loans and other loans (a)….……………...Ps.165,636 Ps.291,342
Credit card loans (b)…..……………………..……. 22,947,873  14,049,429
Clearing items in process (c)..………………………… 234,515  137,944
Other guarantees (d)…………………………………. 483,644  57,739

(a)
Commitments to extend credit are agreements to lend to a customer at a future date, subject to such customers meeting of pre-defined contractual milestones. Typically, the Bank will commit to extend financing for construction project lending on the basis of the certified progress of the work under construction. Most arrangements require the borrower to pledge the land or buildings under construction as collateral. In the opinion of management, the Bank’s outstanding commitments do not represent unusual credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the other party is represented by the contractual notional amount of those commitments.

Commitments to extend credit are agreements to lend to a customer at a future date, subject to such customers meeting of pre-defined contractual milestones. Typically, the Bank will commit to extend financing for construction project lending on the basis of the certified progress of the work under construction. Most arrangements require the borrower to pledge the land or buildings under construction as collateral. In the opinion of management, the
(b)  The Bank has a unilateral and irrevocable right to reduce or change the credit card limit, thus it considered there is no off-balance sheet risk. In the opinion of management, the

 

F- 245
F-314

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Bank’s outstanding commitments do not represent unusual credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the other party is represented by the contractual notional amount of those commitments.
(b)

Bank’s outstanding commitments do not represent unusual credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the other party is represented by the contractual notional amount of those commitments.
(c)  The Bank accounts for items drawn on other banks in memorandum accounts until such time as the related item clears or is accepted. In the opinion of management, the Bank’s risk of loss on these clearing transactions is not significant as the transactions primarily relate to collections on behalf of third parties.

(c)
(d)             Mainly includes the amounts given as collateral for transactions held by customers.
The Bank has a unilateral and irrevocable right to reduce or change the credit card limit, thus it considered there is no off-balance sheet risk. In the opinion of management, the Bank’s outstanding commitments do not represent unusual credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the other party is represented by the contractual notional amount of those commitments.

(d)
The Bank accounts for items drawn on other banks in memorandum accounts until such time as the related item clears or is accepted. In the opinion of management, the Bank’s risk of loss on these clearing transactions is not significant as the transactions primarily relate to collections on behalf of third parties.
(e)
 Mainly includes the amounts given as collateral for transactions held by customers.
29. Adoption of International Financial Reporting Standards

By virtue of its General Resolution No. 562, the Argentine Securities Commission (CNV) has decided to enforce the provisions under the Technical Pronouncement No. 26 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) that adopts the International Financial Reporting Standards (IFRS) for all the companies overseen by CNV as from the fiscal years beginning on January 1, 2012.

The Bank is not obligated to apply these standards insofar as the CNV has excluded all the entities for which CNV is empowered to accept the accounting criteria laid down by other regulatory and/or oversight authorities (financial institutions, insurance companies, etc.) from using the IFRS.

On February 12, 2014, BCRA issued its Communication “A” 5541 whereby it provides a roadmap to convergence between the informational and accounting regime and IFRS. Pursuant to this Communication, the entities and institutions must start to account for their financial transactions and changes in accordance with the rules issued by BCRA following the above-mentioned convergence regime as from the fiscal years beginning on January 1, 2018. This roadmap includes the following steps:

· First half of 2015
Financial institutions must prepare and file their own convergence plan and provide the name of the compliance officer appointed to such end.

Disclosure of guidelines to be observed by institutions regarding reconciliations are to be filed with the BCRA.

· Second half of 2015
The institutions shall file with the BCRA, together with the financial statements as of the fiscal year’s closing date, a reconciliation of the main asset, liability and shareholders’ equity captions with the amounts that would result from applying the rules issued by the BCRA under the scope of the IFRS convergence process. This information shall include a special report by the independent auditor and will be used exclusively by the BCRA for supervision and regulation purposes, and will qualify as non-public. Institutions shall report on the degree of progress made in the IFRS Convergence Plan.

· Year 2016
According to the method and frequency established in due course, institutions shall continue to report to the BCRA the degree of progress made by them in the IFRS convergence process. In

F- 246
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
addition, they shall continue to disclose in their published financial statements that they are progressing in the IFRS Convergence Plan. There will be an issuance of a CONAU Circular to communicate the new Minimum Accounts Plan and Form of Financial Statements (New Informational and Accounting Regime for Quarterly / Annual Publication).


F-315

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


· Year 2017
As of January 1, 2017, institutions shall prepare the opening financial statements that will serve as basis for preparing their comparative financial statements. In each quarterly statement, they shall include a reconciliation of the main asset, liability and shareholders’ equity captions and results with the amounts that would result from applying the rules issued by the BCRA under the scope of the IFRS convergence process. Such reconciliations shall be supported by a special report by the independent auditor. The quantitative information and the degree of progress of the IFRS Convergence Plan will be disclosed in a note to the published financial statements.

· Year 2018
As from the financial statements starting on January 1, 2018, financial institutions shall be required to record their transactions and equity changes in accordance with the rules issued by the BCRA under the IFRS convergence process. Therefore, as from the closing of the first quarter, they shall prepare and submit their published financial statements according to the above mentioned rules; the independent auditor shall issue an opinion thereon and such financial statements will be the ones used by the institutions for all legal and corporate purposes.

On March 31, 2015 the Bank’s Board of Directors has approved (i) the Implementation Plan for Convergence towards the International Financial Reporting Standards dictated by the Communication “A” 5541 for Financial Entities subject to supervision of the BCRA; and (ii) the designation of the coordinators which will have the obligation to inform the Board of Directors the status and degree of progress of the project.

The plan contains the creation of a work team; coordination with the management of the related companies in which permanent investments are held, controlled companies or companies in which significant influence is exercised; design and communication of a training plan; identifying impacts on operations and the information to be submitted that requires the implementation of specific actions (adapting information systems, internal control, etc.).

Half-yearly reports must be made to the BCRA, showing the progress made in the Implementation Plan. The first due date of this presentation operatedoperates on September 30, 2015. Each half-yearly report shall include a report issued by the Internal Audit Department.

As of June 30, 2016, there have been two presentations relating to the progress of the plan on September 30, 2015 and March 31, 2016. Both presentations were approved by the Board of the entity and were accompanied by an audit report approved by the internal Audit Committee.
On March 31, 2016, was sent to BCRA the reconciliation of assets and liabilities captions applying IFRS as of December 31, 2015, following the guidelines established by Communication " A" 5844, together with the special report the External Auditor.
Subsequently, reconciliations of the balances as of June 30 and December 31 must be sent, operating its due date on September 30 and March 31 respectively, until the B.C.R.A. arrange for its discontinuity. The information must be accompanied by a special report of the External Auditor.
 
30. Commencement of summary proceedings
I –Summary Proceedings before administrative authorities: 

I – Pending Summary Proceedings: 

1.         On September 13, 2013, the Bank was notified of Resolution No. 611 handed down by the Superintendent of Financial and Foreign Exchange Institutions, whereby it ordered to commence summary proceedings against the Bank and the manager Christian Giummarra and the former manager Aixa Manelli (Summary Proceedings No. 5469 on Foreign Exchange Matters) charging them with alleged violation of the foreign exchange laws in selling foreign currency to persons prohibited from trading foreign currency by the Argentine Central Bank. The cumulative amount derived from the alleged violation in the sale of foreign currency is around US$ 39.9 thousand and Euro 1.1 thousand. The relevant defenses and arguments have been filed and evidence has been offered in support of all the defendants subject to the summary proceedings. Due to its related subject matter, the record of this case was joined with Summary Proceedings No. 5529 on Foreign Exchange Matters (File 101,327/10). Therefore, its procedural status is described together with the latter.

2.         On October 8, 2013, the Bank was notified of Resolution No. 720 handed down by the Superintendent of Financial and Foreign Exchange Institutions, ordering to commence summary proceedings against the Bank and its Organization and Procedures Manager, Mr. Christian Giummarra, and the former Systems Manager, Ms. Aixa Manelli (Summary

 

F- 247
F-316

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Proceedings No. 5529 on Foreign Exchange Matters) in accordance with Section 8 of the Criminal Foreign Exchange Regime Law (Ley de Régimen Penal Cambiario) –as amended by Decree 480/95- charging them with alleged violation of the foreign exchange laws in selling foreign currency to persons prohibited from trading foreign currency by the Argentine Central Bank. The cumulative amount derived from the alleged violation in the sale of foreign currency is around US$ 86.4 thousand. The relevant defenses and arguments were filed and evidence was offered in support of all the defendants subject to the summary proceedings. The BCRA opened the discovery stage, and evidence was produced in due time. Once the discovery stage came to a conclusion, the attorneys submitted their closing arguments. The Argentine Central Bank now is expected to send the case file to the competent courts.

In
1.
       On February 19, 2014, the legal counsel’s opinion, atBank was notified of Resolution No. 209/13 handed down by the current statusChairman of the Financial Information Unit (UIF), whereby it ordered to commence summary proceedings there are legal and factual arguments that generate reasonable expectations that the physical persons named defendants and Banco Hipotecario S.A. will be acquitted and that therefore, there are low chances thatagainst the Bank, will beits directors (Messrs. Eduardo S. Elsztain; Mario Blejer; Ernesto M. Viñes; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Písula; Gabriel G. Reznik; Pablo D. Vergara del Carril; Mauricio E. Wior; Saul Zang); the Risk and Controlling Manager, Mr. Gustavo D. Efkhanian and the Manager of the Money Laundering Prevention and Control Unit Manager, Mr. Jorge Gimeno. In these proceedings, an investigation is made into the defendants’ liability for alleged violation of the provisions of Section 21 of Law 25,246, as amended, and Resolution UIF No. 228/2007 due to certain defaults detected by the BCRA in the inspection of the organization and in internal controls implemented for the prevention of money-laundering derived from illegal activities. On March 25, 2014, the relevant defenses and arguments were filed in support of the Bank and the individuals subject to the economic sanctions set forth by the Criminal Foreign Exchange Regime Law (Ley de Régimen Penal Cambiario). For such reason, no allowances have been created in this regard.summary proceedings.

3.  On February 19, 2014, the Bank was notified of Resolution No. 209/13 handed down by the Chairman of the Financial Information Unit (UIF), whereby it ordered to commence summary proceedings against the Bank, its directors (Messrs. Eduardo S. Elsztain; Mario Blejer; Ernesto M. Viñes; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Písula; Gabriel G. Reznik; Pablo D. Vergara del Carril; Mauricio E. Wior; Saul Zang); the Risk and Controlling Manager, Mr. Gustavo D. Efkhanian and the Manager of the Money Laundering Prevention and Control Unit Manager, Mr. Jorge Gimeno. In these proceedings, an investigation is made into the defendants’ liability for alleged violation of the provisions of Section 21 of Law 25,246, as amended, and Resolution UIF No. 228/2007 due to certain defaults detected by the BCRA in the inspection of the organization and in internal controls implemented for the prevention of money-laundering derived from illegal activities. On March 25, 2014, the relevant defenses and arguments were filed in support of the Bank and the individuals subject to the summary proceedings.

In the legal counsel’s opinion, at the current stage of the proceedings and based on the precedents existing at the UIF in connection with similar cases, it is estimated that there are chances of imposing an administrative penalty. For such reason, the bank hasThe estimated allowancesand provisioned as of December 31, 2015 amounts to Ps. 20.

4.         On August 26,
2.
       On December 29, 2014, the Bank was notified of the Resolution passed by the Superintendent of Financial and Foreign Exchange Institutions No. 416 dated August 7, 2014 ordering the start of Summary Proceedings No. 5843 in the terms of Section 8 of the Foreign Exchange Criminal Regime Law No. 19,359 (as signed into law pursuant to Decree No. 480/95). In the above-mentioned summary proceedings, Banco Hipotecario, its directors (Messrs. Eduardo S. Elsztain; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Písula; Gabriel G. Reznik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; and Mauricio E. Wior)  and former directors (Ms. Clarisa D. Lifsic de Estol and Mr. Federico L. Bensadón), and two former managers (Messrs. Gabriel G. Saidón and Enrique L. Benitez), are charged with failure to comply with the rules disclosed by Communication “A” 3471 (paragraphs 2 and 3) and by Communication “A” 4805 (Paragraph 2.2.) due to certain transfers of currency made abroad between August and October 2008 to guarantee the “CER Swap Linked to PG08 and External Debt” swap transaction for a total of US$ 45,968 thousand, without the authorization of the Argentine Central Bank. BHSA has been allowed to review the proceedings (case file No. 100.308/10) which are being handled by the Argentine Central Bank’s Department of Foreign Exchange Contentious Matters. The relevant defenses and


F-317

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


arguments were filed in support of the subjects to the summary proceedings. The BCRA opened the discovery stage on March 16, 2015.

In the legal counsel’s opinion, at the current stage of the proceedings there are legalResolution passed by the Superintendent of Financial and factual arguments that generate reasonable expectations thatForeign Exchange Institutions No. 824 dated December 1, 2014 ordering the physical persons named defendants andstart of Summary Proceedings No. 6086 on Foreign Exchange Matters (File 101.534/11) against Banco Hipotecario S.A. will be acquitted and that therefore, there are low chances thata former Manager (Mr. Gabriel Cambiasso) and five assistants (Claudio H. Martin; Daniel J. Sagray; Rubén E. Perón; Marcelo D. Buzetti and Pablo E. Pizarro) at the Cordoba Branch, in the terms of Section 8 of the Foreign Exchange Criminal Regime Law (as signed into law pursuant to Decree No. 480/95). In the above-mentioned summary proceedings, an investigation is made in connection with excesses in the limits for selling foreign currency to two entities in the City of Cordoba (for a combined amount of US$ 701,270), which allegedly violate the provisions of Communication “A” 5085, paragraph 4.2.1.
On July 3, 2015 the writ containing the defenses and arguments was filed with the Central Bank will be subject toand the economic sanctions set forthrelevant evidence was offered.
On April 12, 2016 the Argentine Central Bank ordered the production of evidence by the Criminal Foreign Exchange Regime Law (Ley de Régimen Penal Cambiario). For such reason, no allowances have been created in this regard.parties, and all evidence previously offered was produced.

5.  On December 29, 2014, the Bank was notified of the Resolution passed by the Superintendent of Financial and Foreign Exchange Institutions No. 824 dated December 1, 2014 ordering the start of Summary Proceedings No. 6086 on Foreign Exchange Matters (File 101.534/11) against Banco Hipotecario S.A. and a former Manager (Mr. Gabriel Cambiasso) and five assistants (Claudio H. Martin; Daniel J. Sagray; Rubén E. Perón; Marcelo D. Buzetti and Pablo E. Pizarro) at the Cordoba Branch, in the terms of Section 8 of the Foreign Exchange Criminal Regime Law (as signed into law pursuant to Decree No. 480/95). In the above-mentioned summary proceedings, an investigation is made in connection with excesses in the limits for selling foreign currency to two entities in the City of Cordoba (for a combined amount of US$ 701,270), which allegedly violate the provisions of Communication “A” 5085, paragraph 4.2.1.

In the legal counsel’s opinion, at the current stage of the proceedings there are legal and factual arguments that generate reasonable expectations that the physical persons named defendants will be acquitted. For such reason, no allowances have been created in this regard.

  6.  Banco de Crédito y Securitización S.A. has been notified of Resolution No. 738 dated October 22, 2013 (Summary Proceedings No. 1406/201 on Financial Matters, File 100,553/12) handed down by the BCRA’s Superintendent of Financial and Exchange Institutions, ordering to start summary proceedings against this Bank, its Chairman, Mr. Eduardo S. Elsztain, and the Vice-Chairman, Mr. Ernesto M. Viñes, due to the late filing of documentation related to the appointment of the Bank’s authorities. On November 8, 2013, the defenses
3.
       On August 11, 2015, we were notified of Resolution No. 76/15 adopted by the chairman of the Unidad de Información Financiera, which initiated a summary proceeding (sumario) against us, our Board of Directors (Eduardo Sergio Elsztain, Mario Blejer, Diego Luis Bossio, Mariana González, Edgardo Luis José Fornero, Ada Mercedes Maza, Mauricio Elías Wior, Saúl Zang, Ernesto Manuel Viñes, Gabriel Adolfo Gregorio Reznik, Jacobo Julio Dreizzen, Pablo Daniel Vergara del Carril and Carlos Bernardo Pisula) and our compliance officer for an alleged violation to section 21 a) of Law No.25,246 and to Resolution No.121/11. The UIF initiated the proceeding after an audit by the Central Bank in 2013 detected certain weaknesses in our internal anti-money laundering controls. As of the date of this offering memorandum, we have not established any provisions in support of the Bank’s rights were filed, and the proceedings are pending an administrative decision by the BCRA.

In connection with these proceedings, the Company has deemedthis proceeding. According to that there are low chances thatresolution, the Bank be imposed anyand its directors would have incurred - "prima facie" - in certain defaults related to the way customers are identified, monitoring parameters , the definition of the monetary sanctions contemplated byrisk matrix and the Financial Institutions Lawupdating procedures of background and applicable regulations issued by the BCRA. For such reason, no allowances have been recorded in the financial statements in this regard.profiles of customer, among others.

  7.  On November 25, 2014, Tarshop S.A. was notified by the Financial Information Unit that summary proceedings had been filed, identified under Resolution No. 234/14, for potential formal violations derived from the alleged non-compliance with Section 21, paragraph a) of Law 25,246 and UIF Resolutions No. 27/11 and 2/12. Summonses were sent to the Company (Tarshop S.A.), its Compliance Officer (Mauricio Elías Wior) and the Directors then in office (Messrs. Eduardo Sergio Elsztain, Saúl Zang, Marcelo Gustavo Cufré and Fernando Sergio Rubín) for them to file their defenses. In the legal counsel’s opinion, at the current stage of the proceedings and based on the precedents existing at the UIF in similar cases, it is likely that a penalty be imposed under the scope of the administrative proceedings. For such reason, allowances have been recorded in this regard. In the framework of the summary proceedings described above, the evidence offered by the defendants in the summary proceedings was produced and the next stage is the submission of closing arguments.

 

F- 248
F-318

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


II –Summary Proceedings pending Court Decision

On September 23, 2015, the Bank raised depositions and defenses with the UIF along with documentary evidence and produced informative evidence, IT expert opinions and oral evidence. On April 13, 2016, the production of evidence was ordered and all evidence was duly produced.
1.  On May 4, 2012 the Bank was notified of Resolution No. 186, dated April 25, 2012 issued by the Superintendent of Financial and Foreign Exchange Institutions whereby Summary Proceedings No. 4976 on Foreign Exchange Matters were commenced against the Bank, its directors  (Messrs. Eduardo S. Elsztain; Gabriel G. Reznik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; Carlos B. Písula; Edgardo L. Fornero; Jacobo J. Dreizzen); former directors (Ms. Clarisa D. Lifsic de Estol; Messrs. Julio A. Macchi; Federico L. Bensadón; and Jorge M. Grouman) and the former Finance Manager Gabriel G. Saidón, under section 8 of the Foreign Exchange Criminal Regime Law (as signed into law by Decree No. 480/95).

In such proceedings, charges were pressed for alleged violations ofBased on the provisions of Communications “A” 3640, 3645, 4347 and supplementary rules, due to the acquisition of good delivery silver bars during the 2003-2006 period with funds arising from its General Exchange Position.

The defenses to whichUIF’s backround on similar cases, the Bank is entitled were raised in due time. Within the period grantedlikely to such end,be imposed an administrative fine. Therefore, it was deemed reasonable to create an allowance for this contingency amounting to Ps. 20, which was booked on October 22, 2015.
4. On February 15, 2016 the Bank was notified of Resolution No. 1014 issued by the Superintendent of Financial and Exchange Institutions by which it was decided to conduct summary (Summary No. 1486) under the other defendants producedterms of Article 41 of the Financial Institutions Law to Banco Hipotecario SA and its president Mr. Eduardo S. Elsztain for alleged violation of the rules of Communication "A" 4490 because of his failure to report -within the deadline set by the legislation applicable-, the appointment of new directors by the shareholders’ meetings held on 27 March and 24 April 2013, and having belatedly submitted documentation related to these directors. It is worth mentioning that in all cases tried to regular and alternate directors designated by the National State.
On 29 February 2016 the defenses and rebuttals were presented and accompanied the documentary evidence, previously offered. As soon as that stagewhich examined by the Management Contentious Financial Affairs in the procedure came to a conclusion, the counsel for the defense presented their closing arguments and Central Bank.
in August 2014, the Argentine Central Bank sent the case file to the competent court (therefore, at present the case is being heard by the Court with Jurisdiction over Criminal Economic Matters No. 7 presided by Judge Juan Galvan Greenway).

In the legal counsel’s opinion, at the current statuslight of the proceedings, there are legal and factual arguments that generate reasonable expectations that the physical persons named defendants and Banco Hipotecario S.A. will be acquitted and that therefore, there are low chanceslikelihood that the Bank willcould be subjectimposed an administrative fine, it was deemed reasonable to create an allowance for this contingency amounting Ps.560, which was booked as of the economic sanctions set forthclosing date of these financial statements
5. On May 10, 2016 the Bank was notified of Resolution No 219 dated April 22, 2016 handed down by the Superintendent of Financial and Foreign Exchange Institutions in order to commence summary proceedings (Summary Proceedings file No. 6845) in the terms of Section 8 of the Foreign Exchange Criminal Regime Law (Ley de Régimen Penal Cambiario). For such reason, no allowances have been created in this regard.

2.  On October 7, 2014, BHSA was notified of Resolution No. 513 dated August 16, 2014 handed down by the Superintendent of Financial and Foreign Exchange Institutions in the summary proceedings in financial matters No. 1365 (on grounds of alleged failure to comply with the minimum requirements in terms of internal controls under Communication “A” 2525) whereby Banco Hipotecario S.A. was imposed a fine for Ps. 112 and its directors (Messrs. Pablo D. Vergara del Carril; Carlos B. Písula, Eduardo S. Elsztain, Jacobo J. Dreizzen, Gabriel G. Reznik; Edgardo L. Fornero; Ernesto M. Viñes; and Saul Zang) and former directors (Ms. Clarisa D. Lifsic de Estol and Messrs. Jorge L. March; and Federico L. Bensadón) were fined for different amounts.

As required by Section 42No. 19,359 (as signed into law pursuant to Decree No. 480/95) against Banco Hipotecario S.A. its former Manager Mr. Ricardo José González and Mrs. Luciana Sabrina Fusco and Liliana Elisabeth Sabella, on grounds of alleged breach of the Lawrules contained in Communication “A” 5318 and “5322”, as supplemented, consisting in allegedly selling foreign currency for US$ 69,620 under residential mortgage transaction, without fulfilling the requirements set forth in the above mentioned communications.
Notice was taken of the proceedings and a request was filed for extending the deadline for filing the relevant defenses and arguments.
6. Banco de Crédito y Securitización S.A. has been notified of Resolution No. 401 dated September 7, 2012 handed down by the BCRA’s Superintendent of Financial and Exchange Institutions, ordering to start summary proceedings against this Bank and its Chairman, Mr. Eduardo S. Elsztain, due to the fineslate filing of documentation related to the appointment of the Bank’s authorities. On October 9, 2012, the defenses and arguments of the Bank’s rights were paid and the relevant appeal was lodged with the National Appellate Court with Federal Jurisdiction over Contentious and Administrative Matters against the above-mentioned resolution. The fine for Ps. 112 paid byfiled. Subsequently, the Bank was booked in an allowance.notified of Resolution No. 729 dated October 23,

3.  On October 31, 2014, BHSA was notified of Resolution No. 685 dated October 29, 2014 handed down by the Superintendent of Financial and Foreign Exchange Institutions in the summary proceedings in financial matters No. 1320 whereby the Bank and its authorities had been charged, on one hand, with the violation of the rules governing financial aid to the Non-Financial Public Sector, with excess over the limits of fractioned exposure to credit risk from the non-financial public sector, with excess in the allocation of assets to guarantee, with failure to satisfy minimum capital requirements and with objections against the accounting

 

F- 249
F-319

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


treatment afforded to the “Cer Swap Linked to PG08 and External Debt” transaction and on the other hand, with delays in communicating the appointment of new directors and tardiness in the provision of documentation associated to the directors recently elected by the shareholders’ meetings.
2013 which imposed on the Bank and its president Punishment of Call of Care by Article 41 paragraph 1 of the Law of Financial Institutions.

Through such resolution determined fines of Ps. 320 and Ps. 393 to the bank and its directors (Eduardo S. Elsztain and Ernesto M. Viñes ), respectively. Such amounts were charged as a loss as of December 31, 2015.
BACS and the Directors filed an appeal against Resolution No. 690 in due course. The appeals are pending resolution by Panel IV of the National Court of Appeals in Federal Administrative Contentious Matters in the action styled “BACS BANCO DE CRÉDITO Y SECURITIZACIÓN S.A. ET AL V. BANCO CENTRAL DE LA REPÚBLICA ARGENTINA, in re. Financial Institutions Law No. 21,526, Section 42, Direct Appeal” (Case File No. 51,471/2015).
7. On November 25, 2014, Tarshop S.A. was notified by the Financial Information Unit that summary proceedings had been filed, identified under Resolution No. 234/14, for potential formal violations derived from the alleged non-compliance with Section 21, paragraph a) of Law 25,246 and UIF Resolutions No. 27/11 and 2/12. Summonses were sent to the Company (Tarshop S.A.), its Compliance Officer (Mauricio Elías Wior) and the Directors then in office (Messrs. Eduardo Sergio Elsztain, Saúl Zang, Marcelo Gustavo Cufré and Fernando Sergio Rubín) for them to file their defenses. In the legal counsel’s opinion, at the current stage of the proceedings and based on the precedents existing at the UIF in similar cases, it is likely that a penalty be imposed under the scope of the administrative proceedings. For such reason, allowances for Ps. 360 have been recorded in this regard.
II –Summary Proceedings pending Court Decision
1.
        On October 31, 2014, BHSA was notified of Resolution No. 685 dated October 29, 2014 handed down by the Superintendent of Financial and Foreign Exchange Institutions in the summary proceedings in financial matters No. 1320 whereby the Bank and its authorities had been charged, on one hand, with the violation of the rules governing financial aid to the Non-Financial Public Sector, with excess over the limits of fractioned exposure to credit risk from the non-financial public sector, with excess in the allocation of assets to guarantee, with failure to satisfy minimum capital requirements and with objections against the accounting treatment afforded to the “Cer Swap Linked to PG08 and External Debt” transaction and on the other hand, with delays in communicating the appointment of new directors and tardiness in the provision of documentation associated to the directors recently elected by the shareholders’ meetings.
Resolution No. 685 then fined Banco Hipotecario S.A. with Ps. 4,040Ps,4,040 and also fined BHSA’s directors (Eduardo S. Elsztain; Jacobo J. Dreizzen; Carlos B. Písula; Edgardo L. Fornero; Gabriel G. Reznik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; Mauricio E. Wior), former directors (Clarisa D. Lifsic de Estol; Federico L. Bensadón; Jorge L. March and Jaime A. Grinberg), statutory auditors (Messrs. Ricardo Flammini; José D. Abelovich; Marcelo H. Fuxman; Alfredo H. Groppo; and Martín E. Scotto), the Area Manager Gustavo D. Efkhanian and former managers (Gabriel G. Saidón and Enrique L. Benitez) for an aggregate amount of Ps.51,581.8. Under this decision, former Statutory Auditor Ms. Silvana M. Gentile was acquitted.

On November 25, 2014, Banco Hipotecario and the other individuals affected by the adverse decision lodged an appeal under Section 42 of the Financial Institutions Law, that was sent by the BCRA to the National Appellate Court with Federal Jurisdiction over Contentious and Administrative Matters. Therefore, at present the case is being heard by Panel I of such Appellate Court. Moreover, on December 30, 2014, the Bank and the individuals against whom sanctions were imposed requested the levying of separate injunctions by such court against the enforcements pursued by the BCRA for collection of the fines.

F- 250
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
Upon being notified of the resolution handed down on June 30 by the Appellate Court that denied the motion for injunction filed by the Bank and by the directors, managers and some of the statutory auditors and in order to prevent further conflicts and financial damage that could result from the actions to compel payment of fines, the Bank’s Executive Committee decided to apply the indemnity rules regarding directors, high ranking officers and statutory auditors, as an alternative for the amounts not covered by the D&O insurance policy approved by the Bank’s Board of Directors at its meetings held on August 2, 2002 and May 8, 2013, and resolved to deposit the amounts of the fines.

Such deposit, including the amount corresponding to the fine imposed on the Bank and the respective legal costs, totaled Ps. 57,671.9. Out this amount, Ps. 53,631.9 thousand were computed as losses for this period in the manner described in the Minutes of the Meeting held by Banco Hipotecario S.A.’s Executive Committee on July 2, 2015 and in the Minutes of the Board Meeting held on July 15, 2015, and Ps. 4,040 were covered by a provision made in the previous fiscal year.year 2014.

This notwithstanding, in the brief filed with the court that is hearing the proceedings to compel payment it was sustained that the amounts deposited in the judicial accounts opened to such end were subject to attachment, and a petition was filed for the respective amounts to be invested in automatically renewable term deposits for 180 days in order to ensure the integrity of the funds until the Appellate Court with Federal Jurisdiction over Contentious and Administrative Matters hands down a decision on the appeal lodged against Resolution No. 685/14 of the Argentine Central Bank.

III – Summary ProceedingsThe request for injunction were rejected and the Court made progress in whichthe proceedings for enforcing the fines against each of the defendants. For such reason, a Court Decision has been Renderedrequest was made for applying the amounts subject to attachments to the payment of the relevant fines.

Under
2.
       On September 13, 2013, the Bank was notified of Resolution No. 286 dated July 2, 2010, issued611 handed down by the Superintendent of Financial and Foreign Exchange Institutions, whereby it ordered to commence summary proceedings were commencedagainst the Bank and the manager Christian Giummarra and the former manager Aixa Manelli (Summary Proceedings No. 5469 on Foreign Exchange Matters) charging them with alleged violation of the foreign exchange laws in selling foreign currency to persons prohibited from trading foreign currency by the Argentine Central Bank. The cumulative amount derived from the alleged violation in the sale of foreign currency is around US$ 39.9 thousand and Euro 1.1 thousand. The relevant defenses and arguments have been filed and evidence has been offered in support of all the defendants subject to the summary proceedings. Due to its related subject matter, the record of this case was joined with Summary Proceedings No. 5529 on Foreign Exchange Matters (File 101,327/10). Therefore, its procedural status is described together with the latter.
Moreover, on October 8, 2013, the Bank was notified of Resolution No. 720 handed down by the Superintendent of Financial and Foreign Exchange Institutions, ordering to commence summary proceedings against the Bank and its directorsOrganization and Procedures Manager, Mr. Christian Giummarra, and the former Systems Manager, Ms. Aixa Manelli (Summary Proceedings No. 43645529 on Foreign Exchange Matters) under sectionin accordance with Section 8 of the Criminal Foreign Exchange Criminal Regime Law (as signed into law(Ley de Régimen Penal Cambiario) –as amended by Decree No. 480/95).95- charging them with alleged violation of the foreign exchange laws in selling foreign currency to persons prohibited from trading foreign currency by the Argentine Central Bank. The cumulative amount derived from the alleged violation in the sale of foreign currency is around US$ 86.4 thousand. The relevant defenses and arguments were filed and evidence was offered in support of all the defendants subject to the summary proceedings. The BCRA opened the discovery stage, and evidence was produced in due

 

F- 251
F-320

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Undertime. Once the discovery stage came to a conclusion, the attorneys submitted their closing arguments. In mid- September 2015 the summary in which both actions were accumulated) was sent by the Central Bank to Economic Criminal Justice for sentencing. Involving the Court with jurisdiction over Criminal Economic Matters No.2 (Dr. Pablo Yadarola) - Secretary No. 3 (Dr. Fernando Stockfisz) .
In the legal counsel’s opinion, at the current status of the proceedings, there are legal and factual arguments that generate reasonable expectations that the physical persons named defendants and Banco Hipotecario S.A. will be acquitted and that therefore, there are low chances that the Bank will be subject to the economic sanctions set forth by the Criminal Foreign Exchange Regime Law (Ley de Régimen Penal Cambiario). For such reason, no allowances have been created in this regard.
3.
On August 26, 2014, the Bank was notified of the Resolution passed by the Superintendent of Financial and Foreign Exchange Institutions No. 416 dated August 7, 2014 ordering the start of Summary Proceedings No. 5843 in the terms of Section 8 of the Foreign Exchange Criminal Regime Law No. 19,359 (as signed into law pursuant to Decree No. 480/95). In the above-mentioned summary proceedings, Banco Hipotecario, its directors (Messrs. Eduardo S. Elsztain; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Písula; Gabriel G. Reznik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; and Mauricio E. Wior) and former directors (Ms. Clarisa D. Lifsic de Estol and Mr. Federico L. Bensadón), and two former managers (Messrs. Gabriel G. Saidón and Enrique L. Benitez), are charged with failure to comply with the rules disclosed by Communication “A” 3471 (paragraphs 2 and 3) and by Communication “A” 4805 (Paragraph 2.2.) due to certain transfers of currency made abroad between August and October 2008 to guarantee the “CER Swap Linked to PG08 and External Debt” swap transaction for a total of US$ 45,968 thousand, without the authorization of the Argentine Central Bank. BHSA has been allowed to review the proceedings (case file No. 100.308/10) which are being handled by the Argentine Central Bank’s Department of Foreign Exchange Contentious Matters. The relevant defenses and arguments were filed in support of the subjects to the summary proceedings. The BCRA opened the discovery stage on March 16, 2015. Evidence was produced and the counsels for the defense’s allegations were raised in due time. Upon conclusion of the administrative stage of the proceedings, the case file was sent to the Courts with Jurisdiction over Criminal Economic Matters. On November 18, 2015, the Court with Jurisdiction over Criminal Economic Matters No. 3, presided by Dr. Rafael E. Caputo, Clerk’s Office No. 5, determined that it lacked jurisdiction to hear the case; therefore, the proceedings were forwarded to the Court with Jurisdiction over Criminal Economic Matters No. 2, which has still not determined whether it has competent jurisdiction
In the legal counsel’s opinion, at the current stage of the proceedings there are legal and factual arguments that generate reasonable expectations that the physical persons named defendants and Banco Hipotecario S.A. will be acquitted and that therefore, there are low chances that the Bank will be subject to the economic sanctions set forth by the Criminal Foreign Exchange Regime Law (Ley de Régimen Penal Cambiario). For such reason, no allowances have been created in this regard.
III –Concluded Summary Proceedings
1.
        On May 4, 2012 the Bank was notified of Resolution No. 186, dated April 25, 2012 issued by the Superintendent of Financial and Foreign Exchange Institutions whereby Summary Proceedings No. 4976 on Foreign Exchange Matters were commenced against the Bank, its directors (Messrs. Eduardo S. Elsztain; Gabriel G. Reznik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; Carlos B. Písula; Edgardo L. Fornero; Jacobo J. Dreizzen); former directors (Ms. Clarisa D. Lifsic de Estol; Messrs. Julio A. Macchi; Federico L.
F- 252
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
2.
Bensadón; and Jorge M. Grouman) and the former Finance Manager Gabriel G. Saidón, under section 8 of the Foreign Exchange Criminal Regime Law (as signed into law by Decree No. 480/95).
In such proceedings, charges were pressed for violationalleged violations of certainthe provisions underof Communications “A” 40873640, 3645, 4347 and 4177 concerning early repaymentssupplementary rules, due to the acquisition of restructured external debt for US$ 91,420,135 and Euros 2,803,965 ingood delivery silver bars during the 2003-2006 period February 2004 through June 2005. with funds arising from its General Exchange Position.
The relevant defenses and arguments in support ofto which the Bank’s positionBank is entitled were filedraised in due course.time. Within the period granted for the production of evidence,to such end, the Bank and the other defendants produced the evidence previously offered. As soon as that stage in the procedure came to a conclusion, the counsel for the defense presented their closing arguments and in August 2014, the Argentine Central Bank sent the case file to the competent court (Court(therefore, at present the case is being heard by the Court with Jurisdiction over Criminal Economic Matters No. 57 presided by Judge Juan Galvan Greenway), Clerk’s office No. 13, presided by Ms. Mariana Zavala Duffau.
. III – BANCO HIPOTECARIO S.A., Clarisa Diana LIFSIC, Eduardo Sergio Elsztain, Gabriel Adolfo Gregorio REZNIK, Pablo Daniel VERGARA DEL CARRIL, Ernesto Manuel VIÑES, Saúl ZANG, Edgardo Luis José FORNERO, Federico León BENSADON, Jacobo Julio DREIZZEN, Jorge Brugo)Miguel GROUMAN, Gabriel Gustavo SAIDON, Julio Augusto MACCHI and Carlos Bernardo PISULA WERE FULLY RELEASED OF LIABILITY for the other charges pressed against them in this action in connection with violation of the Criminal Foreign Exchange Regime Law under these summary proceedings filed by the Argentine Central Bank regarding the transactions recorded under slips Nos. 40729 and 41288 (according to the charges pressed in each case) as the alleged conducts did not match with any of the offenses set forth by law. IV – NO COURT COSTS WERE AWARDED (pursuant to Sections 143 and 144 Code of Criminal Procedure).

Through his judgment dated December 12, 2014,On April 29, 2016, final judgement was passed, whereby: I- The criminal charges files against Banco Hipotecario S.A., Clarisa Diana Lifsic, Eduardo Sergio Elsztain, Gabriel Adolfo Gregorio Reznik, Pablo Daniel Vergara Del Carril, Ernesto Manuel Viñes, Saul Zang, Julio Augusto Macchi, Carlos Bernardo Pisula, Edgardo Luis José Fornero, Federico León Bensadón and Gabriel Gustavo Saidón in connection with the transactions recorded under slips No. 21683, 21749, 22065, 22136, WERE DECLARED PARTIALLY STATUTE BARRED and the above mentioned Judge decided thatpersons WERE PARTIALLY ACQUITTED as concerns the above mentioned deeds (Section 19 of Law 19,359 and Section 434 and 443, subsection 3 and 454 of the Code of Criminal Procedure). II The criminal charges filed against Jacobo Julio Dreizzen and Jorge Miguel Grouman, in connection with the transactions recorded under slips No. 31034, 31042, 37270, 37973, 38476, 38511, 38651, 38693, 40005, 40066, 40190, 40304, 40687 and 40688 WERE DECLARED PARTIALLY STATUTE-BARRED and the above mentioned persons WERE PARTIALLY ACQUITTED as concerns the above mentioned deeds (Section 19 of Law 19,359 and Section 434 and 443, subsection 3, and 454 of the Code of Criminal Procedure). III –Banco Hipotecario S.A., Clarisa Diana Lifsic, Eduardo Sergio Elsztain, Gabriel Adolfo Gregorio Reznik, Pablo Daniel Vergara del Carril, Ernesto Manuel Viñes, Saúl Zang, Edgardo Luis José Fornero, Federico León Bensadón, Jacobo Julio Dreizzen, Jorge Miguel Grouman, Gabriel Gustavo Saidón, Julio Augusto Macchi and Carlos Bernardo Pisula WERE FULLY RELEASED OF LIABILITY for the other charges pressed against them in this action in connection with violation of the Criminal Foreign Exchange Regime Law under these summary proceedings filed by the Argentine Central Bank regarding the transactions recorded under slips Nos. 40729 and 41288 (according to the charges pressed in each case) as the alleged conducts did not match with any of the offenses set forth by law. IV – IV – NO COURT COSTS WERE AWARDED (pursuant to Sections 143 and 144 Code of Criminal Procedure).
As no appeal was lodged against it, the judgment became firm and conclusive.

F- 253
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
       On October 7, 2014, BHSA had been notified of Resolution No. 513 dated August 16, 2014 handed down by the Superintendent of Financial and Foreign Exchange Institutions in the summary proceedings in financial matters No. 1365 (on grounds of alleged failure to comply with the minimum requirements in terms of internal controls under Communication “A” 2525) whereby Banco Hipotecario S.A. was exempt from liabilityimposed a fine for Ps. 112 and acquitted directors: Messrs.its directors (Messrs. Pablo D. Vergara del Carril; Carlos B. Písula, Eduardo S. Elsztain;Elsztain, Jacobo J. Dreizzen, Gabriel G. Reznik; Pablo Vergara del Carril;Edgardo L. Fornero; Ernesto M. Viñes; Carlos B. Písula;  Edgardo L. Fornero; Saúl Zang;  Jacobo J. Dreizzen;and Saul Zang) and former directors: Ms.directors (Ms. Clarisa D. Lifsic de Estol;Estol and Messrs. Miguel A. Kiguel; Julio A. Macchi;Jorge L. March; and Federico L. Bensadón; Guillermo H. Sorondo and Jorge Miguel Grouman;n).
As required by Section 42 of the Law of Financial Institutions, the fines were paid and the Area Manager Gustavo D. Efkhanian; Manager Daniel H. Fittipaldi; former general sub-manager Gustavo D. Chiera; former managers Gabriel G. Saidón; Carlos Gonzalez Pagano and Marcelo C. Icikson; and Mr. Miguel J. Diaz, named defendants to those proceedings.

In response torelevant appeal was lodged with the appeal filed by the State Attorney against the judgment, Panel “A” of theNational Appellate Court with Federal Jurisdiction over Criminal EconomicContentious and Administrative Matters handed down a decision on July 17, 2015 confirmingagainst the appealed resolution toabove-mentioned resolution. The fine of 112 thousand pesos was timely provisioned and paid by the extent that it acquitsBank.
Under judgment dated June 21, 2016, the National Appellate Court with Federal Jurisdiction over Contentious and Administrative Matters – Panel IV, dismissedthe appeals lodged by Banco Hipotecario S.A.,  Clarisa Lifsic de Estol, Eduardo S. Elsztain; Gabriel G. Reznik; Pablo Vergara del Carril; Ernesto M. Viñes; Carlos B. Písula;  Edgardo L. Fornero; Saúl Zang;  Jacobo J. Dreizzen; Miguel A. Kiguel; Julio A. Macchi; Federico L. Bensadón; Guillermo H. Sorondo and Jorge Miguel Grouman; Gustavo D. Efkhanian;  Daniel H. Fittipaldi; Gustavo D. Chiera;  Gabriel G. Saidón; Carlos Gonzalez Pagano; Marcelo C. Icikson;the defendant directors, and Miguel J. Diaz without any award of costs.awarded court costs against the losing appellants. The judgement became final and conclusive.

31. Programa Crédito Argentino del Bicentenario para la Vivienda Única y Familiar (PROCREAR)

On June 12, 2012, the Argentine Executive Branch issued Decree No. 902 whereby it ordered the creation of a Public Fiduciary Fund referred to as Programa Crédito Argentino del Bicentenario para la Vivienda Única Familiar (Argentine Single Family Housing Program for the Bicentennial) (PROCREAR).

On that same date, the Bank’s Board of Directors approved the Bank’s role as trustee of the referred fund.

On July 18, 2012, the Argentine State, as Trustor, and Banco Hipotecario S.A. as Trustee, created the PROCREAR Administrative and Financial Trust, and its underlying assets were transferred to it as trust property.

The Trust’s sole and irrevocable purpose is as follows: (i) to manage the trust assets with the aim of facilitating the population’s access to housing and the generation of job opportunities as economic and social development policies, in compliance with the principles and objectives set forth in Decree No. 902; (ii) the use by the Trustee of the net proceeds of the placement of the Trust Bonds (Valores Representativos de Deuda or VRDs) and cash contributions by the Argentine State to originate loans for the construction of houses in accordance with the provisions of Decree No. 902 and the credit lines; and (iii) the repayment of the VRDs in accordance with the terms of the agreement that creates the Trust and the provisions of the Trust Law.

 

F-321

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The Trust shall be in effect for a term of thirty (30) years as from the date of execution of the agreement (July 18, 2012).

In addition to the obligations imposed on it under the Trust Law and the Commercial Code, the Trustee is required to:
perform the obligations set forth in the Trust Agreement and follow the instructions imparted on it by the Executive Committee;
carry out its duties as Trustee with the loyalty, diligence and prudence of a good businessman acting on the basis of the trust placed on him;
exercise the powers granted to it under the Agreement, and preserve the Trust Assets;

F- 254
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

use the Trust Assets for lawful purposes, in accordance with the provisions of the Agreement and following the Executive Committee’s instructions;
identify the Trust Property and record it in a separate accounting system, segregated from its own assets or the assets of other trusts held by it at present or in the future in the course of its business;
prepare the Trust’s financial statements, hire the relevant audit firms and comply with the applicable disclosure regulations;
insure the Trust Assets against risks that could affect their integrity;
invest or reinvest the Trust’s funds in accordance with the provisions of the Agreement and following the instructions imparted by the Executive Committee.

In compliance with Communication “A” 5392, the Bank has capitalized mortgage loan origination expenses under this program (see note 2.13.).

32. Capital Market Law

On December 27, 2012, the Capital Market Law No. 26,831 was promulgated, considering a comprehensive amendment to the public offering regime set forth by Law No. 17,811.

Insofar as concerns the matters related to the Company’s business, this law broadens the regulatory powers of the Argentine Government in connection with the public offering of securities, through the Argentine Securities Commission (CNV), and concentrates in this agency the powers of authorization, supervision and oversight, disciplinary authority and regulation of all capital market players; further, it establishes that intermediary agents willing to deal in a securities market are no longer required to be members thereof, thus allowing the entry of other participants, and delegates to the CNV the power to authorize, register and regulate the various categories of agents.

On August 1, 2013, Decree 1023/2013, partially regulating the Capital Markets Law, was published in the Official Gazette, and on September 9, 2013, General Resolution No. 622 of the CNV, approving the related regulations, was published in the Official Gazette.

These regulations implement a register of agents that participate in the capital market. To take part in each of the activities regulated by this resolution, agents had to be entered in that register in such capacity by March 1, 2014.

For those agents who have applied for registration with the final registry before March 1, 2014 to comply with all the requirements, on February 7, 2014, the Argentine Securities Commission (CNV) extended the term until December 31, 2014. On June 23, 2014 we were notified by Mercado Abierto Electrónico S.A. that CNV mandated that the Agents registered with MAE S.A. who have proceedings underway before CNV for registration as Agent in any of the categories authorized by currently applicable rules and regulations may continue to do business normally up and until they start operating in the new Agent category as per the CNV rules (N.T.2013)

 

F-322

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


In turn, pursuant to CNV Resolution No. 17,392 dated June 26, 2014, the Bank was registered with the Registry of Financial Trustees prescribed by Sections 6 and 7 of Chapter IV, Title V of the Rules, under No. 57. And, on September 19, 2014, pursuant to CNV Resolution No. 2122, the Bank has been registered as Settlement and Clearing Agent and Comprehensive Trading Agent No. 40.

Pursuant to the provisions of Section 45 of Law 26,831 and paragraph a), Section 20, Article VI, Chapter II, Title VII, and subsection j) of Section 7, Article IV, Chapter IV, Title V of Resolution No.622 of the CNV, it is made known that Banco Hipotecario’s minimum capital composed as required by the rules issued by the Argentine Central Bank exceeds the minimum amount required under such resolution. On the other hand, the Bank’s capital was duly paid in as of the closing of
F- 255
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
the period and the liquid balancing account is identified as BONAR 17 (Government security carried at fair market value).

 
On October 22, 2014, the Board of Directors of Mercado de Valores de Buenos Aires S.A. approved the registration of Banco Hipotecario S.A. in Mercado de Valores de Buenos Aires S.A.’s Registry of Agents as Settlement and Clearing Agent and Trading Agent – Comprehensive (ALyC and AN as per the Spanish acronyms).

On December 23, 2014, BHSA was authorized to operate under the provisions of Merval Communication No. 15594.

Pursuant to CNV’s Resolution No. 17.338 dated April 24, 2014, BACS Banco de Crédito y Securitización S.A., was registered with the Registry of Financial Trustees prescribed by Sections 6 and 7 of Chapter IV, Title V of the Rules, under No. 55. And, on September 19, 2014, CNV communicated to BACS that in its capacity as Settlement and Clearing Agent - Comprehensive and Trading Agent the Bank has been assigned License No. 25. It must be noted that the composition of BACS’ equity as of the end of the period was correct and that the liquidity requirement takes the form of Peso-denominated Lebacs.

As of the date of these financial statements, BH Valores SA has been approved by CNV as a Settlement and Clearing Agent in its own name under Registration Number 189 in the terms of CNV’s General Resolution No. 622.

According to the minimum requirements laid down, BH Valores S.A.’s minimum shareholders’ equity exceeds the amount prescribed by CNV’s General Resolution No. 622 and its composition is correct. As to the liquidity requirements, they have been satisfied in the form of a deposit of the Government security called Bono de la Nación Argentina $ Badlar Privada + 200 bps. Vto. 2017, as discussed in Exhibit II to the Company’s financial statements.

In view of the latest tax, regulatory and operational developments that have modified BH Valores S.A.’s commercial strategy and decreased the competitive advantages of running such a business, the Board of Directors of BH Valores S.A. has, as of the date of these financial statements, decided to substantially diminish the volume of operations with an eye towards suspending the operations of BH Valores S.A. in the future to prevent two structures that are presently highly similar in terms of their functions and have been rendered redundant within the same conglomerate from overlapping.

33. Resolutions issued by the Argentine Central Bank

Credit LineFinancing line for Productive Investmentsproduction and financial inclusion

Under Communication “A” 53195874 dated July 5, 2012,December 31, 2015, the BCRA approvedArgentine Central Bank revised the implementationname of a newthe credit line in effect since 2012 and started to be extended bypublish the “Credit line for production and financial inclusion purposes”.
The new line will become effective on the first half of 2016. The financial institutions intendedsubject to promotethe provisions of this circular must record a lending balance under this credit line amounting to at least 14% of the deposits from the non-financial private sector in pesos, calculated taking into account the monthly average daily balances of November 2015, being able to attribute all the balances of loans disbursed through the "Line of credit for productive investmentsinvestment " in so far as the case of destinations also supported by this line.

At least 75% of the quota must be granted to SMEs. In calculating the quota, the average daily balances of outstanding loans during the first half of 2016 will be considered. The highest rate applicable under this line should be a fixed nominal rate of 22% per annum for the first 36 months, except for the purchase of portfolio and mortgage loans and loans for the acquisition of rights over trusts for the construction of real property to individuals, which will be a mixed interest rate. For clients who do not qualify as SMEs, the rate will be freely agreed upon.
 

F- 256
F-323

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


consisting
Finally, under Communication "A" 5975 dated May 17, 2016 the Argentine Central Bank established the 2016 second quota under the "Fianncing line of the purchase of capital goodsproduction and the construction of the facilities necessary for producing goods and services. Generally, financial institutions accounting for more than 1% of the total deposits in the financial system and institutions operating as financial agents of the provinces are requiredinclusion", whereby a lending balance equal to allocate to this new credit line 5% of the total amount of deposits from the private sector held as of June 2012. In all cases, 50% of the loan amounts must be granted to companies qualifying as SMEs.

Under successive BCRA communications, the quotas allocable by financial institutions under this line were expanded and supplemented semi-annually under similar conditions as those set forth in the previous paragraph, i.e., a minimum allocation of 5%/5.5% of the amount of deposits from the non-financial private sector, terms and conditions including interest rates ranging from 15/19% per annum and maturities of up to 36 months.

Under Communication “A” 5771, the BCRA resolved to extend the Credit Line for Productive Investments over the second half of 2015. Therefore, the financial institutions subject to the provisions of this circular must allocate to this credit line an amount of at least 7.50%15.5 % of the non-financial private sector deposits in pesos, calculated taking into account the monthly average daily balances of May 2015. 100% of the quota2016, must be granted to SMEs, excluding those engaged in financial intermediation and insurance services, or services related to gambling and betting activities. The loans must be fully agreed as of September 30, 2015, and may be disbursed in a single drawing until that date or on a staggered basis until June 30, 2016, in the latter case only when warranted due to the features of the project subject to financing. Moreover, as of September 30, 2015, the loans agreed should amount to at least 30% of the total amount of the second tranche of the 2015 Quota. The highest interest rate applicable inrecorded under this tranche is a fixed nominal annual rate of 18% per annum for the first 36 months.line.

At the closing of these financial statements BHSA had recorded in average Ps. 870,7181,401,724 as principal and interest under BHSA’s assets in connection with this credit line.

Compliance with rules on term deposits and investments. Conditions governing interest rates on term deposits


Pursuant to its Communication “A” 5781, the Argentine Central Bank raised the floor of the interest rates payable on term deposits and the maximum amount of the placements that may obtain such benefit. The rest of the transactions shall be agreed upon freely, that is, without the involvement of the Argentine Central Bank.

It has been determined that starting on July 27, 2015 the minimum rates on deposits shallcan’t be less than the product arising from the last reference interest rate and a coefficient according to the original term of the imposition, as follows:

 - from 30 to 44 days: 23.58%0.91
- from 45 to 59 days: 24.10%0.93
- from 60 to 89 days: 25.13%0.97
- from 90 to 119 days: 25.61%0.97
- from 120 to 179 days: 25.87%0.98
- from 180 days or more: 0.99
 
These minimum rates apply to all Peso-denominated term deposits of up to Ps.1,000.Ps.1,000 on behalf of holders who are human and / or legal persons.

Finally, the Argentine Central Bank provides that failure to comply with the minimum rate level shall result in an increase in minimum cash requirements in Pesos for an amount equivalent to all relevant term deposits for the month following that when the failure to comply takes place. No offsets among term deposits are allowed. In addition to the foregoing, summary proceedings shall


F-324

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


be commenced in accordance with the guidelines laid down by the Superintendent of Financial and Foreign Exchange Institutions.

Conditions applicableThis regulation was repealed by the Argentine Central Bank through Communication “A” 5853, as described in the following item.
Interest rates on lending transactions. Financing subject to benchmark interest rates for personal and pledge loansrate regulation by the Central Bank.

Under Communication “A” 5590 dated June 10, 2014, the BCRA adopted a system of benchmark interest rates for personal and pledge loans to individuals not qualifying as SMEs and established a ceiling for these kinds of loans that may not exceed the product arising from multiplying the 90-day LEBACs’ cut-off interest rate by a multiplier ranging from 1.25 to 2.0, depending on the kind of loan and Bank Group. To this end, banks are divided into:

F- 257
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

- Group I: financial institutions operating as financial agents of the national, provincial and/or municipal governments and/or other institutions accounting for at least 1% of the total deposits from the non-financial private sector; and
- Group II; the remaining institutions.

The BCRA publishes the “benchmark interest rate” to be applied by the financial institutions in each of these groups to each type of loans (personal loans, pledge loans and portfolio purchases). The rates applied by each institution to each loan within the lines mentioned above may not exceed the “benchmark interest rate” reported by the BCRA.

On December 17, 2015, under Communication "A" 5853 the BCRA repealed the above mentioned Communications and thus eliminated any regulation on rates, for both lending transactions and term deposits. This new rule will became applicable to any loans agreed upon from December 17, 2015 onwards.
However, the BCRA provides that financial institutions shall disclose the total financial cost of lending transactions (by displaying it at their offices and in press ads) subject to specific typeface size requirements.
Moreover, it establishes a timetable for violations detected until June 30, 2016 for transactions subject to regulated interest rates, i.e., those outstanding as of December 16, 2015; and for violations detected from January 1, 2016 onwards, the provisions set forth in Communication “A” 5849 shall apply.
The mechanism provided in such rule imposed the obligation to reimburse the excess amount collected and any expenses incurred by clients in filing their claims.
Protection granted to users of financial services

UnderOn March 23, 2016 following Communication “A” 5685"A" 5928 the Argentine Central Bank decided that all savings accounts shall be free of charge, including the use of debit cards and that the fees charged by the bank can be raised by up to twenty percent (20 %), insofar as the customer is informed of these increases at least 60 days before their effective application in the case of products sold for a price. Bank shall be free to determine the fees to be charged by them starting September 1, 2016.
Financial institutions shall be under duty to inform their competitors’s prices when they decide to change a price and to insert a highlighted hyperlink on their website with the name "Price Comparison " leading to BCRA’sweb page which will show the charges applied by peer banks on their different products.
Finally, under Communication "A" 5993 dated December 23, 2014,June 22, 2016 the BCRA ordered that anyArgentine Central Bank put an end to the "Financial service fees and/or charges " reporting scheme and establishes a new commissions (commissions for newtransparency reporting scheme, whereby financial institutions are required to disclose on a monthly basis the fees and charges of the products and/or services intendedoffered to be marketed)users of financial services.
Assignment of financial and increases in commissions must obtainforeign exchange institutions’ foreign currency position
On December 17, 2015 under Communication "A " 5828, the BCRA’s previous authorization. Changes in charges shall be reported as well. In the case of basic financial products and/or services, theBCRA provided that financial institutions authorized to carry out foreign exchange transactions, should sell to the BCRA their positive foreign currency position as of the closing of business on December 16, 2015 valued at reference exchange rate prevailing on such date, and non-financial companies issuerscould then repurchase it in full, on December 17, 18 or 21, 2015 at the reference exchange rate prevailing on the repurchase date.

F- 258
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of credit cards shall meet several requirements and proceduresfor the twelve-month periods ended June 30, 2016, 2015 and submit various explanations upon applying for such authorization.2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

In addition,  Communication “A” 5715 dated February 13, 2015 imposesorden to exercise this option, the institutions filed a new monthly reporting duty that requires disclosingnotice signed by their highest local authority by 10 a.m. on the amountsselected repurchase date, sent to the General Transactions Sub-Management Department, giving express notice of commissions and/or charges collected for each product or service offeredtheir decision to individuals in their capacities as final users and the number of transactions, movements or services rendered during the month.effect such repurchase.

Lastly, the Argentine Central Bank approved a new methodology to find a solution for the requests of increases in the commissions for financial services and products by the entities that provide them. This methodology includes both basic and non-basic services, except for high-end products, whose increases shall be vetoed if considered abusive. Increases in commissions shall be subject to a maximum 20 per cent limit for all types of services and products.

34. Summary of Significant Differences between Argentine Banking GAAP and U.S. GAAP

The Bank’s consolidated financial statements have been prepared in accordance with Argentine Banking GAAP, which differs in certain significant respects from U.S. GAAP. Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and regulations of the SEC. These consolidated financial statements include solely a reconciliation of net income and shareholders’ equity to U.S. GAAP. Pursuant to Item 17 of Form 20-F, this reconciliation does not include disclosure of all information that would be required by U.S. GAAP and regulations of the SEC.

 

F- 259
F-325

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



I.
 Differences in measurement methods

 Differences in measurement methods
As from March 1, 2003, inflation accounting was discontinued. The following reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the Securities and Exchange Commission (“SEC”), it represents a comprehensive measure of the effects of price-level changes in the Argentine economy, and as such, is considered a more meaningful presentation than historical cost-based financial reporting for both Argentine GAAP and U.S. GAAP.

The main differences between Argentine GAAP and U.S. GAAP as they relate to the Bank are described below, together with an explanation, where appropriate, of the method used in the determination of the necessary adjustments. References below to “ASC” are to Accounting Standard Codification issued by the Financial Accounting Standards Board in the United States of America.

The following tables summarize the main reconciling items between Argentine GAAP and U.S. GAAP:

Reconciliation of net income:
  June 30,
201620152014
Net income as reported under Argentine Banking GAAPPs.1,115,530537,190627,027
U.S. GAAP adjustments:    
- Loan origination fees and costs………………….(a)(131,794)(19,325)27,525
- Loan loss reserve ....………………………………(b)(30,165)(30,703)(29,677)
- Derivative financial instruments...……………….(c)-876(941)
- Government securities …………………………...(d)(12,429)18,230(17,669)
- Financial liabilities……….………………………(e)77,5812,7094,136
- Securitizations…………………..………………..(f)(41,251)16,434(10,725)
- Intangible assets………………………………….    
Software costs……………………………..…(g)1,522(26,525)(18,396)
Other intangible assets……………………….(g)59(3,156)(4,793)
Business combinations………...………...…..(g)990991989
- Impairment of fixed and foreclosed assets.……...(h)1,116944983
- Miscellaneous assets.………………………..…...(n)(30,848)--
- Vacation provision..……………………………..(j)(17,010)(17,302)(18,955)
- Insurance technical reserve..…………………….(k)(960)2,7801,398
- Capitalization of interest cost…….………………(l)(4,001)775301
- Financial guarantees issued...…….………………(m)(1,209)--
- Deferred income tax……………………………..(o)94,02844,67355,122
- Non-Controlling interest..………………………..(i)(5,998)(13,658)(11,031)
Net income in accordance with U.S. GAAPPs.1,015,161514,933605,294
- Less Net (Gain) / Loss attributable to the Non-Controlling interest……………………………..….(i)18,3114,36910,284
Net income attributable to Controlling interest in accordance with U.S. GAAPPs.1,033,472519,302615,578
Basic and diluted net income per share in accordance with U.S. GAAP 6.9373.5194.136
Average number of shares outstanding (in thousands)…………………………………………. 1,463,3651,463,3651,463,365
   June 30, 
   2015  2014  2013 
Net income as reported under Argentine Banking GAAP  Ps.537,190   627,027   339,122 
U.S. GAAP adjustments:             
- Loan origination fees and costs(a)  (19,325)  27,525   (29,863)
- Loan loss reserve(b)  (30,703)  (29,677)  (25,253)
- Derivative financial instruments(c)  876   (941)  (1,223)
- Government securities(d)  18,230   (17,669)  12,727 
- Provincial public debt(e)  -   -   331 
- Financial liabilities(f)  2,709   4,136   3,154 
- Securitizations(g)  16,434   (10,725)  (17,512)
- Intangible assets             
Software costs(h)  (26,525)  (18,396)  (8,639)
Other intangible assets(h)  (3,156)  (4,793)  (3,157)
Business combinations(h)  991   989   991 
- Impairment of fixed and foreclosed assets(i)  944   983   932 
- Vacation provision(k)  (17,302)  (18,955)  (7,714)
- Insurance technical reserve(l)  2,780   1,398   1,003 
- Capitalization of interest cost(m)  775   301   553 
- Deferred income tax(n)  44,673   55,122   (20,057)
- Non-Controlling interest(j)  (13,658)  (11,031)  14,148 
Net income in accordance with U.S. GAAP  Ps.514,933   605,294   259,543 
- Less Net (Gain) / Loss attributable to the Non-Controlling interest(j)  4,369   10,284   (8,834)
Net income attributable to Controlling interest in accordance with U.S. GAAP  Ps.519,302   615,578   250,709 
Basic and diluted net income per share in accordance with U.S. GAAP   3.519   4.136   1.774 
Average number of shares outstanding (in thousands)   1,463,365   1,463,365   1,463,365 


 

F- 260
F-326

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Reconciliation of shareholders’ equity

   June 30, 
   2015  2014 
Total shareholders' equity under Argentine Banking GAAP  Ps.4,700,716   4,205,343 
U.S. GAAP adjustments:         
- Loan origination fees and costs(a)  (90,893)  (71,568)
- Loan loss reserve(b)  (220,541)  (189,838)
- Derivative financial Instruments(c)  -   (876)
- Government securities(d)  37,759   3,871 
- Financial liabilities(f)  10,282   7,573 
- Securitizations(g)  (15,442)  (31,876)
- Intangible assets         
Software costs(h)  (63,888)  (37,363)
Other intangible assets(h)  (59)  3,097 
Business combinations(h)  (1,176)  (2,167)
- Impairment of fixed and foreclosed assets(i)  (37,379)  (38,323)
- Vacation provision(k)  (57,634)  (40,332)
- Insurance technical reserve(l)  (339)  (3,119)
- Capitalization of interest cost(m)  4,001   3,226 
- Deferred income Tax(n)  258,903   214,230 
- Non-Controlling interest(j)  67,957   59,849 
Total Shareholders’ Equity under U.S. GAAP  Ps.4,592,267   4,081,727 
- Non-Controlling Interest under U.S. GAAP(j)  (68,126)  (50,662)
Consolidated Parent Company Shareholders’ Equity under U.S. GAAP  Ps.4,524,141   4,031,065 
  June 30,
  20162015
Total shareholders' equity under Argentine Banking GAAPPs.5,816,2424,700,716
U.S. GAAP adjustments:   
- Loan origination fees and costs..…………………...(a)(222,687)(90,893)
- Loan loss reserve …………………………………..(b)(250,706)(220,541)
- Government securities…..………….………………(d)(4,697)37,759
- Financial liabilities…...…………………………….(e)87,86310,282
- Securitizations…………………...…………………(f)(56,693)(15,442)
- Intangible assets………………………………….…   
Software costs………………………….………(g)(62,366)(63,888)
Other intangible assets……………………...….(g)-(59)
Business combinations….………...………..…..(g)(186)(1,176)
- Impairment of fixed and foreclosed assets…………(h)(36,263)(37,379)
- Miscellaneous assets ……………………….………(n)(30,848)-
- Vacation provision…………………………………(j)(74,644)(57,634)
- Insurance technical reserve…………………………(k)(1,299)(339)
- Capitalization of interest cost………………………(l)-4,001
- Financial guarantees issued...…….………………(m)(1,209)-
- Deferred income Tax……………………….………(o)352,931258,903
- Non-Controlling interest..…………………………..(i)130,20767,957
Total Shareholders’ Equity under U.S. GAAPPs.5,645,6454,592,267
- Non-Controlling Interest under U.S. GAAP…..…..(i)(118,063)(68,126)
Consolidated Parent Company Shareholders’ Equity under U.S. GAAPPs.5,527,5824,524,141


Description of changes in shareholders’ equity under U.S. GAAP:

 Total Shareholders’ Equity
Balance as of June 30, 20132014Ps.3,423,2044,031,065
Cash dividends (30,000)(41,817)
Other Comprehensive Income 22,28315,591
Net income for the twelve-month period in accordance with U.S. GAAP 615,578519,302
Balance as of June 30, 20142015Ps.4,031,065
Cash dividends(41,817)4,524,141
Other Comprehensive Income 15,591(30,031)
Net income for the twelve-month period in accordance with U.S. GAAP 519,3021,033,472
Balance as of June 30, 20152016Ps.4,524,1415,527,582

a. Loan origination fees and costs

Under Argentine Banking GAAP, the Bank does not defer loan origination fees and costs on mortgage, personal and credit card loans, different from those originated under the Pro.Cre.Ar program.

F- 261
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

Given the bank’s role as Trustee of the PROCREAR Administrative and Financial Trust, (see note 30), it has capitalized direct expenses incurred in the mortgage loan origination process, which


F-327

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


disbursements would not have been incurred by it had it not been for the grant of the related loans, in accordance with the provisions of Communication “A” 5392. Such origination expenses are amortized in 60 monthly installments.

In accordance with U.S. GAAP, under ASC 310 loan origination fees and certain direct loan origination costs should be recognized over the life of the related loan as an adjustment of yield.

Therefore the shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP for Banco Hipotecario S.A. as of June 30, 20152016 and 20142015 amounted to Ps. (90,893)(222,687) and (71,568)(90,893), respectively.

b. Loan loss reserve

The Bank’s accounting for its allowance for loan losses differs in some significant respects with practices of U.S.-based banks.

Under Argentine Banking GAAP, the allowance for loan losses is calculated according to specific criteria. This criterion is different for commercial loans (those in excess of Ps. 2,500) and consumer loans. Loan loss reserves for commercial loans are principally based on the debtors’ payment capacity and cash-flows analysis. Loan loss reserves for consumer loans are based on the client’s aging. Argentine banks may maintain other reserves to cover potential loan losses which management believes to be inherent in the loan portfolio, and other Argentine Central Bank required reserves.

Under U.S. GAAP, the allowance for loan losses should be in amounts adequate to cover inherent losses in the loan portfolio, incurred at the respective balance sheet dates. Specifically:

a)
Loans considered impaired, in accordance with ASC 310-10 “Accounting for Creditors for Impairment of a Loan”, are recorded at the present value of the expected future cash flows discounted at the loan’s effective contractual interest rate or at the fair value of the collateral if the loan is collateral dependent. Under ASC 310-10, a loan is considered impaired when, based on current information, it is probable that the borrower will be unable to pay contractual interest or principal payments as scheduled in the loan agreement. ASC 310-10 applies to all loans except smaller-balance homogeneous consumer loans, loans carried at the lower of cost or fair value, debt securities, and leases.

Loans considered impaired, in accordance with ASC 310-10 “Accounting for Creditors for Impairment of a Loan”, are recorded at the present value of the expected future cash flows discounted at the loan’s effective contractual interest rate or at the fair value of the collateral if the loan is collateral dependent. Under ASC 310-10, a loan is considered impaired when, based on current information, it is probable that the borrower will be unable to pay contractual interest or principal payments as scheduled in the loan agreement. ASC 310-10 applies to all loans except smaller-balance homogeneous consumer loans, loans carried at the lower of cost or fair value, debt securities, and leases.
The Bank applies ASC 310-10 to all commercial loans classified as “With problems”, “Insolvency Risks” and “Uncollectible” or commercial loans more than 90 days past due. The Bank specifically calculates the present value of estimated cash flows for commercial loans in excess of Ps.2,500 and more than 90 days past due. For commercial and other loans in legal proceedings, loans in excess of Ps.2,500 are specifically reviewed either on a cash-flow or collateral-value basis, both considering the estimated time to settle the proceedings.

As of June 30, 20152016 and 2014,2015, the result of applying ASC 310-10, shows that the Bank recorded an adjustment to shareholders’ equity for U.S. GAAP purposes of Ps.60,574 and Ps. 39,753, and Ps. 54,052, respectively.

b)
In addition, the Bank has performed a migration analysis for mortgage, credit cards and consumer loans following the ASC 450-20 and historical loss ratios were determined by analyzing historical losses, in order to calculate the allowance required for smaller-balance impaired loans and unimpaired loans for U.S. GAAP purposes. Loss estimates are analyzed by loan type and thus for homogeneous groups of clients. Such historical ratios were updated to incorporate the most recent data reflecting current economic conditions, industry performance

In addition, the Bank has performed a migration analysis for mortgage, credit cards and consumer loans following the ASC 450-20 and historical loss ratios were determined by analyzing historical losses, in order to calculate the allowance required for smaller-balance impaired loans and unimpaired loans for U.S. GAAP purposes. Loss estimates are analyzed by loan type and thus for homogeneous groups of clients. Such historical ratios were updated to
 

F- 262
F-328

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


trends, geographic or obligor concentrations within each portfolio segment, and any other pertinent information that may affect the estimation of the allowance for loan losses.
c)

incorporate the most recent data reflecting current economic conditions, industry performance trends, geographic or obligor concentrations within each portfolio segment, and any other pertinent information that may affect the estimation of the allowance for loan losses.
As a result of the analysis mentioned before, the Bank recorded an adjustment to shareholders’ equity for U.S. GAAP purposes of Ps. (129,868)(193,715) and Ps. (162,828)(129,868), for 20152016 and 2014,2015, respectively.

c)  Under Argentine Banking GAAP, loans that were previously charged-off, which are subsequently restructured and become performing loans, are included again in the Bank’s assets, according to the policies adopted by the bank. Under U.S. GAAP recoveries of loans previously charged off should be recorded when received. As of June 2015 and 2014, the Bank recorded an adjustment to shareholders’ equity related to reinstated loans of Ps. (62,502) and Ps. (79,889), respectively.
d)

Under Argentine Banking GAAP, loans that were previously charged-off, which are subsequently restructured and become performing loans, are included again in the Bank’s assets, according to the policies adopted by the bank. Under U.S. GAAP recoveries of loans previously charged off should be recorded when received. As of June 2016 and 2015, the Bank recorded an adjustment to shareholders’ equity related to reinstated loans of Ps. (48,146) and Ps. (62,502), respectively.
d)       Effective July 1, 2010, the Bank implemented new accounting guidance provided by SFAS 166 and 167 (ASU 2009-16 and ASU 2009-17, respectively, under the new codification), which amend the accounting for transfers of financial assets and consolidation of variable interest entities (VIEs). As a result of applying such guidance, the Bank, or its subsidiaries, were deemed to be the primary beneficiary of the securitization trusts because the Bank, or its subsidiaries, have the power to direct the activities of these VIEs through its servicing responsibilities and duties. Additionally, the Bank, or its subsidiaries, through its retained interests held in these securitizations have the obligation to absorb losses or the right to receive benefits from the VIEs. As a result of the analysis performed, the Bank should consolidate assets and liabilities of those securitization trusts, elimininating the investment in the retained interests and recording and adjustment in the allowance for loan losses of such securitization trusts.

e)
     Effective July 1, 2010, the Bank implemented new accounting guidance provided by SFAS 166 and 167 (ASU 2009-16 and ASU 2009-17, respectively, under the new codification), which amend the accounting for transfers of financial assets and consolidation of variable interest entities (VIEs). As a result of applying such guidance, the Bank, or its subsidiaries, were deemed to be the primary beneficiary of the securitization trusts because the Bank, or its subsidiaries, have the power to direct the activities of these VIEs through its servicing responsibilities and duties. Additionally, the Bank, or its subsidiaries, through its retained interests held in these securitizations have the obligation to absorb losses or the right to receive benefits from the VIEs. As a result of the analysis performed, the Bank should consolidate assets and liabilities of those securitization trusts, elimininating the investment in the retained interests and recording and adjustment in the allowance for loan losses of such securitization trusts.
As a result of the analysis mentioned before, the Bank recorded an adjustment to shareholders’ equity for U.S. GAAP purposes of Ps. (67,924)(69,419) and Ps. (1,173)(67,924), for 20152016 and 2014,2015, respectively.

As a result of analysis performed the breakdown of the shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP between the Bank’s adjustment and the reconsolidated securitization trusts as of June 30, 20152016 and 20142015 is as follows:
 
20162015
  2015     2014  Allowances under Arg. Banking GAAPAllowances under U.S. GAAPAdjustment to shareholders’ equityAllowances under Arg. Banking GAAPAllowances under U.S. GAAPAdjustment to shareholders’ equity
  Allowances under Arg. Banking GAAP   Allowances under U.S. GAAP   Adjustment to shareholders’ equity   Allowances under Arg. Banking GAAP   Allowances under U.S. GAAP   Adjustment to shareholders’ equity      
Migration analysis (*)  346,797   476,665   (129,868)  292,526   455,354   (162,828)412,693606,408(193,715)346,797476,665(129,868)
ASC 310-10  91,365   51,612   39,753   68,788   14,736   54,052 84,15723,58360,57491,36551,61239,753
Reinstated loans  -   62,502   (62,502)  -   79,889   (79,889)-48,146(48,146)-62,502(62,502)
Subtotal  438,162   590,779   (152,617)  361,314   549,979   (188,665)496,850678,137(181,287)438,162590,779(152,617)

(*) Migration analysis of Banco Hipotecario and its subsidiaries.

 

F- 263
F-329

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



  2015  2014 
  Allowances under Arg. Banking GAAP  Allowances under U.S. GAAP  Adjustment to shareholders’ equity  Allowances under Arg. Banking GAAP  Allowances under U.S. GAAP  Adjustment to shareholders’ equity 
                   
Reconsolidated trusts  76,232   144,156   (67,924)  45,504   46,677   (1,173)
Subtotal  76,232   144,156   (67,924)  45,504   46,677   (1,173)
                         
Total   514,394    734,935   (220,541   406,818   596,656   (189,838)
 
 20162015
 Allowances under Arg. Banking GAAPAllowances under U.S. GAAPAdjustment to shareholders’ equityAllowances under Arg. Banking GAAPAllowances under U.S. GAAPAdjustment to shareholders’ equity
       
Reconsolidated trusts196,202265,621(69,419)76,232144,156(67,924)
Subtotal196,202265,621(69,419)76,232144,156(67,924)
     
Total693,052943,758(250,706)514,394734,935(220,541)

c. Derivative Financial Instruments

As mentioned in notes 18 and 2.9. the Bank entered in several derivative transactions, mainly, to hedge: i) the exchange rate risk attached to liabilities denominated in foreign currency, and ii) interest rate swaps to manage its interest rate risk.

Gains and losses are recorded in earnings in each period.

Under U.S. GAAP, the Bank accounts for derivative financial instruments in accordance with ASC 815 which establishes the standards of accounting and reporting derivative instruments, including certain derivative instruments embedded within contracts (collectively referred to as derivatives) and hedging activities. This statement requires institutions to recognize all derivatives in the balance sheet, whether as assets or liabilities, and to measure those instruments at their fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge for the exposure to changes in the fair value of a recorded asset or liability or unrecorded firm commitment, (b) a hedge for the exposure of future cash flows and (c) a hedge for the exposure of foreign currency. If such a hedge designation is achieved then special hedge accounting can be applied for the hedged transactions that will reduce the volatility in the income statement to the extent that the hedge is effective. In order for hedge accounting to be applied the derivative and the hedged item must meet strict designation and effectiveness tests.

The Bank’s derivatives do not qualify for hedge accounting treatment under U.S. GAAP. Therefore gains and losses are recorded in earnings in each period.

Under U.S. GAAP, the Bank’s estimates the fair value of the receivable and payable on the derivative instrument using valuation techniques with observable market parameters. As of June 30, 2014 the shareholder’s equity adjustment amounts to Ps. (876).

d. Government securities

The following table summarizes the U.S. GAAP shareholders’ equity adjustment related to other government securities, as of June 30, 20152016 and 2014:2015:
 June 30,
 2016 2015
      
Discount BondsPs.- Ps.(534)
Unquoted Securities issued by the BCRA 1,525  1,352
Bills issued by Provincial Governments (10,167)  8,472
Other National Government Bonds 3,945  28,469
TotalPs.(4,697) Ps.37,759

 June 30, 
 2015 2014 
       
Discount Bonds Ps.(534) Ps.(4,126)
Unquoted Securities issued by the BCRA  1,352   7,387 
Bills issued by Provincial Governments  8,472   4,234 
Other National Government Bonds  28,469   (3,624)
Total Ps.37,759  Ps.3,871 


 

F- 264
F-330

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

 

·  Discount Bonds

Discount Bonds
As of June 30, 2004 the Bank held certain defaulted Argentine government bonds. Such bonds were not quoted in the public market. On January 2005, the Bank accepted the offer to exchange its defaulted government securities for “Discount Bonds in pesos” issued under the Argentine debt restructuring. On April 1, 2005 the government securities were exchange.

For U.S. GAAP purposes and in accordance with ASC 310 satisfaction of one monetary asset (in this case a defaulted government securities) by the receipt of another monetary asset (in this case Discount Bonds) from the creditor is generally based on the market value of the asset received in satisfaction of the debt. In this particular case, the Bonds being received are significantly different in structure and in interest rates than the securities swapped. Therefore, the fair value of the Bonds was determined on the balance sheet date based on their market value and will constitute the cost basis of the asset. Any difference between the old asset and the fair value of the new asset is recognized as a gain or loss. The bonds arisen from the exchange have been sold.

During the twelve-month periods ended June 30, 2014 and 2015, there have been purchases of Discount Bonds.

As of June 30, 2015 and 20142015 the Discount Bonds were considered available for sale securities for U.S. GAAP purposes according with ASC 320-10 and recorded at fair value with the unrealized gains and losses recognized as a charge or credit to equity through other comprehensive income.
As of June 30, 2015 and 2014 the following table shows the amortized cost, book value and fair value of the mentioned bond.

  2015  2014 
  Amortized Cost U.S. GAAP  Book Value Argentine Banking GAAP  Fair Value – Book value under U.S. GAAP  Unrealized (Loss)/Gain  Shareholders’ equity Adjustment  Amortized Cost U.S. GAAP  Book Value Argentine Banking GAAP  Fair Value – Book value under U.S. GAAP  Unrealized (Loss)/Gain  Shareholders’ equity Adjustment 
  (In thousands of $) 
                               
Discount Bonds  9,624   9,624   9,090   (11,013)  (534)  77,177   91,782   87,656   10,479   (4,126)
 2015
 Amortized Cost U.S. GAAPBook Value Argentine Banking GAAPFair Value – Book value under U.S. GAAPUnrealized (Loss)/GainShareholders’ equity Adjustment
 (In thousands of $)
      
Discount Bonds9,6249,6249,090(11,013)(534)

The Bank has evaluated whether there was a decline in the value of the security that is other-than temporary as defined by ASC 320.

A number of factors are considered in performing an impairment analysis of securities. Those factors include, among others:

a.  Intent and ability of the Bank to retain its investment for a period of time that allows for any anticipated recovery in market value;
b.  Expectation to recover the entire amortized cost of the security;
c.  Recoveries in fair value after the balance sheet date;
d.  The financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer (such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of a business that may affect the future earnings potential).
e.  Likelihood that it will be required to sell debt investments before recovery of amortized cost.

 

F-331

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and forDuring the twelve-month periodsperiod ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The Bank also takes into account2016, all Discount Bonds were sold. Therefore, the length of time and2016 U.S. GAAP net income reconciliation includes the extent to which the market valuereversal of the security has been less than cost2015 shareholders’ equity adjustment of Ps. (534) plus Ps. 534 of gains previously recorded through other comprehensive income, which that are being realized and changes in global and regional economic conditions and changes related to specific issuers or industries that could adversely affect these values.

As ofreversed through the income statement during the period ended June 30, 2014 the fair value of the investment is greater than its amortized cost. The Bank as a result of its analysis has determined that, as of June 30, 2015, unrealized losses on Discount2016.
Other Bonds are temporary in nature based on its ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery, the financial condition of the issuer and the recoveries in fair values after the balance sheet date.

·  Other Bonds

Under Argentine Banking GAAP, as of June 30, 20152016 and 2014,2015, some National Government Bonds, unquoted securities issued by the BCRA and bills issued by Provincial Governments have been recorded at cost. This value increases monthly on the basis of the internal rate of return resulting from the interest rate which, used as discount, matches the cash flow’s present value with the initial value.

Under U.S. GAAP these securities were considered available for sale securities according with ASC 320 and recorded at fair value with the unrealized gains and losses recognized as a charge or credit to equity through other comprehensive income.
As of June 30, 20152016 and 20142015 the following table shows the amortized cost, book value and fair value of the mentioned bonds:

  2015  2014 
  Amortized Cost U.S. GAAP  Book Value Argentine Banking GAAP  Fair Value – Book value under U.S. GAAP  Unrealized (Loss)/Gain  Shareholders’ equity Adjustment  Amortized Cost U.S. GAAP  Book Value Argentine Banking GAAP  Fair Value – Book value under U.S. GAAP  Unrealized (Loss)/Gain  Shareholders’ equity Adjustment 
  (In thousands of $) 
                               
Unquoted securities issued by the BCRA  1,719,856   1,719,856   1,721,208   1,352   1,352   1,342,425   1,342,425   1,349,812   7,387   7,387 
Bills issued by Provincial Governments  539,172   539,172   547,644   8,472   8,472   423,275   423,275   427,509   4,234   4,234 
                                         
Other National Government Bonds  648,921   648,921   677,390   28,469   28,465   33,136   32,796   29,172   -   (3,624)
F- 265
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

 20162015
 Amortized Cost U.S. GAAPBook Value Argentine Banking GAAPFair Value – Book value under U.S. GAAPUnrealized (Loss)/GainShareholders’ equity AdjustmentAmortized Cost U.S. GAAPBook Value Argentine Banking GAAPFair Value – Book value under U.S. GAAPUnrealized (Loss)/GainShareholders’ equity Adjustment
 (In thousands of $)
           
Unquoted securities issued by the BCRA
 
1,251,4611,251,4611,252,9861,5251,5251,719,8561,719,8561,721,2081,3521,352
Bills issued by Provincial Governments503,200503,200493,0332,259(10,167)539,172539,172547,6448,4728,472
           
Other National Government Bonds377,990377,990381,9353,9453,945648,921648,921677,39028,46928,465
The Bank has evaluated whether there was a decline in the value of the security that is other-than temporary as defined by ASC 320-10.320.

A number of factors are considered in performing an impairment analysis of securities. Those factors include, among others:
a.
Intent and ability of the Bank to retain its investment for a period of time that allows for any anticipated recovery in market value;
b.
Expectation to recover the entire amortized cost of the security;
c.
Recoveries in fair value after the balance sheet date;
d.
The financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer (such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of a business that may affect the future earnings potential).
e.
Likelihood that it will be required to sell debt investments before recovery of amortized cost.
The Bank also takes into account the length of time and the extent to which the market value of the security has been less than cost and changes in global and regional economic conditions and changes related to specific issuers or industries that could adversely affect these values.
As of June 30, 2014,2016 the fair value of the Bills issued by Provincial Governments is less than its amortized cost. The Bank as a result of its analysis has determined that, as of June 30, 2016, unrealized losses on PRO XIII Bondssome Bills, are not temporary, consequently the Bank has recorded an other-than temporary impairment for U.S. GAAP purposes. Therefore the fair value of the security was determined on the balance sheet date based on their market value and will constitute the new cost basis for the asset. In addition, the bank has performed an impairment analysis for the rest of their portfolio and no other than temporary impairment were detected. As of June 30, 2015 the fair value of the investment is greater than its amortized cost.

 

F-332

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



e. Provincial Public Debt

As of June 2002, the Bank offered to exchange certain loans to Argentine provincial governments for loans or securities of the Argentine National Government; however the exchange had not been finalized until 2003. As these loans were performing no provision was recorded under U.S. GAAP in accordance with ASC 310-10.

In 2003, the Bank tendered in the exchange under Decree N°1579/02 almost all its portfolio of loans to provincial governments and received securities of the Argentine National Government (“BOGAR”).

For U.S. GAAP purposes and in accordance with ASC 310-20 satisfaction of one monetary asset (in this case a loan) by the receipt of another monetary asset (in this case BOGAR) from the creditor is generally based on the market value of the asset received in satisfaction of the debt. In this particular case, the BOGAR being received is significantly different in structure and in interest rates than the loans swapped. Therefore, such amounts should initially be recognized at their market value. The estimated fair value of the securities received will constitute the cost basis of the asset. Any difference between the old asset and the fair value of the new asset is recognized as a gain or loss. The difference between the cost basis and the amount expected to be collected will be amortized on an effective yield basis over the life of the bond.

For U.S. GAAP purposes, these BOGAR Bonds were classified by the Bank, as available for sale securities and recorded at fair value with the unrealized gains or losses recognized as a charge or credit to equity through other comprehensive income.

During the period ended June 30, 2013, all BOGAR Bonds were sold. Therefore, the 2013 U.S. GAAP net income reconciliation includes the reversal of the 2012 shareholders’ equity adjustment of Ps. 363 plus Ps. 694 of gains previously recorded through other comprehensive income, which that are being realized and reversed through the income statement during the period ended June 30, 2013.

f. Financial liabilities

Bonds
As described in note 15, the bank has issued several series of negotiable obligations in different terms and conditions. Under Argentine Banking GAAP, the costs of originating such instruments have been charged to the Income Statement at the issuance date.

Under U.S.GAAP, and according to ASC 835-30-45-3, issuance costs should be reported in the balance sheet as deferred charges. In addition, ASC 470-10-35-2 states that debt issuance costs should be amortized over the same period used in the interest cost determination.

F- 266
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

Subordinated bonds
On June 22, 2015 BACS Banco de Crédito y Securitización S.A., issued negotiable obligations that are convertible into the Company’s ordinary and book-entry shares for a principal amount of Ps.100,000. The private offering of the convertible negotiable obligations was solely addressed to the Company’s shareholders. IRSA Inversiones y Representaciones Sociedad Anónima subscribed all the convertible negotiable obligations.
Under Argentine Banking GAAP the subordinated negotiable obligations have been recorded at their residual value plus interests accrued.
According to ASC 470-20-25-5, an embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid in capital.
As of June 30, 20152016 and 20142015 the shareholder’s equity adjustment, for both concepts, amounts to Ps. 10,28287,863 and Ps. 7,573,10,282, respectively.

g.f. Securitizations

For Argentine Banking GAAP purposes, the debt securities and certificates retained by the Bank are accounted for at cost plus accrued interest for the debt securities, and the equity method is used to account for the residual interest in the trust.

Under U.S. GAAP the primary beneficiary of a variable interest entity (VIE) is required to consolidate its assets and liabilities. An entity is considered a VIE if it possesses one of the following characteristics:


F-333

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
  (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

Insufficient Equity Investment at Risk


·    Insufficient Equity Investment at Risk
  Equity lacks decision-making rights
·    Equity lacks decision-making rights
·    Equity with non-substantive voting rights
  Equity with non-substantive voting rights
·    Lacking the obligation to Absorb an Entity´s Expected Losses
·    Lacking the right to receive an Entity´s expected residual returns
  Lacking the obligation to Absorb an Entity´s Expected Losses

  Lacking the right to receive an Entity´s expected residual returns
The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether the Bank has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Bank considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities.

As a consequence of this assessment, the Bank was deemed to be the primary beneficiary of certain securitization trusts because the Bank has the power to direct the activities of these VIEs through its servicing responsibilities and duties. Additionally, the Bank through its retained interests held in these securitizations has the obligation to absorb losses or the right to receive benefits from the VIEs.

For U.S. GAAP purposes, as of June 30, 2015, 20142016 and 2013,2015, the Bank consolidated certain VIE’s in which the Bank had a controlling financial interest and for which it is the primary beneficiary. Therefore, the Bank reconsolidated their net assets, eliminated the gain or loss recognized on the sale of receivables when the carrying value of transferred credit card receivables differs from the amount of cash and certificates of participation received, eliminated the servicing liabilities and re-established its loan loss reserves under ASC 450-20. See note 33.b. for allowance for loan losses.

F- 267
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

No servicing assets or liabilities have been recognized.

The total shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 20152016 and 20142015 amounted to Ps. (15,442)(56,693) and Ps. (31,876)(15,442), respectively.

Additional information required by U.S. GAAP

The Bank adopted ASC 860-10 and ASC 810-10 which require additional disclosures about its involvement with consolidated VIE’s and expanded the population of VIE’s to be disclosed. The table below presents the assets and liabilities of the financial trusts which have been consolidated for U.S. GAAP purposes:

 

 June 30,
 2016 2015
      
Cash and due from banksPs.224, 065 Ps.88,236
Loans (net of allowances) 4,425,255  2,235,655
Other assets 1,181,403  1,149,023
Total AssetsPs.5,830,723 Ps.3,472,914
      
Debt SecuritiesPs.4,575,569 Ps.2,868,064
Certificates of Participation 1,062,201  451,365
Other liabilities 192,953  153,485
Total LiabilitiesPs.5,830,723 Ps.3,472,914
 
F-334

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 June 30, 
 2015 2014 
       
Cash and due from banks Ps.88,236  Ps.103,693 
Loans (net of allowances)  2,235,655   1,771,175 
Other assets  1,149,023   826,795 
Total Assets Ps.3,472,914  Ps.2,701,663 
         
Debt Securities Ps.2,868,064  Ps.2,214,488 
Certificates of Participation  451,365   427,246 
Other liabilities  153,485   59,929 
Total Liabilities Ps.3,472,914  Ps.2,701,663 

As of June 30, 2015,2016, the Bank’s maximum loss exposure, which amounted to Ps. 3,472,914,5,830,723, is based on the unlikely event that all of the assets in the VIE’s become worthless and incorporates potential losses associated with assets recorded on the Bank’s Balance Sheet. Nevertheless, under Argentine Law the Debt securities will be paid exclusively with the securitized assets.

h.g. Intangible Assets

Software costs

Under Argentine Banking GAAP fees paid for a re-engineering project and for restructuring expenses incurred in relation to certain equity transactions are recognized as an intangible asset and amortized in a maximum of five years. Such cost should be expensed as incurred under U.S. GAAP.

Under Argentine Banking GAAP, the Bank capitalizes costs relating to all three of the stages of software development. Under ASC 350-40 defines three stages for the costs of computer software developed or obtained for internal use: the preliminary project stage, the application development stage and the post-implementation operation stage. Only the second stage costs should be capitalized.

Shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 20152016 and 20142015 amounted to Ps. (63,888)(62,366) and Ps. (37,363)(63,888), respectively.

Other intangible assets

F- 268
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

On January 13, 2011, Tarshop S.A. acquired from APSA Media S.A., previously Metroshop S.A., a portfolio of credit cards delinquent by less than 60 days; a contractual position in contracts for the issuance of credit cards; the accounts of customers, the lease agreements and movable property at certain branches and the contracts of employment with personnel under a labor relationship.

Under Argentine Banking GAAP, no intangible assets should be recognized in accordance with these transactions.

Under U.S. GAAP, ASC 350-30 defines that an intangible asset which is acquired either individually or with a group of other assets shall be recognized. Assets are recognized based on their cost to the acquiring entity, which generally includes the transaction costs of the assets acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs the assets’ carrying amount on the acquiring entity’s books. The cost of a


F-335

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


group of assets acquired shall be allocated to the individual assets acquired or liabilities assumed based on their relative fair values and shall not give rise to goodwill.

Shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 2015 and 2014 amounted to Ps. (59) and Ps. 3,097,, respectively, related to the contractual position in contracts for the issuance of credit cards and the accounts of customers recorded as intangibles assets for U.S. GAAP purposes.

Business combination

i) Acquisition of Tarshop S.A.

On August 30, 2010, the Financial and Exchange Institutions Superintendency of the Argentine Central Bank gave its consent to the purchase of 80% of the share capital of Tarshop SA. Such shareholding consists of 107,037,152 non-endorsable, registered ordinary shares, par value 1 Peso per share, and entitled to one vote per share, in turn equivalent to 107,037,152 votes.

The sales price amounted to US$ 26.8 million, of which 20% (US$ 5.4 million) was paid on December 29, 2009 and the remaining balance of the price was cancelled on September 13, 2010.

Pursuant to Argentine Central Bank rules, and due to the difference between the acquisition cost and the estimated fair value of assets and liabilities acquired, a goodwill amounting to Ps. 29,568 was recorded under Intangible Assets – Goodwill. This goodwill is subsequently charged to Income on a straight-line basis during 60 months. As of June 30, 20152016 and 20142015 the Bank has a balance of Ps. 15,27712,320 and Ps. 18,234,15,277, respectively, related to the goodwill.

Under U.S. GAAP, ASC 805 requires the acquisition of controlling interest of Tarshop S.A. to be accounted for as a business combination applying the purchase method, recognizing all net assets acquired at their fair value.

The intangible assets identified as part of the acquisition where customer relationships, trademark and workforce amounted to Ps. 24,394 as of August 31, 2010 subject to amortization.

ii) Acquisition of BACS Administradora de activos S.A. S.G.F.C.I.

On April 26, 2012 BACS Banco de Crédito y Securitización S.A. acquired 85% of the shares belonging to BACS Administradora de activos S.A. S.G.F.C.I. (former FCMI Argentina Financial Corporation S.A. S.G.F.C.I.). The purchase price was Ps. 6 million.

Pursuant to Argentine Central Bank rules, and due to the difference between the acquisition cost and the estimated fair value of assets and liabilities acquired as of April 30, 2012, a goodwill amounting to Ps. 4,728 was recorded under Intangible Assets – Goodwill. This goodwill is subsequently charged to income on a straight-line basis during 120 months. As of June 30, 20152016 and 20142015 the Bank recorded such balance which amounted to Ps. 3,2312,758 and Ps. 3,704,3,231, respectively.

F- 269
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

Under U.S. GAAP, ASC 805 requires the acquisition of controlling interest of BACS Administradora de activos S.A. S.G.F.C.I. (former FCMI Argentina Financial Corporation S.A. S.G.F.C.I.) to be accounted for as a business combination applying the purchase method, recognizing all net assets acquired at their fair value.

Goodwill amortization, under Argentine Banking GAAP has been reversed for U.S. GAAP purposes.

 

F-336

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


i. h.Impairment of fixed assets and foreclosed assets
Under Argentine Banking GAAP, fixed assets and foreclosed assets are restated for inflation using the WPI index at February 28, 2003. As such, the balances of fixed assets and foreclosed assets were increased approximately 120%.

In accordance with ASC 360-10 such assets are subject to impairment tests in certain circumstances. Because projected cash flows associated with fixed assets and foreclosed assets are insufficient to recover the restated carrying amounts of the assets, those assets should be tested for impairment. During 2002, in the absence of credible market values for our fixed and foreclosed assets, the Bank under U.S. GAAP reversed the restatement of fixed and foreclosed assets.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

As of June 20152016 and 2014,2015, no additional impairment was recorded in fixed and foreclosed assets.

Shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 20152016 and 20142015 amounted to Ps. (37,379)(36,263) and Ps. (38,323)(37,379), respectively. The differences between periods are due to depreciation recorded under Argentine Banking GAAP.

j.i. Non-controlling interest

Argentine Banking GAAP rules require recording non-controlling interests as a component of the liabilities. ASC 810 requires recording such interests as shareholders’ equity. In addition, the U.S. GAAP adjustment represents the allocation to the non-controlling interest of non-wholly owned subsidiaries of certain U.S. GAAP adjustments related to such subsidiaries.

k.j. Vacation Provision

The Bank’s policy for vacation benefits is to expense such benefits as taken. For U.S. GAAP purposes, the vacation accrual is based on an accrual basis, where earned but untaken vacation is recognized as a liability.

Shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 20152016 and 20142015 amounted to Ps. (57,634)(74,644) and Ps. (40,332)(57,634), respectively.

l.k. Insurance Technical reserve

F- 270
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

Until September 2003, the calculation of the local technical reserves performed by the Bank was the same as that used under U.S. GAAP.

On September 2003, the National Insurance Superintendency issued certain regulations on the calculation of reserves introducing changes to the local regulations. ForFor U.S. GAAP purposes the Bank has accounted these insurance technical reserves under ASC 944.

Therefore, the technical reserves for the twelve-month periods ended June 30, 20152016 and 20142015 were adjusted for U.S. GAAP purposes. Shareholders’ equity adjustment as of June 30, 20152016 and 20142015 amounted to Ps. (339)(1,299) and Ps. (3,119)(339), respectively.respectively.

m.l. Capitalization of interest cost

Under Argentine Banking GAAP, during the process of construction of an asset the capitalization of interest is not recognized.

 

F-337

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


For U.S. GAAP purposes, as stated in ASC 835-20 the amount of interest cost to be capitalized for qualifying assets is intended to be that portion of the interest cost incurred during the assets’ acquisition periods that theoretically could have been avoided (for example, by avoiding additional borrowings or by using the funds expended for the assets to repay existing borrowings) if expenditures for the assets had not been made.

The amount capitalized in an accounting period shall be determined by applying an interest rate to the average amount of accumulated expenditures for the asset during the period. The capitalization rates used in an accounting period shall be based on the rates applicable to borrowings outstanding during the period.
The total amount of interest cost capitalized in an accounting period shall not exceed the total amount of interest cost incurred by the enterprise in that period.
Shareholders’ Equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 2015 and 2014 amounted to Ps. 4,001, and Ps. 3,226, respectively.
m. Financial guarantees issued
During the twelve-month period ended June 30, 2016, the Bank entered into different agreements to guarantee lines of credit of selected customers. As of June 30, 2016, guarantees granted by the Bank amounted to Ps. 463,107.
Under Argentine Banking GAAP the guarantees are recorded in memorandum accounts. As of June 30, 2016, for U.S. GAAP purposes the Bank recognized a liability for the fair value of the obligations assumed at its inception in accordance with the requirements of ASC 460. Such liabilities are being amortized over the expected term of the guarantee. As of June 30, 2016, the fair value of the guarantees less the estimated proceeds from collateral amounted to Ps. (1,209).
As of June 30, 2016, the Bank maintained the following guarantees:
 As of June 30, 2016
 Maximum Potential Payments (*) Estimated Proceeds from collateral resource U.S. GAAP adjustment
Financial guaranteesPs.463,107 Ps.4,398 Ps.(1,209)
 Ps.463,107 Ps.4,398 Ps.(1,209)
(*) The maximum potential payments represent a “worse-case scenario”, and do not necessarily reflect expected results. Estimated proceeds from collateral and recourse represent the anticipated value of assets that could be liquidated or received from other parties to offset the Company’s payments under guarantees.

F- 271
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

n. Miscellaneous assets
Under Argentine Banking GAAP, the stock of forms, books, prints, stationery and other assets of a similar nature the entity has to be used in the future, are booked under the caption “Miscellaneous assets”.
For U.S. GAAP purposes, the amounts expensed in these items should be recognized as a cost incurred during the period.
Shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP as of June 30, 2016 amounted to Ps. (30,848).
o. Deferred Income Tax

Argentine Banking GAAP requires income taxes to be recognized on the basis of amounts due in accordance with Argentine tax regulations. Temporary differences between the financial reporting and income tax bases of accounting are therefore not considered in recognizing income taxes.
In accordance with ASC 740-10 under U.S. GAAP income taxes are recognized on the liability method whereby deferred tax assets and liabilities are established for temporary differences between the financial reporting and tax bases of our assets and liabilities. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recorded or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized for that component of net deferred tax assets which is “more likely than not” that it will not be recoverable.

As of June 30, 20152016 and 2014,2015, and based on the tax projections performed, the Bank believes that is more likely than not that it will recover the net operating tax loss carry forward and all the temporary differences, with future taxable income.

In a consolidated basis, the Bank has recognized a shareholders’ equity adjustment between Argentine Banking GAAP and U.S. GAAP that amounted to Ps. 258,903352,931 and Ps. 214,230,258,903, as of June 30, 20152016 and 2014,2015, respectively.

ASC 740 prescribes a comprehensive model for the recognition, measurement, financial statement presentation and disclosure of uncertain tax positions taken or expected to be taken in a tax return. Additionally, it provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of June 30, 2015,2016, there were no uncertain tax positions.

The Bank classifies income tax-related interest and penalties as income taxes in the financial statements. The adoption of this pronouncement had no effect on the Bank’s overall financial position or results of operations.

The following table shows the tax years open for examination as of June 30, 2015,2016, by major tax jurisdictions in which the Bank operates:
 
 
F- 272
F-338BANCO HIPOTECARIO SA AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
 
 

Jurisdiction
 
Tax year
Argentina 2010201120142015

o.
p. Items in process of collection
The Bank does not give accounting recognition to checks drawn on the Bank or other banks, or other items to be collected until such time as the related item clears or is accepted. Such items are recorded by the Bank in memorandum accounts. U.S. banks, however, account for such items through balance sheet clearing accounts at the time the items are presented to the Bank.

The Bank’s assets and liabilities would be increased by approximately Ps. 137,944234,515 and Ps. 163,304,137,944, had U.S. GAAP been applied at June 30, 20152016 and 2014,2015, respectively.

II.
 Additional disclosure requirements:

 Additional disclosure requirements:
p.
q. Fair Value Measurements Disclosures

ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Effective January 2010, the Bank adopted new accounting guidance under ASC 820 that requires additional disclosures including, among other things, (i) the amounts and reasons for certain significant transfers among the three hierarchy levels of inputs, (ii) the gross, rather than net, basis for certain level 3 roll forward information, (iii) use of a “class” rather than a “major category” basis for assets and liabilities, and (iv) valuation techniques and inputs used to estimate level 2 and level 3 fair value measurements.
 
In addition, ASC 820-10 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows.

·  Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
·  Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·  Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Determination of fair value

Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon internally developed models that use primarily market-based or independently-sourced market parameters, including interest rate yield curves, option volatilities and currency rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, the Bank’s creditworthiness, liquidity and unobservable parameters that are applied consistently over time.

 

F- 273
F-339

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


The Bank believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following section describes the valuation methodologies used by the Bank to measure various financial instruments at fair value, including an indication of the level in the fair-value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models as well as any significant assumptions.

Assets (by Class of asset)

a)
Securities

Securities
As of June 30, 20152016 and 20142015 the Bank’s securities are classified within level 1of the valuation hierarchy using quoted prices available in the active market. Level 1 securities includes government bonds and instruments issued by BCRA and corporate securities. Furthermore the Bank´s instruments issued by BCRA with no volatility published by the BCRA and bills issued by Provincial Governments are classified within Level 2 using quoted prices available of similar assets.

b)
Securities receivable under repurchase agreements

Securities receivable under repurchase agreements
The Bank’s securities receivable under repurchase agreements which do not qualify for sale accounting for U.S. GAAP purposes, are classified within level 1 of the valuation hierarchy. To estimate the fair value of these securities, quoted prices are available in an active market.

c)
Derivatives

Derivatives
The fair value of level 1 derivative positions are determined using quoted market prices. The fair value of level 2 derivative positions are determined using internally developed models that utilize market observable parameters.

Liabilities (by Class of liability)

d)
Derivatives

Derivatives
The fair value of level 1 derivative positions are determined using quoted market prices.

The following table presents the financial instruments, by class of asset and liabilities, carried at fair value as of June 30, 20152016 and 2014,2015, by ASC 820-10 valuation hierarchy (as described above).


 

F- 274
F-340

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 Balances as of June 30, 2015 Balances as of June 30, 2016
 Total carrying value  
Quoted market prices in active markets
(Level 1)
  
Internal models with significant observable market parameters
 (Level 2)
  
Internal models with significant unobservable market parameters
 (Level 3)
 Total carrying value
Quoted market prices in active markets
(Level 1)
Internal models with significant observable market parameters
 (Level 2)
Internal models with significant unobservable market parameters
 (Level 3)
ASSETS               
               
Government and corporate securities               
Trading securities  1,244,278   1,244,278   -   - 2,592,1552,592,155--
Available for sale securities  1,210,421   729,986   480,435   - 894,122727,009167,113-
Instruments issued by the BCRA  2,422,813   672,239   1,750,574   - 1,296,7231,263,65733,066-
Corporate securities  430,855   430,855   -   - 490,538490,538--
                   
Other receivables from financial transactions                   
Trading securities  231,366   231,366   -   - 903,031903,031--
Available for sale securities  231,400   231,117   283   - 260,298260,298--
Futures  182   182   -   - 50,63750,637--
Interest rate swaps  575   575   -   - 
                   
Miscellaneous assets                   
Trading securities  162,759   162,759   -   - 14,35014,350--
                   
TOTAL ASSETS AT FAIR VALUE  5,934,649   3,703,357   2,231,292   - 6,501,8546,301,675200,179-
                   
LIABILITIES                   
                   
                
Other obligations from financial transactions                   
Trading securities  (105,684)  (105,684)  -   - (792,149)(792,149)--
Available for sale securities  (247,143)  (247,143)  -   - (71,880)(53,307)(18,573)-
Futures  (687)  (687)  -   - (37,864)(37,864)--
Interest rate swaps  (512)  (512)  -   - 
                   
Deposits                   
Trading securities  (99,515)  (99,515)  -   - (776,687)(776,687)--
Available for sale securities  (16,288)  (16,288)  -   - 
                   
TOTAL LIABILITIES AT FAIR VALUE  (469,829)  (469,829)  -   - (1,678,580)(1,660,007)(18,573)-

 

F- 275
F-341

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 Balances as of June 30, 2014 Balances as of June 30, 2015
 Total carrying value  
Quoted market prices in active markets
(Level 1)
  
Internal models with significant observable market parameters
 (Level 2)
  
Internal models with significant unobservable market parameters
 (Level 3)
 Total carrying value
Quoted market prices in active markets
(Level 1)
Internal models with significant observable market parameters
 (Level 2)
Internal models with significant unobservable market parameters
 (Level 3)
ASSETS               
               
Government and corporate securities               
Trading securities  1,316,864   1,316,864   -   - 1,244,2781,244,278--
Available for sale securities  486,322   437,566   48,756   - 1,210,421729,986480,435-
Instruments issued by the BCRA  1,704,354   354,542   1,349,812   - 2,422,813672,2391,750,574-
Corporate securities  345,565   345,565   -   - 430,855430,855--
                   
Other receivables from financial transactions                   
Trading securities  1,279   1,279   -   - 231,366231,366--
Available for sale securities  58,015   58,015   -   - 231,400231,117283-
Forwards  33,794   -   33,794   - 
Futures  6,766   6,766   -   - 182182--
Interest rate swaps575575--
   
Miscellaneous assets   
Trading securities162,759162,759--
                   
TOTAL ASSETS AT FAIR VALUE  3,952,959   2,520,597   1,432,362   - 5,934,6493,703,3572,231,292-
                   
LIABILITIES                   
                   
Other obligations from financial transactions                   
Trading securities(105,684)(105,684)--
Available for sale securities(247,143)(247,143)--
Futures  (7,911)  (7,911)  -   - (687)(687)--
Interest rate swaps(512)(512)--
   
Deposits   
Trading securities(99,515)(99,515)--
Available for sale securities(16,288)(16,288)--
                   
TOTAL LIABILITIES AT FAIR VALUE  (7,911)  (7,911)  -   - (469,829)(469,829)--


q. Credit Risk disclosures

Allowance for credit losses and recorded investments in financial receivables

The following table presents the allowance for account receivables losses and the related carrying amount of Financing Receivables for the periods ended June 30, 20152016 and 20142015 respectively:
 As of June 30, 2016
 Consumer Loan Portfolio Commercial Loan Portfolio Total
Allowance for credit losses:        
Ending balance: individually evaluated for impairmentPs.- Ps.19,621 Ps.19,621
Ending balance: collectively evaluated for impairment 920,175  3,962  924,137
Ending BalancePs.920,175 Ps.23,583 Ps.943,758
Financing receivables:        
Ending balance: individually evaluated for impairmentPs.- Ps.21,635 Ps.21,635
Ending balance: collectively evaluated for impairment 19,821,668  7,646,522  27,468,190
Ending BalancePs.19,821,668 Ps.7,668,157 Ps.27,489,825

 As of June 30, 2015 
 Consumer Loan Portfolio Commercial Loan Portfolio Total 
Allowance for credit losses:         
Ending balance: individually evaluated for impairment Ps.-  Ps.26,410  Ps.26,410 
Ending balance: collectively evaluated for impairment  683,323   25,202   708,525 
Ending Balance Ps.683,323  Ps.51,612  Ps.734,935 
Financing receivables:            
Ending balance: individually evaluated for impairment  -  Ps.44,496  Ps.44,496 
Ending balance: collectively evaluated for impairment  15,266,470   6,853,897   22,120,367 
Ending Balance Ps.15,266,470  Ps.6,898,393  Ps.22,164,863 


 

F- 276
F-342

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



As of June 30, 2014 As of June 30, 2015
Consumer Loan Portfolio Commercial Loan Portfolio Total Consumer Loan Portfolio Commercial Loan Portfolio Total
Allowance for credit losses:                 
Ending balance: individually evaluated for impairment Ps.-  Ps.11,296  Ps.11,296 Ps.- Ps.26,410 Ps.26,410
Ending balance: collectively evaluated for impairment  581,920   3,440   585,360  683,323  25,202  708,525
Ending Balance Ps.581,920  Ps.14,736  Ps.596,656 Ps.683,323 Ps.51,612 Ps.734,935
Financing receivables:                    
Ending balance: individually evaluated for impairment Ps.-  Ps.24,323  Ps.24,323 Ps.- Ps.44,496 Ps.44,496
Ending balance: collectively evaluated for impairment  11,592,745   6,182,266   17,775,011  15,266,470  6,853,897  22,120,367
Ending Balance Ps.11,592,745  Ps.6,206,589  Ps.17,799,334 Ps.15,266,470 Ps.6,898,393 Ps.22,164,863
The activity in the allowance for loan losses for period is as follows:

As of June 30, As of June 30,
2015 2014 2016 2015
Allowance for credit losses:           
Beginning Balance Ps.596,656  Ps.508,654 Ps.734,935 Ps.596,656
Charge-offs  (267,694)  (245,023) (177,834)  (267,694)
Provision for loan losses  405,973   333,025  386,657  405,973
Ending Balance Ps.734,935  Ps.596,656 Ps.943,758 Ps.734,935


Account receivable charge-off and recoveries

Under Argentine GAAP, recoveries on previously charge-off account receivable are recorded directly to income and the amount of charge-off account receivable in excess of amounts specifically allocated is recorded as a direct charge to the income statement. The Bank does not partially charge off troubled account receivable until final disposition of the credit, rather, the allowance is maintained on a credit-by –credit basis for its estimated settlement value. Under U.S. GAAP, all charge off and recovery activity is recorded through the allowance for account receivable losses account. Further, account receivables are generally charged to the allowance account when all or part of the credit is considered uncollectible.

Impaired loans

ASC 310, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. This Statement is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. Loans are considered impaired when, based on Management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms.

F- 277
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)

The following table discloses the amounts of loans considered impaired in accordance with ASC 310 updated by ASU 2010 - 20, as of June 30, 20152016 and 2014:


2015:
 
 As of June 30, 2016
 Recorded Investment Unpaid Principal Balance Related Allowance
With no related allowance recorded:        
Commercial        
Impaired LoansPs.- Ps.- Ps.-
         
With an allowance recorded:        
Commercial        
Impaired LoansPs.21,635 Ps.18,389 Ps.19,621
TotalPs.21,635 Ps.18,389 Ps.19,621
F-343

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 As of June 30, 2015
 Recorded Investment Unpaid Principal Balance Related Allowance
With no related allowance recorded:        
Commercial        
Impaired LoansPs.- Ps.- Ps.-
         
With an allowance recorded:        
Commercial        
Impaired LoansPs.44,496 Ps.37,658 Ps.26,410
TotalPs.44,496 Ps.37,658 Ps.26,410


 As of June 30, 2014 
 Recorded Investment Unpaid Principal Balance Related Allowance 
With no related allowance recorded:         
Commercial         
Impaired Loans Ps.-  Ps.-  Ps.- 
             
With an allowance recorded:            
Commercial            
Impaired Loans Ps.24,323  Ps.21,441  Ps.11,296 
Total Ps.24,323  Ps.21,441  Ps.11,296 


The average recorded investment in impaired loans amounted Ps. 42,3491,983 and Ps. 23,971,42,349, as of June 30, 20152016 and 2014,2015, respectively. There is no amount of interest income recognized during the time within the period that the loans were impaired.

Non-accrual accounts receivables and Past due

Non-Accrual loans are defined as those loans in the categories of: (a) Consumer portfolio: “Medium Risk”, “High Risk” and “Uncollectible”, and (b) Commercial portfolio: “With problems”, “High Risk of Insolvency” and “Uncollectible”.

The following table represents the amounts of nonaccruals, as of June 30, 2016 and 2015, and 2014, respectively:

 

F- 278
F-344

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



As of June 30, As of June 30,
2015 2014 2016 2015
Consumer           
Advances Ps.187  Ps.566 Ps.342 Ps.187
Mortgage Loans  30,739   37,955  26,996  30,739
Personal Loans – BHSA  88,514   74,950  100,484  88,514
Personal Loans – Financial trusts  52,827   -  92,396  52,827
Personal Loans – Tarshop -  -
Credit Card Loans – BHSA  115,792   104,200  152,892  115,792
Credit card Loans – Tarshop  109,319   117,809  316,083  109,319
Total Consumer
 Ps.397,378  Ps.335,480 Ps.689,193 Ps.397,378
Commercial             
Performing Loans Ps.   Ps.- Ps.  Ps. 
Impaired Loans  44,496   24,323  21,635  44,496
Total Commercial
 Ps.44,496  Ps.24,323 Ps.21,635 Ps.44,496
             
Total Non accrual loans
 Ps.441,874  Ps.359,803 Ps.710,828 Ps.441,874

An aging analysis of past due account receivables, segregated by class of account receivables, as of June 30, 20152016 and 20142015 was as follows:

As of June 30, 2016
 As of June 30, 2015 30-9091-180181-360  
 30-90 Days  91-180 Days   181-360 Days  Greater  Total  Current  Total Days PastGreaterTotal PastCurrentTotal
 Past Due  Past Due  Past Due  than 360  Past Due     Financing Duethan 360Due Financing
Consumer                          
Advances  904   119   62   6   1,091   17,846   18,937 2661072181760812,70113,309
Mortgage Loans  24,196   6,707   4,350   19,682   54,935   2,662,466   2,717,401 25,8385,1634,40917,42452,8342,536,6702,589,504
Personal Loans – BHSA  74,437   40,349   47,916   249   162,951   2,449,316   2,612,267 111,17946,89053,051543211,6632,916,9703,128,633
Personal Loans – Financial trusts  94,144   31,334   21,030   463   146,971   727,455   874,426 8,6489,99433,45848,944101,044131,044232,088
Personal Loans – Tarshop3,787-3,78792,80496,591
Credit Card Loans – BHSA  58,835   53,133   62,318   341   174,627   7,349,464   7,524,091 111,06178,22674,57195263,9539,627,3529,891,305
Credit card Loans – Tarshop  112,302   49,500   53,187   6,632   221,621   1,297,727   1,519,348 139,332162,809148,6514,623455,4153,414,8233,870,238
Total Consumer Loans  364,818   181,142   188,863   27,373   762,196   14,504,274   15,266,470 400,111303,189314,35871,6461,089,30418,732,36419,821,668
                              
Commercial:                              
Performing Loans  1,568   -   -   -   1,568   6,852,329   6,853,897 1,763-1,7637,644,7597,646,522
Impaired loans  -   173   11,402   32,921   44,496   -   44,496 -63,67317,95621,635-21,635
Total Commercial Loans  1,568   173   11,402   32,921   46,064   6,852,329   6,898,393 1,76363,67317,95623,3987,644,7597,668,157
Total  366,386   181,315   200,265   60,294   808,260   21,356,603   22,164,863 401,874303,195318,03189,6021,112,70226,377,12327,489,825


 

F- 279
F-345

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



As of June 30, 2015
 As of June 30, 2014 30-9091-180181-360  
 30-90 Days  91-180 Days  181-360 Days  Greater  Total  Current  Total Days PastDays PastGreaterTotal PastCurrentTotal
 Past Due  Past Due  Past Due  than 360  Past Due     Financing DueDuethan 360Due Financing
Consumer                            
Advances  837   111   131   324   1,403   24,648   26,051 9041196261,09117,84618,937
Mortgage Loans  27,812   7,235   5,403   25,317   65,767   2,801,484   2,867,251 24,1966,7074,35019,68254,9352,662,4662,717,401
Personal Loans  78,819   36,785   37,735   430   153,769   1,937,243   2,091,012 
Personal Loans – BHSA
74,43740,34947,916249162,9512,449,3162,612,267
Personal Loans – Financial trusts94,14431,33421,030463146,971727,455874,426
Credit Card Loans – BHSA  71,613   54,950   49,225   25   175,813   5,009,921   5,185,734 58,83553,13362,318341174,6277,349,4647,524,091
Credit card Loans – Tarshop  156,447   57,833   55,617   4,359   274,256   1,148,441   1,422,697 112,30249,50053,1876,632221,6211,297,7271,519,348
Total Consumer Loans  335,528   156,914   148,111   30,455   671,008   10,921,737   11,592,745 364,818181,142188,86327,373762,19614,504,27415,266,470
                                
Commercial:                                
Performing Loans  164   -   -   -   164   6,182,102   6,182,266 1,568---1,5686,852,3296,853,897
Impaired loans  -   1,777   5,550   16,996   24,323   -   24,323 -17311,40232,92144,496-44,496
Total Commercial Loans  164   1,777   5,550   16,996   24,487   6,182,102   6,206,589 1,56817311,40232,92146,0646,852,3296,898,393
Total  335,692   158,691   153,661   47,451   695,495   17,103,839   17,799,334 366,386181,315200,26560,294808,26021,356,60322,164,863


Financial receivables that are past due 90 days or more do not accrue interests.

Credit Quality

The following tables contain the loan portfolio classification by credit quality indicator set forth by the Argentine Central Bank.

Commercial Portfolio:

Loan ClassificationDescription
Loan Classification 
1.  Normal SituationThe debtor is widely able to meet its financial obligations, demonstrating significant cash flows, a liquid financial situation, an adequate financial structure, a timely payment record, competent management, available information in a timely, accurate manner and satisfactory internal controls. The debtor is in a sector of activity that is operating properly and has good prospects.
Description
2.  With Special Follow-upCash flow analysis reflects that the debt may be repaid even though it is possible that the customer’s future payment ability may deteriorate without a proper follow-up.
1. Normal Situation 
The debtor is widely able to meet its financial obligations, demonstrating significant cash flows, a liquid financial situation, an adequate financial structure, a timely payment record, competent management, available information in a timely, accurate manner and satisfactory internal controls. The debtor is in a sector of activity that is operating properly and has good prospects.
2. With Special Follow-up 
Cash flow analysis reflects that the debt may be repaid even though it is possible that the customer’s future payment ability may deteriorate without a proper follow-up.
This category is divided into two subcategories:
(2.a). Under Observation;
(2.b). Under Negotiation or Refinancing Agreements.
3.  With ProblemsCash flow analysis evidences problems to repay the debt, and therefore, if these problems are not solved, there may be some losses.
3. With Problems 
4.  High Risk of InsolvencyCash flow analysis evidences that repayment of the full debt is highly unlikely.
Cash flow analysis evidences problems to repay the debt, and therefore, if these problems are not solved, there may be some losses.
5.  UncollectibleThe amounts in this category are deemed total
4. High Risk of Insolvency 
Cash flow analysis evidences that repayment of the full debt is highly unlikely.
5. Uncollectible 
The amounts in this category are deemed total losses. Even though these assets may be recovered under certain future circumstances, inability to make payments is evident at the date of the analysis. It includes loans to insolvent or bankrupt borrowers.

 

F- 280
F-346

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


losses. Even though these assets may be recovered under certain future circumstances, inability to make payments is evident at the date of the analysis. It includes loans to insolvent or bankrupt borrowers.

Credit quality indicators for the commercial portfolio are reviewed, at a minimum, on an annual basis.

Consumer Portfolio::

Loan ClassificationDescription
Loan Classification 
1.  Normal SituationLoans with timely repayment or arrears not exceeding 31 days, both of principal and interest.
Description
2.  Low RiskOccasional late payments, with a payment in arrears of more than 32 days and up to 90 days. A customer classified as “Medium Risk” having been refinanced may be recategorized within this category, as long as he amortizes one principal installment (whether monthly or bimonthly) or repays 5% of principal.
1. Normal Situation 
3.  Medium RiskSome inability to make payments, with arrears of more than 91 days and up to 180 days. A customer classified as “High Risk” having been refinanced may be recategorized within this category, as long as he amortizes two principal installments (whether monthly or bimonthly) or repays 5% of principal.
Loans with timely repayment or arrears not exceeding 31 days, both of principal and interest.
4.  High RiskJudicial proceedings demanding payment have been initiated or arrears of more than 180 days and up to one year. A customer classified as “Uncollectible” having been refinanced may be recategorized within this category, as long as he amortizes three principal installments (whether monthly or bimonthly) or repays 10% of principal.
2. Low Risk 
5.  UncollectibleLoans to insolvent or bankrupt borrowers, or subject to judicial proceedings, with little or no possibility of collection, or with arrears in excess of one year.
Occasional late payments, with a payment in arrears of more than 32 days and up to 90 days. A customer classified as “Medium Risk” having been refinanced may be recategorized within this category, as long as he amortizes one principal installment (whether monthly or bimonthly) or repays 5% of principal.

3. Medium Risk 
Some inability to make payments, with arrears of more than 91 days and up to 180 days. A customer classified as “High Risk” having been refinanced may be recategorized within this category, as long as he amortizes two principal installments (whether monthly or bimonthly) or repays 5% of principal.
4. High Risk 
Judicial proceedings demanding payment have been initiated or arrears of more than 180 days and up to one year. A customer classified as “Uncollectible” having been refinanced may be recategorized within this category, as long as he amortizes three principal installments (whether monthly or bimonthly) or repays 10% of principal.
5. Uncollectible 
Loans to insolvent or bankrupt borrowers, or subject to judicial proceedings, with little or no possibility of collection, or with arrears in excess of one year.
Credit quality indicators for the consumer portfolio are reviewed on a monthly basis.

The following table shows the account receivable balances categorized by credit quality indicators for the periods ended June 30, 20152016 and 2014:2015:

 

F- 281
F-347

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



  As of June 30, 2015 
  "1"  "2"  "3"  "4"  "5"    
  Normal Situation  With special follow-up or Low Risk  With problems or Medium Risk  High risk of insolvency or High risk  Uncollectible  Total 
Consumer                  
Advances  17,846   904   119   62   6   18,937 
Mortgage Loans  2,662,466   24,196   6,707   4,350   19,682   2,717,401 
Personal Loans – BHSA  2,449,316   74,437   40,349   47,916   249   2,612,267 
Personal Loans – Financial trusts  796,527   24,931   31,418   21,550   -   874,426 
Credit Card Loans – BHSA  7,349,464   58,835   53,133   62,318   341   7,524,091 
Credit card Loans – Tarshop  1,297,727   112,302   49,500   53,187   6,632   1,519,348 
Total Consumer Loans  14,573,346   295,605   181,226   189,383   26,910   15,266,470 
                         
Commercial:                        
Performing loans  6,852,329   1,568   -   -   -   6,853,897 
Impaired loans  -   -   173   11,402   32,921   44,496 
Total Commercial Loans  6,852,329   1,568   173   11,402   32,921   6,898,393 
Total Financing Receivables  21,425,675   297,173   181,399   200,785   59,831   22,164,863 
 
 As of June 30, 2014 As of June 30, 2016
 "1"  "2"  "3"  "4"  "5"     "1""2""3""4""5" 
 Normal Situation  With special follow-up or Low Risk  With problems or Medium Risk  High risk of insolvency or High risk  Uncollectible  Total Normal SituationWith special follow-up or Low RiskWith problems or Medium RiskHigh risk of insolvency or High riskUncollectibleTotal
Consumer                           
Advances  24,648   837   111   131   324   26,051 12,7012661072181713,309
Mortgage Loans  2,801,484   27,812   7,235   5,403   25,317   2,867,251 2,536,67025,8385,1634,40917,4242,589,504
Personal Loans  1,937,243   78,819   36,785   37,735   430   2,091,012 
Personal Loans – BHSA2,916,970111,17946,89053,0515433,128,633
Personal Loans – Financial trusts131,0448,6483,54288,854-232,088
Personal Loans – Tarshop92,8043,787-96,591
Credit Card Loans – BHSA  5,009,921   71,613   54,950   49,225   25   5,185,734 9,627,352111,06178,22674,571959,891,305
Credit card Loans – Tarshop  1,148,441   156,447   57,833   55,617   4,359   1,422,697 3,414,823139,332162,809148,6514,6233,870,238
Total Consumer Loans  10,921,737   335,528   156,914   148,111   30,455   11,592,745 18,732,364400,111296,737369,75422,70219,821,668
                           
Commercial:                           
Performing loans  6,182,102   164   -   -   -   6,182,266 7,644,7591,763-7,646,522
Impaired loans  -   -   1,777   5,550   16,996   24,323 63,67317,95621,635
Total Commercial Loans  6,182,102   164   1,777   5,550   16,996   6,206,589 7,644,7591,76363,67317,9567,668,157
Total Financing Receivables  17,103,839   335,692   158,691   153,661   47,451   17,799,334 26,377,123401,874296,743373,42740,65827,489,825
As of June 30, 2015
"1""2""3""4""5" 
Normal SituationWith special follow-up or Low RiskWith problems or Medium RiskHigh risk of insolvency or High riskUncollectibleTotal
Consumer   
Advances17,84690411962618,937
Mortgage Loans2,662,46624,1966,7074,35019,6822,717,401
Personal Loans – BHSA
2,449,31674,43740,34947,9162492,612,267
Personal Loans – Financial trusts796,52724,93131,41821,550-874,426
Credit Card Loans – BHSA7,349,46458,83553,13362,3183417,524,091
Credit card Loans – Tarshop1,297,727112,30249,50053,1876,6321,519,348
Total Consumer Loans14,573,346295,605181,226189,38326,91015,266,470
   
Commercial:   
Performing loans6,852,3291,568-6,853,897
Impaired loans17311,40232,92144,496
Total Commercial Loans6,852,3291,56817311,40232,9216,898,393
Total Financing Receivables21,425,675297,173181,399200,78559,83122,164,863


Troubled debt restructuring

According to BCRA regulations, a refinancing is considered to exist whenever any of the original contractually agreed conditions for a financing transaction (term, capital, interest or rate) are modified.

F- 282
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
We concluded that all our refinanced loans comply with the conditions for considering them as troubled debt restructuring (“TDR”) as defined under U.S. GAAP. In accordance with ASC 310-40 a restructured loan is considered a TDR if the debtor is experiencing financial difficulties and the


F-348

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


Bank grants a concession to the debtor that would not otherwise be considered. Concessions granted could include: reduction in interest rate to rates that are considered below market, extension of repayment schedules and maturity dates beyond original contractual terms.

The following table presents for the financing receivables modified as troubled debt restructurings within during the last two periods:

 As of June 30, 2016
 Number of contracts Post-modification Outstanding recorded investment
Consumer    
Advances35 Ps.950
Mortgage Loans109  2,826
Personal Loans5,260  141,884
Credit Card Loans – BHSA12,038  195,570
Credit card Loans – Tarshop17,275  167,361
Total Consumer34,717 Ps.508,591
     
Commercial    
Performing Loans- Ps.-
Impaired Loans-  -
Total Commercial- Ps.-
     
Total TDRs34,717 Ps.508,591
  
  
 As of June 30, 2015
 Number of contracts Post-modification Outstanding recorded investment
Consumer    
Advances63 Ps.1,463
Mortgage Loans174  4,490
Personal Loans6,921  160,312
Credit Card Loans – BHSA21,472  245,522
Credit card Loans – Tarshop15,512  92,758
Total Consumer44,142 Ps.504,545
     
Commercial    
Performing Loans- Ps.-
Impaired Loans-  -
Total Commercial- Ps.-
     
Total TDRs44,142 Ps.504,545

    
    
  As of June 30, 2014 
  Number of contracts Post-modification Outstanding recorded investment 
Consumer      
Advances  52  Ps.987 
Mortgage Loans  110   3,602 
Personal Loans  4,140   79,250 
Credit Card Loans – BHSA  1,209   14,749 
Credit card Loans – Tarshop  18,553   89,655 
 Total Consumer
  24,064  Ps.188,243 
         
Commercial        
Performing Loans  -  Ps.- 
Impaired Loans  -   - 
 Total Commercial
  -  Ps.- 
         
 Total TDRs
  24,064  Ps.188,243 

The following table presents for, the financing receivables modified as troubled debt restructurings within the previous 12 months and for which there was a payment default during that period. We consider a TDR that have subsequently defaulted if the borrower has failed to make payments of either principal, interest or both for a period of 90 days or more from contractual due date.

 

F- 283
F-349

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



 As of June 30, As of June 30,
 2015  2014 2016 2015
 Number of contracts Recorded investment  Number of contracts Recorded investment Number of contracts Recorded investment Number of contracts Recorded investment
Consumer                     
Advances  10  Ps.197   6  Ps.85 8 Ps.180 10 Ps.197
Mortgage Loans  25   783   22   490 100  2,203 25  783
Personal Loans  1,116   21,602   469   6,816 1,176  26,913 1,116  21,602
Credit Card Loans – BHSA  672   7,923   590   6,262 3,176  35,285 672  7,923
Credit card Loans – Tarshop  5,146   26,253   8,571   41,835 5,574  36,315 5,146  26,253
Total Consumer
  6,969  Ps.56,758   9,658  Ps.55,488 10,034 Ps.100,896 6,969 Ps.56,758
                         
Commercial                         
Performing Loans  -  Ps.-   -  Ps.- - Ps.- - Ps.-
Impaired Loans  -   -   -   - -  - -  -
Total Commercial
  -  Ps.-   -  Ps.- - Ps.- - Ps.-
                         
Total TDRs that subsequently defaulted  6,969  Ps.56,758   9,658  Ps.55,488 10,034 Ps.100,896 6,969 Ps.56,758
Allowance for Credit Losses

Accounts receivable balances are classified as uncollectible and written off from the Consolidated Balance Sheet when 365 days past due and subsequently recorded in memorandum accounts.

The activity in the allowance for accounts receivables losses under U.S. GAAP for the fiscal periods ended June 30, 20152016 and 20142015 was as follows:

   
Argentine Banking GAAP U.S. GAAP Adjustment Argentine Banking GAAP U.S. GAAP Adjustment
June 30, 2014 Ps.406,818  Ps.596,656  Ps.(189,838)
June 30, 2015 Ps.514,394 Ps.734,935 Ps.(220,541)
                    
Variances  107,576   138,279   (30,703) 178,658  208,823  (30,165)
                    
June 30, 2015 Ps.514,394  Ps.734,935  Ps.(220,541)
June 30, 2016 Ps.693,052 Ps.943,758 Ps.(250,706)

r.s. Comprehensive income

ASC 220 establishes standards for reporting and disclosure of comprehensive income and its components (revenues, expenses, gains and losses) in the financial statements. Comprehensive income is the total of net income and other charges or credits to equity that are not the result of transactions with owners.

The following disclosure presented for the twelve-month periods ended June 30, 2016, 2015 2014 and 2013,2014, shows all periods in Argentine Banking GAAP format reflecting U.S. GAAP income and comprehensive statement adjustments.

 

F- 284
F-350

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)



June 30, June 30,
2015 2014 2013 2016 2015 2014
Income Statement                 
                 
Financial income Ps.5,559,510  Ps.4,666,910  Ps.2,418,505 Ps.9,063,628 Ps.5,559,510 Ps.4,666,910
Financial expenses  (3,241,306)  (2,399,052)  (1,281,120) (5,612,760)  (3,241,306)  (2,399,052)
Net financial income Ps.2,318,204  Ps.2,267,858  Ps.1,137,385 Ps.3,450,868 Ps.2,318,204 Ps.2,267,858
Provision for loan losses  (405,973)  (333,025)  (258,629) (386,657)  (405,973)  (333,025)
Income from services  3,264,698   2,145,423   1,365,116  4,307,451  3,264,698  2,145,423
Expenses for services  (768,870)  (682,638)  (290,908) (1,089,690)  (768,870)  (682,638)
Administrative expenses  (3,411,162)  (2,380,651)  (1,621,522) (4,539,637)  (3,411,162)  (2,380,651)
Net income from financial transactions Ps.996,897  Ps.1,016,967  Ps.331,442 Ps.1,742,335 Ps.996,897 Ps.1,016,967
Miscellaneous income  317,530   188,928   193,422  546,543  317,530  188,928
Miscellaneous expenses  (466,554)  (286,596)  (168,735) (669,358)  (466,554)  (286,596)
Income before income taxes and Non-controlling interest Ps.847,873  Ps.919,299  Ps.356,129 
Income before income taxes and Non-controlling interest....………………Ps.1,619,520 Ps.847,873 Ps.919,299
Income taxes  (332,940)  (314,005)  (96,586) (604,359)  (332,940)  (314,005)
Net income under U.S. GAAP Ps.514,933  Ps.605,294  Ps.259,543 Ps.1,015,161 Ps.514,933 Ps.605,294
Less Net (Loss) attributable to the Non-controlling interest  4,369   10,284   (8,834)
Net income attributable Controlling interest in accordance with U.S. GAAP Ps.519,302  Ps.615,578  Ps.250,709 
Less Net (Loss) attributable to the Non-controlling interest…………... 18,311  4,369  10,284
Net income attributable Controlling interest in accordance with U.S. GAAP……………………………..…Ps1,033,472 Ps519,302 Ps615,578
                    
Other comprehensive income (loss):                    
                    
Unrealized gains (loss) on securities  15,591   22,283   (7,377) (30,031)  15,591  22,283
Other comprehensive income (loss) Ps.15,591  Ps.22,283  Ps.(7,377)
Comprehensive income Ps.534,893  Ps.637,861  Ps.243,332 
Other comprehensive income (loss)…………………………………
Ps(30,031)  Ps15,591  Ps22,283
Comprehensive income …..………..
Ps.1,003,441 Ps.534,893 Ps.637,861

s.t. Risks and Uncertainties

All transactions involving the purchase of foreign currency must be settled through the single free exchange market (Mercado Único Libre de Cambios, or “MULC”) where the Central Bank supervises the purchase and sale of foreign currency. Under Executive Branch Decree No. 260/2002, the Argentine government set up an exchange market through which all foreign currency exchange transactions are made. Such transactions are subject to the regulations and requirements imposed by the Central Bank. Under Communication “A” 3471, as amended, the Central Bank established certain restrictions and requirements applicable to foreign currency exchange transactions. If such restrictions and requirements are not met, criminal penalties shall be applied.

On October 28, 2011, the Federal Administration of Public Revenues (Administración Federal de Ingresos Públicos, “AFIP”) established an Exchange Transactions Inquiry Program (“Inquiry Program”) through which the entities authorized by the Central Bank to deal in foreign exchange must inquire and register through an IT system the total peso amount of each exchange transaction at the moment it is closed. All foreign exchange sale transactions, whether involving foreign currency or banknotes, irrespective of their purpose or allocation, are subject to this inquiry and registration system, which determines whether Transactions are “Validated” or “Inconsistent”.

Pursuant to Communication “A” 5239, afterward replaced by Communication “A” 5245, in the case of sales of foreign exchange (foreign currency or banknotes) for the formation of off-shore


F-351

BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2015, 2014 and 2013
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


assets by residents without the obligation of subsequently allocating it to specific purpose, entities authorized to deal in foreign exchange may only allow transactions through the MULC by those clients who have obtained the validation and who comply with the rest of the requirements set forth in the applicable foreign exchange regulations. Sales of foreign exchange other than for the formation of off-shore assets by residents without a specific purpose are also exempted from the Inquiry Program, although, the financial entities must verify that the other requirements established by the MULC are accomplished.

F- 285
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
According to Communication “A” 5264, as amended, in general terms the access to the foreign exchange market for resident in order to pay services, debts and profits to non-residents has no limits or restrictions. The access to the MULC requires the filing of certain documentation by residents evidencing the validity of transactions for which the funds are purchase for its remittance abroad. Communication “A” 5236, item 4.2. which regulated the outflow of fund allowing residents to access to the MULC for the formation of off-shore assets without a specific allocation by residents has been suspended and, up to now, the Central Bank has not issued any other measure or provisions in this regard.

On August 6, 2012, Resolution #3210 was replaced by Resolution #3356 enacted by AFIP. This resolution sets forth more restrictions for the access to the foreign exchange market, in particular for the outflow of funds made by residents. Both resolutions (3210 and 3356) are related with Communications “A” 5239 (currently abrogated) and 5245.

The Argentine government may, in the future, impose additional controls on the foreign exchange market and on capital flows from and into Argentina, in response to capital flight or depreciation of the Peso. These restrictions may have a negative effect on the economy and on our business if imposed in an economic environment where access to local capital is constrained.

t.u. U.S. GAAP estimates

Valuation reserves, impairment charges and estimates of market values on assets and step up bonds discounting, as established by the Bank for U.S. GAAP purposes are subject to significant assumptions of future cash flows and interest rates for discounting such cash flows. Losses on the exchange of government and provincial bonds were significantly affected by higher discount rates. Should the discount rates change in future years, the carrying amounts and charges to income and shareholders’ equity deficit will also change. In addition, as estimates of future cash flows change, so too will the carrying amounts which are dependent on such cash flows. It is possible that changes to the carrying amounts of loans, investments and other assets will be adjusted in the near term in amounts that are material to the Bank’s financial position and results of income.

u.v. Allowance for loan losses

Management believes that the current level of allowance for loan losses recorded for U.S. GAAP purposes are sufficient to cover incurred losses of the Bank’s loan portfolio as of June 30, 20152016 and 2014.2015. Many factors can affect the Bank’s estimates of allowance for loan losses, including expected cash flows, volatility of default probability, migrations and estimated loss severity. The process of determining the level of the allowance for credit losses requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions. If market conditions and economic uncertainties exist, it might result in higher credit losses and provision for credit losses in future periods.


F- 286
F-352

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


35. New authoritative pronouncements

During the twelve-months ended June 30, 2015,2016, the FASB has issued Accounting Standards Updates. Those updates applicable for the Bank are mentioned below:

ASU No. 2014-132015-03
In August 2014, theThe FASB issued dein April 2015 the Accounting Standards Update No. 2014-13 “Consolidation” (ASC 810)2015-03 “Interest—Imputation of Interest (Subtopic 835-30) — Simplifying the Presentation of Debt Issuance Costs”. After transition,The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of U.S. GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements.
The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in IFRS, which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit.
To simplify presentation of debt issuance costs, the amendments in this Update applyrequire that debt issuance costs related to a reporting entity that is required to consolidaterecognized debt liability be presented in the balance sheet as a collateralized financing entity underdirect deduction from the Variable Interest Entities Subsections of Subtopic 810-10 when (1) the reporting entity measures all of the financial assets and the financial liabilitiescarrying amount of that consolidated collateralized financing entity at fair value indebt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the consolidated financial statements based on other Topics and (2) the changes in the fair values of those financial assets and financial liabilities are reflected in earnings.

The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Update.
For entities other than public business entities, the amendments in this Update are effective for annual periods ending after December 15, 2016, and interim periodsfinancial statements issued for fiscal years beginning after December 15, 2016. Early adoption is permitted as of the beginning of an annual period.2015, and interim periods within those fiscal years.

The Bank considers this ASU has not any significant effect in the US GAAP disclosures and financial information.

ASU No. 2014-142015-15
TheIn August 2015, the FASB issued the Accounting Standards Update No. 2014-14 “Receivables – Troubled2015-15 “Presentation and Subsequent Measurement of Debt Restructuring by Creditors (ASC 310-40)” was issued by the FASB in August 2014. The amendments in this Update affect creditors that hold government-guaranteed mortgage loans and require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if some conditions are met. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor.

The objective of this Update is to reduce diversity in practice by addressing the classification of foreclosed mortgage loans that are fully or partially guaranteed under government programs. Currently, some creditors reclassify those loans to real estate asIssuance Costs Associated with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. periods, beginning after December 15, 2014.

In conclusion, the impact of adoption this ASU has not any significant effect in the present US GAAP financial information and disclosures. However, the Bank is in the process of evaluating the impact deriving from the current update for future periods.

ASU No. 2014-16
In November 2014, the FASB issued ASU No. 2014-16 “Derivatives and Hedging (Topic 815)”Line-of-Credit Arrangements”. The amendments in this Update applyprovide guidance on accounting for the costs on line-of-credit arrangements.
Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to all entities that are issuers of, or investors in, hybrid financial instruments that are issued inline-of-credit arrangements, the form of a share.

The amendments in this Update doSEC staff would not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is,object to an entity will continue to evaluate whetherdeferring and presenting debt issuance costs as an asset and subsequently amortizing the economic characteristics and risksdeferred debt issuance costs ratably over the term of the embedded derivative featureline-of-credit arrangement, regardless of whether there are clearly and closely related to those ofany outstanding borrowings on the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity shouldline-of-credit arrangement.
 
F-353

consider all relevant terms and features’ including the embedded derivative feature being evaluated for bifurcations in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument.

The impact of this ASU has not any significant effect in the USU.S. GAAP disclosures and financial information for the Bank. The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required.

ASU No. 2014-172015-16
TheIn September 2015, FASB issued in November 2014ASU 16 “Simplifying the Accounting Standard Update No. 2014-17 “Business Combinations (Topic 805)”. The objective of this Update is to provide guidance for determining whether and at what threshold an acquiree (acquired entity) that is a business or nonprofit activity can reflect the acquirer’s accounting and reporting basis (pushdown accounting) in its separate financial statements.Measurement-Period Adjustment”

This Update provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If an acquired entity elects the option to apply pushdown accounting in its separate financial statements, it should disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting.

Current GAAP offers limited guidance for determining whether and at what threshold pushdown accounting should be established in an acquired entity’s separate financial statements.
The Bank considers this ASU has not any significant effect in the US GAAP disclosures and financial information.

ASU No. 2014-18
During December 2014, the FASB issued the Accounting Standards Update No. 2014-18 “Business Combinations (Topic 805)”. The objective of the amendments in this Update is to address the concerns of private company stakeholders that the benefits of the current accounting for identifiable intangible assets acquired in a business combination do not justify the related costs. The amendments provide guidance about an accounting alternative for recognizing or otherwise considering the fair value of identifiable intangible assets acquired as a result of certain specified transactions, including business combinations.

The impact of this Update has not any significant effect in the present US GAAP financial statements.

36. Subsequent events

Negotiable obligations

The following table shows the amount, interest rate and maturity date of each series issued after June 30, 2015:

 

F- 287
F-354

 
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 2014 and 20132014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)


ASU 2016-01
In January 2016, the FASB issued the Accounting Standards Update No. 2016-01 “Recognition and Measurement of Financial Assetsand Financial Liabilities”. The amendments in this Update: i) Require equity investments (except those accounted for under the equity method of accounting or those thatresult in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; ii) simplify theimpairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identifyimpairment; iii) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used toestimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; andiv) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosurepurposes; among other changes.
For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginningafter December 15, 2017, and interim periods within those fiscal years.
The impact of this Update has not any significant effect in the present U.S. GAAP financial statements.
ASU 2016-02
Accounting Standard Update 2016-02 “Leases (Topic 842)” was issued in February 2016. The FASB is issuing this Update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the ASC and creating Topic 842, Leases. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.
For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
The impact of this Update has not any significant effect in the present U.S. GAAP financial statements.
36. BHN Inversión S.A.’s dividend distribution
On March 9, 2016 the Ordinary Shareholders' Meeting of BHN Sociedad de Inversión S.A. approved the payment of cash dividends and / or government securities for Ps 650,000 authorizing the Board to make the distribution in the form and opportunity in the year 2016 sees fit.
On March 30, 2016 BHN Sociedad de Inversión S.A. made a first payment of dividends in government securities for Ps 330,000.
37. BACS Banco de Crédito y Securitización S.A. - Representations before the Central Bank to perform the activities planned for a commercial bank of first grade
On October 20, 2015 the Extraordinary General Shareholders’ unanimously approved to:
Delegate in the Board of Directors the broadest powers to take all steps, events and presentations necessary for the purposes of processing the license to operate as a commercial bank of first grade to the Central Bank and also prepare, approve , manage and execute all documentation -whether public or private instrument- that is required by the institution for the purpose of the authorization, and
Authorize the Board of Directors to delegate the powers mentioned in the preceding point in one or more of its members or one or more of the managers of the company

F- 288
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
38. Supplementary services to the financial business
Pursuant to Communication “A” 5700, the Argentine Central Bank included changes in the rules on “Supplementary services to the financial business and permitted activities”, “Consolidated supervision” and “Minimum capitals of financial institutions”.
As concerns the scope of the supplementary services, it is allowed to hold interests in the stock capital of companies engaged in the development of two of the subject activities to the extent that, in the opinion of the SEFyC, both activities are economically related to each other and there are no legal inconsistencies that would prevent them from being developed jointly.
The subject activities include the issuance of credit, debit and similar cards. This notwithstanding, provided that 25% of the total financing amount as of the closing date of each month is not exceeded, loans not subject to the credit card law may be extended to financial services users, in which cases the provisions on “Interest rates applicable to lending transactions” shall be complied with.
On the other hand, changes are introduced in the calculation of the regulatory capital (responsabilidad patrimonial computable) to reflect the impact of these amendments.
As a result of such Communication, on March 16, 2015, Tarshop SA’s General Extraordinary Shareholders’ Meeting approved an amendment to its corporate purpose. According to such amendment, the company may grant and market consumer loans and consumer credits and financing for users of financial services pursuant to the Argentine Central Bank’s rules and regulations, handle the collection of utility bills, credits and similar items, render payroll and supplier payment and revenue collection services.
In such regard, on June 3, 2016, the Argentine Central Bank awarded the Company a Provisional Authorization Code in the Register of Other Non-Financial Credit Providers, and thus allowed it to start granting consumer loans, in line with the amendment to the corporate purpose recorded with the General Superintendency of Corporations on January 8, 2016 under number 437, book 77 of Corporations, and authorized by the Argentine Securities Commission under Resolution No. 17,930 dated December 21, 2015.
39. Subsequent events
Negotiable obligations
The following table shows the amount, interest rate and maturity date of each series issued after June 30, 2016:
F- 289
BANCO HIPOTECARIO SA AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the twelve-month periods ended June 30, 2016, 2015 and 2014
 (Expressed in thousands of Argentine pesos, except share data and as otherwise indicated)
 Issue dateMaturity dateAnnual interest rate
Banco Hipotecario S.A.   
Series XXXVIII (Ps. 145,200)08/18/1602/18/18Badlar+300bp
Series XXXXXXIX (Ps. 314,611)343,241)09/04/1508/18/1603/04/1708/18/19a/bMixed (c)
Series XXXI (US$. 14,730 thousand)09/04/1509/04/18a2.0%Badlar+349bp
 Series XL (Ps. 6,078,320) 10/12/16 01/12/20 Badlar + 250bp
BACS Banco de Crédito y Securitización S.A.  
Series VIIX (Ps. 141,666)249,500)07/23/1527/1604/24/1707/27/18a/bMixed (d)Badlar +345bp
    
Tarshop S.A.  
Class I (Ps. 204,033)09/07/1603/07/18Badlar +448bp
Class II (Ps. 67,360)09/07/1603/07/19Badlar +499bp
 
Series XXII (Ps. 126,667)v
07/30/1501/30/17a29.0%
    

(a)Fixed interest rate
(b)Variable interest rate
(c)Fixed rate of 28.25% on the first nine months and variable interest rate of Badlar+450bps from that moment on.
(d)Fixed rate of 27.5% on the first nine months and variable interest rate of Badlar+450bps from that moment on.

Tarshop’s irrevocable capital contribution

On September 11, 2015, the Board of Directors of Banco Hipotecario S.A. approved an irrevocable capital contribution to Tarshop S.A. in the amount of Ps. 52,500 to be made by shareholders Banco Hipotecario S.A. and IRSA Propiedades Comerciales S.A. pro rata of their shareholdings.


 


F- 290
F-355

 

NEW LIPSTICK LLC AND SUBSIDIARY
(A Limited Liability Company)
 




Table of Contents
 Page
  
Consolidated Financial Statements: 
  
Independent Auditors ReportF-357F-292
  
Consolidated Balance SheetSheets
As of June 30, 2015 and 2014
 
F-358F-293
  
Consolidated Statements of Operations
For the Years Ended June 30, 2015, 2014, and 2013
 
F-359
F-294
  
Consolidated Statements of Changes in Members’ Deficit
   For the Years Ended June 30, 2015, 2014, and 2013
F-295
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2015, 2014, and 2013
 
F-360
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2015, 2014, and 2013
F-361F-296
  
Consolidated Notes to Financial Statements
June 30, 2015, 2014, and 2013
 
F-362F-297
  
 


F-356

F- 291
 

INDEPENDENT AUDITORS REPORT
 

New Lipstick LLC and Subsidiary

We have audited the accompanying consolidated financial statements of New Lipstick LLC and Subsidiary, which comprise the balance sheets as of June 30, 2015 and 2014 the related statements of operations, changes in members’ deficit and cash flows for the years ended June 30, 2015, 2014 and 2013, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New Lipstick LLC and Subsidiary, as of June 30, 2015 and 2014, and the results of its operations and its cash flows for the years ended June 30, 2015, 2014, and 2013, in accordance with accounting principles generally accepted in the United States of America.
 
 
By:
/s/Marks Paneth LLP
New York, NY
November 13, 2015
 October 31, 2016
 


F- 292
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
    
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30,
(Amounts in US dollars)
 
    
ASSETS
    
    
 2015 2014
    
Real estate, net$ 140,469,010  $ 142,358,747
Cash and cash equivalents1,075,395 851,726
Tenant receivables, net of allowance for doubtful accounts of   
$132,141 and $7,264 respectively344,104 422,944
Prepaid expenses and other assets5,809,307 5,476,492
Due from related party125,029 120,274
Restricted cash3,477,967 6,155,597
Deferred rent receivable8,856,399 6,938,578
Lease intangibles, net26,533,839 30,012,973
Goodwill5,422,615 5,422,615
    
          Total$ 192,113,665  $ 197,759,946
    
    
LIABILITIES AND MEMBERS' DEFICIT
    
Liabilities:   
     Note payable$ 113,201,357  $ 113,201,357
     Accrued interest payable316,216 313,950
     Accounts payable and accrued expenses3,031,831 1,584,699
     Due to related parties319,133 553,616
     Deferred revenue918,800 619,885
     Tenants’ security deposits682,727 657,978
     Deferred ground rent payable136,727,666 108,312,912
     Lease intangibles, net42,365,499 45,279,291
    
          Total liabilities297,563,229 270,523,688
    
Members' deficit(105,449,564) (72,763,742)
    
          Total$ 192,113,665  $ 197,759,946
    
 
 
 
See Notes to Consolidated Financial Statements
   
 
F-357

F- 293
 
 
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
 
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30,
(Amounts in US dollars)
 
 
ASSETS
  2015  2014 
       
Real estate, net $140,469,010  $142,358,747 
Cash and cash equivalents  1,075,395   851,726 
Tenant receivables, net of allowance for doubtful accounts of        
$132,141 and $7,264 respectively  344,104   422,944 
Prepaid expenses and other assets  5,809,307   5,476,492 
Due from related party  125,029   120,274 
Restricted cash  3,477,967   6,155,597 
Deferred rent receivable  8,856,399   6,938,578 
Lease intangibles, net  26,533,839   30,012,973 
Goodwill  5,422,615   5,422,615 
         
          Total $192,113,665  $197,759,946 
         
         
 NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
     
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
(Amounts in US dollars)
 
      
      
 2015 2014 2013
Revenues     
     Base rents $ 40,597,526  $ 38,375,303  $ 38,146,887
     Tenant reimbursements and escalations6,903,479 5,427,358 5,354,160
     Other rental revenue40,779 45,292 73,833
     Other revenue1,622 - -
     Interest income                           -                            - 625
      
          Total47,543,406 43,847,953 43,575,505
      
Expenses     
     Real estate taxes10,716,257               9,919,196               9,442,029
     Utilities2,927,214               2,598,340               2,511,198
     Janitorial2,056,750               2,157,449               2,054,086
     Insurance318,027                 315,545                 296,897
     Repairs and maintenance2,262,799               1,445,342               1,332,208
     Bad debt expense124,877                          -                 433,551
     Security1,047,372                 912,362                 846,602
     General and administrative835,373 829,010 875,597
     Management fees988,189                 948,084                 877,898
     Elevator311,875 286,013 174,475
     HVAC62,442 107,515 48,947
     Tenant reimbursable costs154,557                 122,139                 159,564
     Ground rent45,457,736             45,457,735             45,457,737
     Interest expense4,786,205               4,789,913               4,843,275
     Amortization3,005,570               3,087,330               2,947,812
     Depreciation5,599,278               4,886,008               4,428,733
      
          Total80,654,521 77,861,981 76,730,609
      
Net loss $ (33,111,115)  $ (34,014,028)  $ (33,155,104)
      
 
LIABILITIES AND MEMBERS' DEFICIT
Liabilities:      
     Note payable $113,201,357  $113,201,357 
     Accrued interest payable  316,216   313,950 
     Accounts payable and accrued expenses  3,031,831   1,584,699 
     Due to related parties  319,133   553,616 
     Deferred revenue  918,800   619,885 
     Tenants’ security deposits  682,727   657,978 
     Deferred ground rent payable  136,727,666   108,312,912 
     Lease intangibles, net  42,365,499   45,279,291 
         
          Total liabilities  297,563,229   270,523,688 
         
Members' deficit  (105,449,564)  (72,763,742)
         
          Total $192,113,665  $197,759,946 
         
 
See Notes to Consolidated Financial Statements
 

 
F-358

F- 294
 

 
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
(Amounts in US dollars)
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
    
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' DEFICIT
FOR THE YEARS ENDED JUNE 30,
(Amounts in US dollars)
 
      
 2015 2014 2013
      
Balance, beginning of years $ (72,763,742)  $ (43,679,661)  $ (20,096,088)
      
Contributions from members425,293 4,952,500 9,571,531
      
Distribution to member- (22,553)                            -
      
Net loss(33,111,115) (34,014,028) (33,155,104)
      
Balance, end of years $ (105,449,564)  $ (72,763,742)  $ (43,679,661)
      
      
 
          
  2015  2014  2013 
Revenues         
     Base rents $40,597,526  $38,375,303  $38,146,887 
     Tenant reimbursements and escalations  6,903,479   5,427,358   5,354,160 
     Other rental revenue  40,779   45,292   73,833 
     Other revenue  1,622   -   - 
     Interest income  -   -   625 
             
          Total  47,543,406   43,847,953   43,575,505 
             
Expenses            
     Real estate taxes  10,716,257   9,919,196   9,442,029 
     Utilities  2,927,214   2,598,340   2,511,198 
     Janitorial  2,056,750   2,157,449   2,054,086 
     Insurance  318,027   315,545   296,897 
     Repairs and maintenance  2,262,799   1,445,342   1,332,208 
     Bad debt expense  124,877   -   433,551 
     Security  1,047,372   912,362   846,602 
     General and administrative  835,373   829,010   875,597 
     Management fees  988,189   948,084   877,898 
     Elevator  311,875   286,013   174,475 
     HVAC  62,442   107,515   48,947 
     Tenant reimbursable costs  154,557   122,139   159,564 
     Ground rent  45,457,736   45,457,735   45,457,737 
     Interest expense  4,786,205   4,789,913   4,843,275 
     Amortization  3,005,570   3,087,330   2,947,812 
     Depreciation  5,599,278   4,886,008   4,428,733 
             
          Total  80,654,521   77,861,981   76,730,609 
             
Net loss $(33,111,115) $(34,014,028) $(33,155,104)
F- 295
 
See Notes to Consolidated Financial Statements

F-359



NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' DEFICIT
FOR THE YEARS ENDED JUNE 30,
(Amounts in US dollars)
  2015  2014  2013 
          
Balance, beginning of years $(72,763,742) $(43,679,661) $(20,096,088)
             
Contributions from members  425,293   4,952,500   9,571,531 
             
Distribution to member  -   (22,553)  - 
             
Net loss  (33,111,115)  (34,014,028)  (33,155,104)
             
Balance, end of years $(105,449,564) $(72,763,742) $(43,679,661)
             
             

See Notes to Consolidated Financial Statements
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30,
(Amounts in US dollars)
 
       
  2015 2014 2013
       
Operating activities      
     Net loss  $ (33,111,115)  $ (34,014,028)  $ (33,155,104)
     Adjustments to reconcile net loss to net cash      
       used in operating activities:      
          Amortization 3,005,570 3,087,330 2,947,812
          Depreciation 5,599,278 4,886,008 4,428,733
          Bad debt (recovery) expense 124,877 (3,827) 433,551
          Deferred rent (1,917,821) (1,929,668) (1,972,066)
          Below market lease amortization (2,475,983) (2,821,032) (3,287,160)
          Above market lease amortization 1,442,682 1,544,576 1,548,129
          Above market ground lease amortization (437,809) (437,809) (437,808)
          Deferred ground rent 28,414,754 28,822,593 29,220,501
          Changes in operating assets and liabilities:      
               Restricted cash 2,702,379 525,764 (2,616,256)
               Due from related party (4,755)                            - 4,000
               Tenant receivables (46,037) (86,094) (78,989)
               Prepaid expenses and other assets (332,815) (340,620) (233,930)
               Accrued interest payable 2,273 (3,019) (3,332)
               Accounts payable and accrued expenses 349,380 33,811 (569,720)
               Due to related parties (234,483) 208,304 34,445
               Deferred leasing costs (994,677) (1,526,938) (795,940)
               Unearned revenue 298,915 310,488 51,876
                    Net cash (used in) provided by operating activities 2,384,613 (1,744,161) (4,481,258)
       
Investing activities      
     Additions to real estate (2,586,237) (3,700,979) (4,934,785)
               Net cash used in investing activities (2,586,237) (3,700,979) (4,934,785)
       
Financing activities      
     Note principal payments - (1,912) (110,817)
     Contributions from members 425,293 4,952,500 9,571,531
               Net cash provided by financing activities 425,293 4,950,588 9,460,714
       
Net (decrease) increase in cash and cash equivalents 223,669 (494,552) 44,671
       
Cash and cash equivalents, beginning of years 851,726 1,346,278 1,301,607
       
Cash and cash equivalents, end of years  $ 1,075,395  $ 851,726  $ 1,346,278
       
Supplemental disclosure of cash flow information:      
Interest paid  $ 4,783,939  $ 4,792,932  $ 4,846,607
       
Schedule of Noncash Investing Activities      
Real estate additions were financed through accounts payable  $ 1,691,693  $ 568,390  $ 507,133
       
Deferred leasing costs additions were financed through accounts payable $ 90,308 $ 115,867  $ -
       
Schedule of Noncash Financing Activities      
Lobby exhibit acquired in the year ended June 30, 2013, included in real      
estate, and transferred to a 49% member of the Company as a distribution.  $ -  $ 22,553  $ -
 
See Notes to Consolidated Financial Statements
      
 
 
F-360

F- 296
 
 
NEW LIPSTICK LLC AND SUBSIDIARY
(A LIMITED LIABILITY COMPANY)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,
(Amounts in US dollars)
  2015  2014  2013 
          
Operating activities         
     Net loss $(33,111,115) $(34,014,028) $(33,155,104)
     Adjustments to reconcile net loss to net cash            
       used in operating activities:            
          Amortization  3,005,570   3,087,330   2,947,812 
          Depreciation  5,599,278   4,886,008   4,428,733 
          Bad debt (recovery) expense  124,877   (3,827)  433,551 
          Deferred rent  (1,917,821)  (1,929,668)  (1,972,066)
          Below market lease amortization  (2,475,983)  (2,821,032)  (3,287,160)
          Above market lease amortization  1,442,682   1,544,576   1,548,129 
          Above market ground lease amortization  (437,809)  (437,809)  (437,808)
          Deferred ground rent  28,414,754   28,822,593   29,220,501 
          Changes in operating assets and liabilities:            
               Restricted cash  2,702,379   525,764   (2,616,256)
               Due from related party  (4,755)  -   4,000 
               Tenant receivables  (46,037)  (86,094)  (78,989)
               Prepaid expenses and other assets  (332,815)  (340,620)  (233,930)
               Accrued interest payable  2,273   (3,019)  (3,332)
               Accounts payable and accrued expenses  349,380   33,811   (569,720)
               Due to related parties  (234,483)  208,304   34,445 
               Deferred leasing costs  (994,677)  (1,526,938)  (795,940)
               Unearned revenue  298,915   310,488   51,876 
                    Net cash (used in) provided by operating activities  2,384,613   (1,744,161)  (4,481,258)
             
Investing activities            
     Additions to real estate  (2,586,237)  (3,700,979)  (4,934,785)
               Net cash used in investing activities  (2,586,237)  (3,700,979)  (4,934,785)
             
Financing activities            
     Note principal payments  -   (1,912)  (110,817)
     Contributions from members  425,293   4,952,500   9,571,531 
               Net cash provided by financing activities  425,293   4,950,588   9,460,714 
             
Net (decrease) increase in cash and cash equivalents  223,669   (494,552)  44,671 
             
Cash and cash equivalents, beginning of years  851,726   1,346,278   1,301,607 
             
Cash and cash equivalents, end of years $1,075,395  $851,726  $1,346,278 
             
Supplemental disclosure of cash flow information:            
Interest paid $4,783,939  $4,792,932  $4,846,607 
             
Schedule of Noncash Investing Activities            
Real estate additions were financed through accounts payable $1,691,693  $568,390  $507,133 
             
Deferred leasing costs additions were financed through accounts payable $90,308  $115,867  $- 
             
Schedule of Noncash Financing Activities            
Lobby exhibit acquired in the year ended June 30, 2013, included in real            
estate, and transferred to a 49% member of the Company as a distribution. $-  $22,553  $- 
See Notes to Consolidated Financial Statements

F-361


New Lipstick LLC and Subsidiary
(A Limited Liability Company)
Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


NOTE 1:                       
BUSINESS
 
Formation and Property Description
New Lipstick LLC (the "Company"), was organized as a Delaware limited liability company and commenced operations on November 3, 2010. The Company was formed among IRSA International, LLC ("IRSA"), Marciano Investment Group, LLC ("Marciano"), Avi Chicouri ("AVI"), Par Holdings, LLC ("PAR"), and Armenonville S.A. ("Armenonville"), collectively (the "Members"). On December 15, 2010, Armenonville assigned 100 percent of itsmembershipits membership interest to Lomas Urbanas S.A. IRSA is a wholly-owned subsidiary of TYRUS S.A. ("TYRUS"), a wholly-owned subsidiary of IRSA Inversiones y Representaciones Sociedad Anonima, a company whose shares are listed on the Buenos Aires and New York Stock Exchanges. The Company was formed in order to acquire 100% interest in Metropolitan 885 Third Avenue Leasehold LLC ("Metropolitan"), its wholly-owned subsidiary, and to provide management services to Metropolitan.
 
Metropolitan was organized for the purpose of acquiring and operating a 34 story Class A office tower commonly known as the Lipstick Building located at 885 Third Avenue in New York (the "Property"). Metropolitan leased the land which contains approximately 26,135 square feet. The Property was acquired on July 9, 2007 and contains approximately 635,800 square feet of rentable space, consisting of retail and office spaces.
 
On November 16, 2010 (the "Petition Date"), Metropolitan filed a voluntary pre-packaged plan of reorganization under Chapter 11 of Title 11 of the United States Bankruptcy Code (the "Chapter 11") in the Southern District of New York (the "Bankruptcy Court") including a disclosure statement and plan of reorganization (the "Plan"). The Plan provided for, among other things, the extinguishment of 100% of the shares of Metropolitan and the issuance of the membership interest to the Company. The Plan was approved by Metropolitan's members and the Bankruptcy Court approved the Plan on December 22, 2010 with an effective date of December 30, 2010 (the "Effective Date").
 
Metropolitan accounted for the reorganization using "fresh start accounting" effective December 30, 2010. Accordingly, the forgiveness of debt was reflected in the predecessor entity's final statement of operations and all assets and liabilities were restated to reflect their reorganization value.
 
The Company operates under the guidelines of an Operating Agreement (the "Agreement") entered into by the Members on November 15, 2010. The manager of the Company is Lipstick Management, LLC (“LM”), a company affiliated to IRSA.
 
The Agreement calls for Class A and Class B Members. Class A Members are IRSA, Marciano, and Armenonville and Class B Members are AVI and PAR.
 
Class B Membership interests of any Class B Member shall be automatically converted, in whole and not in part, into an equal number of Class A Membership interests on the earlier to occur of the date on which LM certifies that all unreturned additional Class A capital contributions and all unreturned Class A capital contributions have been reduced to zero.




 
F-362

F- 297
 



New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 1:                       
BUSINESS (CONTINUED)

 
Formation and Property Description (continued)
Any Class A Member, as defined in the Agreement, may transfer, directly or indirectly, any or all of its percentage interest as a Member in the Company to an unaffiliated third party, but the offering Member must first offer the Right of First Offer ("ROFO") to each of the Class A Members by written notice specifying the cash price and the other terms and conditions of the offer. Upon receipt of the ROFO notice, each of the offeree members has the right, exercisable in ten (10) days, to accept or decline the offer.
 
The Company shall continue perpetually until dissolution, liquidation or termination.
 
The liability of the members of the Company is limited to the members´ total contribution, plus any amounts guaranteed by the members.
 
The Company has adopted a fiscal year end of June 30.
 
The terms of the Agreement provide for initial capital contributions and percentage interests as follows:

 
Percentage of
Ownership
  
Initial Capital
Contributions
 
Percentage of
Ownership
 Initial Capital Contributions
IRSA International, LLC  49.00  $15,417,925 49.00 $15,417,925
Marciano Investment Group, LLC  42.00   13,215,365 42.00 13,215,365
Lomas Urbanas S.A.  2.27   714,259 2.27 714,259
Avi Chicouri  3.07   - 3.07 -
Par Holdings, LLC  3.66   - 3.66 -
Total  100.00  $29,347,549 100.00 $29,347,549
 
In accordance with the Agreement, the Members may be required to make additional capital contributions which are reasonably related to the operations and/or leasing of the Property and its activities. The Members contributed $ 425,293, $4,952,500, and $9,571,531 for the years ended June 30, 2015, 2014, and 2013, respectively.
 
Distributions
Distribution of capital will be made to the Member at the times, and in aggregate amounts determined by the Board of Directors of the Company. Distributions amounted to $22,553 for the year ended June 30, 2014. There were no distributions for the years ended June 30, 2015 and 2013.
 
Allocation of Profit and Losses
The Company´s profits and losses are allocated to the Members.


 
F-363

F- 298
 

New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 2:                       
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Principles of Consolidation
The accompanying consolidated financial statements of the Company include the accounts of New Lipstick LLC and its wholly-owned subsidiary Metropolitan.
 
All significant intercompany accounts and transactions have been eliminated.
 
Basis of Accounting
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
 
Use of Estimates
Management is required to use estimates and assumptions in preparing financial statements in conformity with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accordingly, actual results could differ from those estimates.
 
Real Estate
Real estate consists of building, building improvements and tenant improvements and is stated at cost. Building and improvements are depreciated over 39 years. Tenant improvements are depreciated over the shorter of the estimated useful life of the asset or the terms of the respective leases.
 
Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized to building improvements and depreciated over their estimated useful lives.
 
The Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is determined by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the assets. If the carrying value of the assets exceeds such cash flows, the assets are considered impaired. The impairment charge to be recognized is measured by the amount by which the carrying amount of the assets exceeds their estimated fair value. No impairment was recorded for the years ended June 30, 2015 and 2014.
 
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less upon acquisition to be cash equivalents.
 
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalent accounts in financial institutions. The Company maintains its cash balances at two financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Company (FDIC) insurance limit. According to the FDIC insurance limit, deposits held in noninterest-bearing transaction accounts are aggregated with any interest-bearing deposits the Company may hold in the same ownership category, and the combined total insured is up to at least $250,000. As of June 30, 2015 and 2014, these balances at one of the institutions, including tenant security and escrow amounts, were in excess of federally insurable limits by approximately $3,985,000 and $6,521,000, respectively.

 
F-364

F- 299
 
 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 2:                       
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
Restricted Cash
Restricted cash represents amounts held in escrow, as required by the lender, to be used for real estate taxes, insurance and other qualified expenditures, as well as tenant security deposits.
 
Tenant Receivables
The Company carries its tenant receivables at the amount due pursuant to lease agreements but uncollected at period end, less an allowance for doubtful accounts. The Company evaluates its receivables and establishes an allowance for doubtful accounts, based on a history of past write-offs, collections and current conditions.
 
Revenue Recognition
The Company recognizes base rent on a straight-line basis over the terms of the respective leases. Deferred rent receivable represents the amount by which straight-line rental revenue exceeded rents currently billed in accordance with the lease agreements.
 
Capitalized below market lease values are amortized as an increase to base rents (see Note 4).
 
Capitalized above market lease values are amortized as a decrease to base rents (see Note 4).
 
The Company also receives reimbursements from tenants for certain costs as provided for in the lease agreements. These costs include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs in excess of a base year amount. The reimbursements are recognized when the tenants are billed.
 
Deferred income represents rent collected in advance of being due.
 
Deferred Ground Rents
Ground rent expense is accounted for on a straight-line basis over the non-cancelable terms of the ground leases. All future minimum increases in the non-cancelable ground rents consist of either 2.5% or 3% annual increases through May 1, 2068. This has resulted in deferred ground rent payable in the amount of $136,727,666 and $108,312,912 as of June 30, 2015 and 2014, respectively (see Note 6).
 
Lease Intangibles
Leasing costs and commissions incurred in connection with leasing activities are capitalized and amortized on a straight-line basis over the lives of the respective leases. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease.
 
Above and below market leases and above market ground lease values were recorded on the Property's reorganization date based on the present value (using an interest rate which reflected the risk associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and ground lease, and (ii) management's estimate of fair market lease rates for the corresponding in-place leases and ground lease, measured over a period equal to the remaining non-cancelable term of the leases.
 

 
F-365

F- 300
 

New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 2:                       
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
Lease Intangibles (continued)
Above market lease values are capitalized as an asset and amortized as a decrease to rental income over the remaining terms of the respective leases. The above market ground lease value is capitalized as a liability and amortized to ground rent expense over the remaining term of the ground lease. Below market lease values are capitalized as a liability and amortized as an increase to rental income over the remaining terms of the respective leases.
 
The aggregate value of in-place leases were measured based on the difference between (i) the Property valued with existing in-place leases adjusted to market rental rates, and (ii) the Property valued as if vacant, based upon management's estimates. Factors considered by management in their analysis included an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management included real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily were a year. Management also estimated costs to execute similar leases including leasing commissions, legal and other related expenses.
 
The value of in-place leases are amortized to expense over the initial term of the respective leases. As of June 30, 2015, the remaining terms were ranging from three months to ten years.
 
Income Taxes
No provision for income taxes is necessary in the accompanying consolidated financial statements because the Company is a disregarded entity for federal and state income tax purposes. Income or loss of the Company is includible in the separate income tax returns of the Members. Prior to the effective date of reorganization on December 30, 2010, the Company was treated as a partnership for federal and state income tax purposes. The Company performed a review for uncertainty in income tax positions in accordance with authoritative guidance. As of June 30, 2015, the Company does not believe it has any uncertain tax positions that would qualify for either recognition or disclosure in the consolidated financial statements. The Company is no longer subject to federal or state and local income tax examinations by tax authorities for tax years ending before December 31, 2011. Management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax laws and new authoritative rulings.
 
The Company´s income tax returns for its tax years commencing January 1, 2009, through December 30, 2010, have been selected by the New York State Department of Taxation and Finance for audit. Such audit is in its preliminary stage. At this time, the Company has not been advised of any proposed changes to its New York State income tax returns filed for the tax years January 1, 2009 through December 30, 2010.


 
F-366

F- 301
 

New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 2:                       
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Goodwill
 
Goodwill
Goodwill represents the excess of the cost of the December 30, 2010 acquisition of Metropolitan over the net of the amounts assigned to assets acquired, including identifiable intangible assets, and liabilities assumed. In accordance with GAAP goodwill is not amortized but is subject to annual impairment tests. Annual impairment tests are performed by either comparing a “reporting units” (in the Company’s case, the Company as a whole) estimated fair value to its carrying amount or by doing a qualitative assessment of a reporting units fair value from the last quantitative assessment to determine if there is a potential impairment.
 
A qualitative assessment may be done when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets. Management has selected the end of the Company’s fiscal year as the date on which to either perform its annual impairment tests for goodwill or make the determination as to whether qualitative factors render it unnecessary. As of June 30, 2015 and 2014, the date of the impairment tests, no impairment of goodwill was identified.
 
Reclassifications
Certain prior year balances have been reclassified to conform to the current year consolidated financial statement presentation.
 
Certain prior year balances have been reclassified to conform to the current year consolidated financial statement presentation.
Subsequent Events
The Company has evaluated for potential recognition and disclosure, events subsequent to the date of the balance sheet through October 26, 2015, the date the consolidated financial statements were available to be issued.


    NOTE 3: REAL ESTATE
 
 
NOTE 3:                       
REAL ESTATE
At June 30, real estate consists of the following:


 2015  2014 20152014
Building and improvements $144,892,369  $144,879,174 $144,892,369$144,879,174
Tenant improvements  16,334,789   12,638,444 16,334,78912,638,444
  161,227,158   157,517,618 161,227,158157,517,618
Less: accumulated depreciation  (20,758,148)  (15,158,871)(20,758,148)(15,158,871)
Total $140,469,010  $142,358,747 $140,469,010$142,358,747

Depreciation expense amounted to $5,599,278 and $4,886,008, and $4,428,733 for the years ended June 30, 2015, 2014, and 2013, respectively.




.

 
F-367

F- 302
 


New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


    NOTE 4: LEASE INTANGIBLES
 
NOTE 4:                        
LEASE INTANGIBLES
Lease intangibles and the value of assumed lease obligations at June 30, 2015, were as follows:
 
 
Leases
In-place
  
Leasing
Costs
  
Above
Market
Leases
  Total  
Below
Market
Leases
  
Above Market
Ground Leases
  Total 
 
 
Leases
In-place
 
Leasing Costs
Above
Market
Leases
Total
 
Below
Market
Leases
 
Above Market Ground Leases
Total
Cost $27,149,892  $4,111,694  $15,316,749  $46,578,335  $30,470,806  $29,041,332  $59,512,138 $27,149,892$4,111,694$15,316,749$46,578,335$30,470,806$29,041,332$59,512,138
Less: accumulated
Amortization
  (12,088,790)  (1,083,075)  (6,872,631)  (20,044,496)  (15,176,499)  (1,970,140)  (17,146,639)     (12,088,790)     (1,083,075)    (6,872,631) (20,044,496)    (15,176,499)      (1,970,140)(17,146,639)
Totals $15,061,102  $3,028,619  $8,444,118  $26,533,839  $15,294,307  $27,071,192  $42,365,499  $15,061,102$3,028,619$8,444,118$26,533,839$ 15,294,307$27,071,192$42,365,499
 
 
Lease intangibles and the value of assumed lease obligations at June 30, 2014 were as follows:

 
 
Leases
In-place
  
Leasing
Costs
  
Above
Market
Leases
  Total  
Below
Market
Leases
  
Above Market
Ground Leases
  Total 
 
 
Leases
In-place
 
Leasing Costs
Above
Market
Leases
Total
 
Below
Market
Leases
 
Above Market Ground Leases
Total
Cost $27,149,892  $3,142,576  $15,316,749  $45,609,217  $30,470,806  $29,041,332  $59,512,138 $27,149,892$         3,142,576$15,316,749$45,609,217$30,470,806$29,041,332$59,512,138
Less: accumulated
Amortization
  (9,520,879)  (645,416)  (5,429,949)  (15,596,244)  (12,700,516)  (1,532,331)  (14,232,847)     (9,520,879)     (645,416)    (5,429,949) (15,596,244)    (12,700,516)      (1,532,331)(14,232,847)
Totals $17,629,013  $2,497,160  $9,886,800  $30,012,973  $17,770,290  $27,509,001  $45,279,291  $17,629,013$2,497,160$9,886,800$30,012,973$17,770,290$27,509,001$45,279,291
 
The aggregate amortization of leases in-place and leasing costs included in amortization expense for the years ended June 30, 2015, 2014, and 2013 were $3,005,570, $3,087,330, and $2,947,812, respectively.
 
The aggregate amortization of above market ground leases included as a reduction of ground rent expense for the years ended June 30, 2015, 2014, and 2013 were $437,809, $437,809, and $437,808, respectively.
 
The aggregate amortization of above market leases included as a reduction of base rental income for the years ended June 30, 2015, 2014, and 2013 were $1,442,682, $1,544,576, and $1,548,129, respectively.
 
The aggregate amortization of below market leases included in base rental income for the years ended June 30, 2015, 2014, and 2013 were $2,475,983, $2,821,032, and $3,287,160, respectively.
 
The estimated amortization of lease intangibles for each of the five years subsequent to June 30, 2015 and thereafter is as follows:


 
F-368

F- 303
 
 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 4:                        
LEASE INTANGIBLES (CONTINUED)

  
Leases
In-place
  
Leasing
Costs
  
Above Market Leases
  
 
Total
  
Below Market Leases
  
Above Market Ground Leases
  
 
Total
 
                      
2016 $2,541,147  $448,938  $1,407,364  $4,397,449  $2,463,176  $437,809  $2,900,985 
2017  2,540,843   380,183   1,407,364   4,328,390   2,459,981   437,809   2,897,790 
2018  2,483,557   278,611   1,407,364   4,169,532   2,387,551   437,809   2,825,360 
2019  2,464,461   260,308   1,407,364   4,132,133   2,363,408   437,809   2,801,217 
2020  2,462,742   213,759   1,407,364   4,083,865   2,356,387   437,809   2,794,196 
Thereafter  2,568,352   1,446,820   1,407,298   5,422,470   3,263,804   24,882,147   28,145,951 
Totals $15,061,102  $3,028,619  $8,444,118  $26,533,839  $15,294,307  $27,071,192  $42,365,499 


 NOTE 5: NOTE PAYABLE
 
 
Leases
In-place
 
Leasing
Costs
Above Market Leases
 
 
Total
Below Market LeasesAbove Market Ground Leases
 
 
Total
        
2016  $ 2,541,147$448,938$ 1,407,364$ 4,397,449$ 2,463,176$437,809$2,900,985
20172,540,843380,183      1,407,3644,328,390    2,459,981437,8092,897,790
20182,483,557278,611      1,407,3644,169,532    2,387,551437,8092,825,360
20192,464,461260,308      1,407,3644,132,133    2,363,408437,8092,801,217
2020      2,462,742213,759      1,407,3644,083,865    2,356,387437,8092,794,196
Thereafter      2,568,3521,446,820      1,407,298    5,422,470    3,263,80424,882,14728,145,951
Totals$ 15,061,102$3,028,619$ 8,444,118$26,533,839$ 15,294,307$27,071,192$42,365,499
 
 
NOTE 5:                        
NOTE PAYABLE
On December 30, 2010, Metropolitan’s existing note agreements with Royal Bank of Canada (the “Lender”) were amended and restated. The outstanding balance of the Amended Note was $115,000,000. The Amended Note bears interest at (i) the London InterBank Offered Rate ("LIBOR") plus 400 basis points, or (ii) Prime Rate plus Prime Rate Margin, if converted into a Prime Rate Loan. The Amended Note provides for a maximum interest rate of 5.25% through February 29, 2012 and 6.25% from March 1, 2012 through August 31, 2015 and matures on August 1, 2017. The interest rate was 4.18% at June 30, 2015. Interest expense amounted to $4,786,205, $4,789,913, and $4,843,275 for the years ended June 30, 2015, 2014, and 2013, respectively.
 
Pursuant to a cash management agreement with the Lender, all rents collected are required to be deposited in a clearing account and all funds are disbursed in accordance with the Loan agreement, including the funding of all reserve accounts. In addition, after payment of debt service, operating expenses and other expenses, as defined, forty percent (40%) of all the remaining cash flow in the cash management account is applied to the outstanding principal balance of the loan on a monthly basis. As of June 30, 2015 and 2014, the outstanding principal balance of the Amended Note is $113,201,357 and $113,201,357, respectively.
 
The Amended Note is collateralized by the Property including all related facilities, amenities, fixtures and personal property owned by the borrower.
 
The Company pledged a first priority security interest in the Company’s membership interest in Metropolitan to the Lender as collateral security for the Amended Note.

NOTE 6: GROUND LEASES
 
The Property was erected on a 26,135 square foot parcel of land (the "Site Area") of which 20,635 square feet is subject to a ground lease (the "Ground Lease") and an adjacent lot containing approximately 5,500 square feet ("Lot A") subject to a ground sub-sublease (the "Ground Sub-sublease").

 
F-369

F- 304
 
 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 6:                       
GROUND LEASE (CONTINUED)
 
The Ground Lease matures on the earlier of (i) April 30, 2077, (ii) the date of termination of the Ground Sub-sublease term or (iii) a date if sooner terminated. The Ground Lease provides for monthly ground rent of approximately $925,000 through April 30, 2012, $1,321,000 through April 30, 2013, and provides for annual increases of 2.5% beginning on May 1, 2013 through April 30, 2020.
 
On May 1, 2020, May 1, 2038 and every ten years thereafter through May 1, 2068, (“Adjustment Years”) ground rent shall be adjusted to be the greater of (a) 1.03 times the base rent payable during the lease year immediately preceding the said Adjustment Year or (b) 7% of the fair market value of the land.
 
Monthly ground rent shall increase 3% annually for each lease year subsequent to the Adjustment Year. The Ground Sub-sublease is subject to a ground sublease and a prime lease. The ground sublease expires on April 29, 2080 (the "Ground Sublease"), and the prime lease matures on April 30, 2080 (the "Prime Lease"). The Ground Sub-sublease matures on the earlier of (i) April 30, 2077, (ii) the expiration or earlier termination of the Prime Lease or (iii) the expiration or earlier termination date of the Ground Sublease, except for reason of default by the sublandlord as subtenant under the Ground Sublease or the sublandlord as subtenant under the Prime Lease provided that the lessees are not in default under the Ground Sub-sublease or the Ground Sublease.
 
The Ground Sub-sublease provides for monthly ground rent of $58,000 through April 30, 2010, and approximately $63,000 beginning on May 1, 2010 through April 30, 2020. On May 1, 2020, May 1, 2040 and May 1, 2060, ground rent shall be adjusted to 8% of the fair market value of Lot A, as defined.
 
For the year ended June 30, 2015, Ground Lease and Ground Sub-sublease expense amounted to $45,136,545 and $759,000, respectively, after giving effect to straight-line rent adjustments of $28,414,754 and $0, respectively. For the year ended June 30, 2014, Ground Lease and Ground Sub-sublease expense amounted to $45,136,544 and $759,000, respectively, after giving effect to straight-line rent adjustments of $28,822,593 and $0, respectively. For the year ended June 30, 2013, Ground Lease and Ground Sub-sublease expenses amounted to $45,136,545 and $759,000, respectively, after giving effect to straight-line rent adjustments of $29,220,501 and $0, respectively.
 
The Ground Lease also provides the Company with an option to purchase the land (the "Purchase Option"). The Purchase Option is exercisable on April 30, 2020, April 30, 2037 and on the last day of every tenth year thereafter (the "Purchase Date"). The Purchase Price, as defined in the Ground Lease, shall be the amount which together with all ground rent paid by the Company on or before the applicable Purchase Date yields an internal rate of return ("IRR") that equals the Target IRR in respect to the applicable Purchase Date as follows:
 
 
F-370

F- 305
 


New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 6:                       
GROUND LEASE (CONTINUED)


Purchase DateTarget IRR
  
April 30, 20207.47%7.47%
April 30, 20377.67%7.67%
April 30, 20477.92%7.92%
April 30, 20578.17%8.17%
April 30, 20678.42%8.42%
April 30, 20778.67%8.67%

 
In the event the Purchase Option is exercised on April 30, 2020, the Company shall pay a purchase price of approximately $521 million which is based upon an agreed land value of $317 million in July 2007, according to a Target IRR of 7.47%. The Ground Lease also provides for an option to demolish the Property ("Demolition Option") during the period beginning on May 1, 2055, and ending on April 30, 2072 (the "Demolition Period"). The Ground Lease lessor has the option to cause the Company to purchase the Property ("Put Option") at a then Put Price, as defined. The Put Option is exercisable during the period subsequent to the Demolition Option and prior to April 30, 2072.
 
Future minimum annual ground rents due before giving effect to the fair market value adjustments which are not determinable at the present time are as follows for the five years subsequent to June 30, 2015, and thereafter:

 Ground Lease  Ground Sub-Sublease  Total Ground Lease Ground Sub-Sublease Total
              
2016 $17,139,836  $759,000  $17,898,836 $ 17,139,836 $ 759,000 $ 17,898,836
2017  17,568,332   759,000   18,327,332 17,568,332 759,000 18,327,332
2018  18,007,540   759,000   18,766,540 18,007,540 759,000 18,766,540
2019  18,457,729   759,000   19,216,729 18,457,729 759,000 19,216,729
2020  18,934,872   632,500   19,567,372 18,934,872 632,500 19,567,372
Thereafter  2,837,562,375   -   2,837,562,375 2,837,562,375                  - 2,837,562,375
Total $2,927,670,684  $3,668,500  $2,931,339,184 $ 2,927,670,684 $ 3,668,500 $ 2,931,339,184
 

 
F-371

F- 306
 

 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


    NOTE 7: TENANT LEASES
 
NOTE 7:                       
TENANT LEASES
The Company leases space in the Property to tenants under long-term noncancelable operating leases.
 
Future minimum annual base rents due from noncancelable operating leases in each of the five years subsequent to June 30, 2015 and thereafter are as follows:

2016 $39,207,929 $  39,207,929
2017  40,626,201 40,626,201
2018  38,220,542 38,220,542
2019  37,075,235 37,075,235
2020  36,531,739 36,531,739
Thereafter  59,314,354 59,314,354
Total $250,976,000 $  250,976,000
 
 
For the year ended June 30, 2015, 2014, and 2013, approximately 71%, 75%, and 77%, respectively, of the Company's base rent before amortization of above and below market bases was from one law firm tenant. For the year ended June 30, 2015, the approximate rental revenue from the one law firm tenant amounted to $27,675,000 of which $0 amounts remain outstanding. For the year ended June 30, 2014, the approximate rental revenue from the one law firm tenant amounted to $27,200,000 of which $0 amounts remain outstanding. For the year ended June 30, 2013, the approximate rental revenue from the one law firm tenant amounted to $26,900,000 of which $0 amounts remained outstanding. Law firms accounted for approximately 79%, 83%, and 82% of the Property’s total base rent for the years ended June 30, 2015, 2014, and 2013, respectively.
 
At June 30, 2015, 2014, and 2013, the Property was approximately 92%, 89%, and 86% leased, respectively.


 
NOTE 8:                       
RELATED PARTY TRANSACTIONS
 
On April 20, 2011, Lipstick Management LLC (“LM”), an affiliate of the Company, entered into an agreement with the Company’s lender which provides that the Company would be directly responsible for certain fees that are payable to Herald Square Properties LLC (“HSP”). HSP is a 49% owner in LM. LM and the Company are affiliated by common ownership. These fees are based on a consulting agreement between LM and HSP which provides a monthly fee of $12,000. As of January 1, 2013, the Company renewed the contract with HSP which provides a monthly fee of $22,000. As of January 1, 2014, the parties agreed to extend the agreement for one year. The parties have the right to terminate this agreement at any time upon thirty (30) days written notice served to the other party. The total management consulting fee for the year ended June 30, 2015, 2014, and 2013, included in management fees in the accompanying statement of operations, amounted to $264,000, $264,000, and $204,000, respectively.



 
F-372

F- 307
 
 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)


 
NOTE 8:                       
RELATED PARTY TRANSACTIONS (CONTINUED)
 
On May 3, 2011, the Company entered into an asset management agreement with LM. The Company is charged an asset management fee of 1% of its consolidated gross revenues. Asset management fees incurred to LM amounted to $449,189 for the year ended June 30, 2015, $409,084 for the year ended June 30, 2014, and $398,898 for the year ended June 30, 2013, of which $38,280, $272,763, and $63,826 were unpaid at June 30, 2015, 2014, and 2013, respectively, and is included in due to related party in the accompanying balance sheet. Asset management fees are included in management fees in the accompanying statement of operations.
 
Effective August 1, 2011, LM leased office space from the Company. The term of the agreement is for five years expiring July 31, 2016. The total amount of rental income earned for the years ended June 30, 2015, 2014, and 2013 amounted to $203,916 for all three years.
 
Balances with related companies are as follows:

 2015  2014 2015 2014
Due from related party:         
Lipstick Management LLC $123,959  $120,274 $123,959 $120,274
Rigby 183 LLC  405    405  
I Madison LLC  310    310  
IRSA International LLC  355    355  
 $125,029  $120,274 $ 125,029 $120,274
 
The above amount represents expenses paid by the Company on behalf of related companies, which will be reimbursed by related companies.

 2015  2014 2015 2014
Due to related party:         
IRSA International, LLC $(39,979) $(39,979)$ (39,979) $ (39,979)
Lipstick Management LLC  (38,280)  (272,763)(38,280) (272,763)
IRSA Inversiones y Representaciones           
Sociedad Anonima  (240,874)  (240,874)(240,874) (240,874)
 $(319,133) $(553,616)$ (319,133) $ (553,616)
 

 
F-373

F- 308
 
New Lipstick LLC and Subsidiary
(A Limited Liability Company)

Notes to Consolidated Financial Statements
June 30, 2015, 2014 and 2013
(Amounts in US dollars)

 
NOTE 9: PROPERTY MANAGEMENT
 
On December 30, 2010, a property management agreement was entered into with a third party. The term of the property management agreement will continue on a month-to-month basis. The Company is charged a monthly property management fee of approximately $22,917. The total property management fee for the years ended June 30, 2015, 2014, and 2013, included in management fees in the accompanying statement of operations, amounted to $275,000 of which $0 is unpaid as of June 30, 2014 and 2013, and $22,917 was unpaid as of June 30, 2015.


 
F-374

F- 309