CLISA — Capital/Financing Update 2005

May 16, 2005

Offering Memorandum Confidential

US$100,000,000

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

11 5/8% Guaranteed Senior Notes due 2004

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. ("CLISA" or the "Issuer")is offering (the "Offering") US$100,000,000 aggregate principal amount of 11 5/8% Guaranteed Senior Notes due June 1, 2004 (the "Senior Notes"). Interest on the Senior Notes is payable semi‑annually on June 1 and December 1 of each year, commencing December 1,1997 at the rate of 11 5/8 % per annum. The Senior Notes will mature on June 1, 2004. If an Initial Public Offering (as defined herein) occurs on or prior to June 1, 2000, up to 25% of the originally issued principal amount of Senior Notes may be redeemed at the option of the Issuer at a redemption price of 1115/8% of the principal amount thereof plus accrued interest to the redemption date; provided that not less than 75% of the originally issued principal amount of Senior Notes remain outstanding immediately after giving effect to such redemption. See "Description of the Senior Notes--Optional Redemption of Senior Notes upon Initial Public Offering."

Upon a Change of Control (as defined herein) of CLISA or the Parent (as defined herein), each holder of the Senior Notes may require the Issuer to repurchase such Senior Notes at 101 % of the principal amount thereof, plus accrued interest to the date of the purchase. In addition, subject to certain limitations, the Issuer may be required to make offers to purchase Senior Notes at a redemption price of 100% of the principal amount thereof, plus accrued interest to the date of the purchase, with the net cash proceeds of certain sales or other dispositions of assets. The Senior Notes may also be redeemed, at the option of the Issuer, in whole but not in part, at 100% of the principal amount thereof, plus accrued interest to the date of the purchase in the event of certain changes in Argentine tax laws. See "Description of the Senior Notes--Change of Control," "--Certain Covenants" and "-- Taxation; Redemption for Taxation Reasons."

The Senior Notes will be senior obligations of the Issuer and will rank pari passu in right of payment with all present and future senior obligations of the Issuer. On the Issue Date (as defined herein), the Senior Notes will be unconditionally guaranteed, jointly and severally, on a senior basis (the "Guarantees") by the Issuer's Wholly‑Owned Restricted Subsidiaries (as defined herein), Benito Roggio E Hijos S.A. ("BRH") and Caminos Australes S.A. ("Caminos" and, collectively with BRH, the "Guarantors"). CLISA is a holding company; accordingly, the Senior Notes will be effectively subordinated to all existing and future indebtedness and other liabilities of the Issuer's Subsidiaries (other than the Guarantors). As of March 31, 1997 and after giving pro forma effect to the issuance of the Senior Notes and the application of the net proceeds therefrom, CLISA, on a consolidated basis, would have had outstanding approximately US$ 120.6 million of total consolidated indebtedness, of which US$19.1 million would have been secured indebtedness or would have been indebtedness of subsidiaries of the Issuer (other than the Guarantors), effectively ranking senior in right of payment to the Senior Notes.

Application has been made to have the Senior Notes accepted for trading in the Private Offerings,Resales and Trading Through Automated Linkages ("PORTAL") Market of The Nasdaq Stock Market, Inc. Additionally, application has been made to list the Senior Notes on the Bolsa de Comercio de Buenos Aires (the "Buenos Aires Stock Exchange").

See "Risk Factors" beginning on page 11 for certain considerations relevant to an investment in the Senior Notes.

THE SENIOR NOTES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED

(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR

SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S

UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A

TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF, THE SECURITIES ACT AND

APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THE SENIOR NOTES OFFERED HEREBY ARE BEING

OFFERED AND SOLD ONLY TO (A) "QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A

UNDER THE SECURITIES ACT), (B) A LIMITED NUMBER OF INSTITUTIONAL "ACCREDITED INVESTORS"

(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) AND (C) PERSONS

(OTHER THAN U.S. PERSONS) OUTSIDE THE UNITED STATES PURSUANT TO REGULATION S

UNDER THE SECURITIES ACT. SEE "PLAN OF DISTRIBUTION" AND "NOTICE TO INVESTORS."

The Senior Notes are offered by the Initial Purchaser subject to prior sale, when, as and if delivered to and accepted by the Initial Purchaser, and subject to various prior conditions, including the right to reject orders in whole or in part. It is expected that delivery of the Senior Notes will be made in book‑entry form through the facilities of The Depository Trust Company in accordance with same‑day funds settlement applicable to debt securities, except in the case of Senior Notes held by institutional "accredited investors," for which settlement is expected to be made in the form of physical certificates representing the Senior Notes, on or about May 29, 1997 against payment therefor in immediately available funds. See "Notice to Investors."

Citicorp Securities, Inc.

Galicia Capital Markets S.A.

The date of this Confidential Offering Memorandum is May 22, 1997.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION CONCERNING THE ISSUER OR THE SENIOR NOTES NOT CONTAINED IN THIS OFFERING MEMORANDUM AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR THE OFFERING, SALE OR DELIVERY OF ANY SENIOR NOTE SHALL CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS OR PROSPECTS OF THE COMPANY SINCE THE DATE HEREOF.

THIS OFFERING MEMORANDUM IS HIGHLY CONFIDENTIAL AND HAS BEEN PREPARED BY THE ISSUER SOLELY FOR USE IN CONNECTION WITH THE PROPOSED PRIVATE OFFERING OF THE SENIOR NOTES. THIS OFFERING MEMORANDUM IS PERSONAL TO EACH OFFEREE AND DOES NOT CONSTITUTE AN OFFER TO ANY OTHER PERSON OR TO THE PUBLIC GENERALLY TO SUBSCRIBE FOR OR OTHERWISE ACQUIRE SENIOR NOTES. DISTRIBUTION OF THIS OFFERING MEMORANDUM TO ANY PERSON OTHER THAN THE OFFEREE AND THOSE PERSONS, IF ANY, RETAINED TO ADVISE SUCH OFFEREE WITH RESPECT THERETO IS UNAUTHORIZED, AND ANY DISCLOSURE OF ANY OF ITS CONTENTS, WITHOUT PRIOR WRITTEN CONSENT OF THE ISSUER, IS PROHIBITED. EACH PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM, AGREES TO THE FOREGOING EFFECT AND AGREES NOT TO MAKE ANY PHOTOCOPIES OF THIS OFFERING MEMORANDUM.

THE DISTRIBUTION OF THIS OFFERING MEMORANDUM AND THE OFFER, SALE AND DELIVERY OF THE SENIOR NOTES IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS OFFERING MEMORANDUM COMES ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY SUCH RESTRICTIONS. SEE "PLAN OF DISTRIBUTION" AND "NOTICE TO INVESTORS" FOR A DESCRIPTION OF CERTAIN RESTRICTIONS ON OFFERS, SALES AND DELIVERIES OF THE SENIOR NOTES AND ON DISTRIBUTION OF THIS OFFERING MEMORANDUM AND OTHER OFFERING MATERIALS. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE SENIOR NOTES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.

The Senior Notes may be offered to the public in Argentina. The Senior Notes constitute Negotiable Obligations under Law No. 23,576, as amended (Ley de Obligaciones Negociables) (the "Negotiable Obligations Law"), and other applicable regulations thereunder.

THE PUBLIC OFFERING OF THE SENIOR NOTES IN ARGENTINA WAS AUTHORIZED BY RESOLUTION NO. 11,735 DATED MAY 15, 1997 OF THE COMISIÓN NACIONAL DE VALORES (THE "CNV"). SUCH AUTHORIZATION ONLY MEANS THAT ALL REQUIREMENTS OF THE CNV RELATED TO INFORMATION HAVE BEEN MET. THE CNV HAS NOT PASSED ANY JUDGMENT REGARDING DATA INCLUDED IN THIS OFFERING MEMORANDUM; INCLUDING, WITHOUT LIMITATION, THE UNAUDITED CONSOLIDATED COMBINED FINANCIAL STATEMENTS AND THE AUDITED COMBINED FINANCIAL STATEMENTS. THE VERACITY OF ALL ACCOUNTING, FINANCIAL AND ECONOMIC INFORMATION, INCLUDING, WITHOUT LIMITATION, THE UNAUDITED CONSOLIDATED COMBINED FINANCIAL STATEMENTS AND THE AUDITED COMBINED FINANCIAL STATEMENTS, AS WELL AS ALL OTHER INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM, IS THE EXCLUSIVE RESPONSIBILITY OF THE BOARD OF DIRECTORS, THE SUPERVISORY COMMITTEE OF THE ISSUER AND, IN THE APPLICABLE PARTS, THE AUDITORS WHO SIGNED THE FINANCIAL STATEMENTS INCLUDED IN THIS OFFERING MEMORANDUM. THE BOARD OF DIRECTORS HAS STATED UNDER OATH THAT THIS OFFERING MEMORANDUM CONTAINS, AS OF THE DATE OF ITS PUBLICATION, ACCURATE AND SUFFICIENT INFORMATION CONCERNING ALL MATERIAL FACTS WHICH MAY AFFECT THE ECONOMIC AND FINANCIAL CONDITION AND THE NET WORTH OF THE ISSUER AND ALL OTHER INFORMATION THAT MUST BE FURNISHED TO INVESTORS IN RELATION TO THIS ISSUANCE IN ACCORDANCE WITH APPLICABLE ARGENTINE LAWS.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SENIOR NOTES. SPECIFICALLY, THE INITIAL PURCHASER MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR, AND PURCHASE, THE SECURITIES IN THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

NOTICE TO NEW HAMPSHIRE RESIDENTS:

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421‑B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421‑B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

FORWARD‑LOOKING STATEMENTS

This Offering Memorandum contains forward‑looking statements. Those statements appear in a number of places in this Offering Memorandum, including, but not limited to, under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Such statements include statements regarding the belief or current expectations of the Issuer concerning the Issuer's future financial condition and results of operations, including the Issuer's expected operating and non‑operating results, ability to meet debt service obligations and financing plans. Prospective investors are cautioned that any such forward‑looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in such forward‑looking statements as a result of various factors. The accompanying information contained in this Offering Memorandum, including, without limitation, the information set forth under the heading "Risk Factors," identifies certain of the factors that could cause such differences.

SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES

The Issuer and each of the Guarantors is a sociedad anónima organized under the laws of Argentina. All of the Company's directors and officers and certain of the experts named herein reside outside the United States (principally in Argentina). All or a substantial portion of the assets of the Company and of these persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Company or such persons or to enforce against the Company or such persons, in United States courts, judgments obtained in such courts predicated solely upon civil liability provisions of the laws of jurisdictions other than Argentina, including any judgments predicated upon the civil liability provisions of the federal securities laws of the United States. The Company has been advised by its Argentine counsel, Carri Pérez, Ferla, Muzi & Asociados, that there is doubt as to the enforceability, in original actions in Argentine courts, of liabilities predicated solely upon the federal securities laws of the United States, and that the enforceability in Argentine courts of judgments of United States courts predicated upon the civil liability provisions of the federal securities laws of the United States will be subject to compliance with procedural requirements under Argentine law, including the condition that such judgments do not violate Argentine public policy. The Indenture under which the Senior Notes are to be issued (the "Indenture") provides that the Company will appoint CT Corporation System as agent for service of process in any suit, action or proceeding with respect to the Indenture or the Senior Notes and for actions brought under federal or state securities laws brought in any federal or state court located in The City of New York, and that the Company will submit to the jurisdiction of such courts in connection with such suits, actions or proceedings.

CLISA was organized as a sociedad anónima under the laws of Argentina on October 21, 1996 and was registered with the Public Registry of Commerce of the City of Buenos Aires on November 15, 1996 under Number 11,458, Book 120, Volume A, of Estatutos de Sociedades Anónimas (Bylaws of Corporations), with a term expiring November 14, 2095. The official financial records of the Company, including the accounting records, are located at the legal domicile of the Company. Its principal executive offices and legal domicile are located at Leandro N. Alem 1050, 9th Floor, 1001 Buenos Aires, Argentina. Its telephone number is (54‑1) 317‑7300.

OFFERING MEMORANDUM SUMMARY

The following summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information and the Consolidated/Combined Financial Statements appearing elsewhere in this Offering Memorandum. References herein to "CLISA" are to CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. as the issuer of the Senior Notes ("CLISA" or the "Issuer") solely and do not include its subsidiaries or any of their respective operations, joint ventures or investments. CLISA was formed on October 21, 1996 in the Restructuring (as defined herein) as a holding company and its shares are currently held as follows: Roggio S.A. ("Roggio"), 97.6%, and Inversar S.A. ("Inversar") and various members of the families controlling Roggio and Inversar, 2.4%. Upon consummation of the Offering, CLISA will own 97.1% of the capital stock of Benito Roggio E Hijos S.A.("BRH") and 99.4% of the capital stock of Caminos Australes S.A. ("Caminos"). Each of BRH, Caminos and each other Person who becomes a guarantor of the Senior Notes under the terms of the Indenture is referred to as a "Guarantor" and, together, the "Guarantors". As used in this Offering Memorandum, the term the "Company" refers, collectively, to the Issuer, the Guarantors, their subsidiaries and their respective operations and investments and all uniones transitorias de empresas ("UTEs") and other joint ventures (together with the Company's UTEs, the "Joint Ventures") in which the Company participates. Unless otherwise expressly noted, the financial and operating information and discussion set forth in this Offering Memorandum are derived from CLISA's Consolidated/Combined Financial Statements, which have been prepared as if the Restructuring had occurred on June 30, 1993. See Note 1 to the Consolidated/Combined Financial Statements. Unless otherwise specified, references herein to "U.S. dollars," "dollars" or "US$" are to United States dollars and references to "Pesos" or "P$" are to Argentine Pesos. Certain amounts which appear in this Offering Memorandum (including percentage amounts) may not sum due to rounding.

Overview

The Company has been a principal participant in Argentina's infrastructure privatization program and is currently one of the leading Argentine infrastructure development and management companies. The Company is comprised of four major operating segments: mass transportation management, waste management, construction and toll road management. For the twelve months ended March 31, 1997, the Company generated revenues of P$417.5 million and EBITDA of P$58.6 million. See footnote 1 to the Summary Consolidated and Combined Historical Financial Information for a definition of "EBITDA."

Mass Transportation Management. CLISA conducts its mass transportation management business through its 55.3%‑owned subsidiary, Metrovías S.A. ("Metrovías"), which has a concession through 2013 to operate and manage a commuter railroad, which carries approximately 25 million paying passengers per year, and the entire Buenos Aires subway system, which carries approximately 200 million paying passengers per year. The Buenos Aires subway system is a 37‑kilometer network of five separate lines which travels within downtown Buenos Aires and between the downtown area and outlying commuter railway stations which serve densely populated areas.

Waste Management. The Company operates and manages the largest private waste management operation in Argentina in terms of number of inhabitants served, providing solid waste collection, street, park and beach cleaning services and other sanitation and cleaning services. The Company provides solid waste collection and street cleaning services to 12 municipalities in Argentina representing 4.1 million inhabitants and four municipalities in Uruguay and Mexico representing over 1.2 million inhabitants. The Company also provides landfill management services to the City of Buenos Aires ("Buenos Aires") and the City of Córdoba ("Córdoba") and industrial and hospital waste management services to private companies and municipalities.

Construction. CLISA is the second largest provider of construction services in Argentina, serving three major sectors: civil, industrial and building construction. The Company's numerous completed construction projects include the IBM Building in Buenos Aires, the Sheraton Hotel in Buenos Aires, the International Airport in Santiago, Chile, and the Piedras Moras Water Dam and the Chateau Carrera Córdoba Soccer Stadium in the Province of Córdoba.

Toll Road Management. The Company has ownership interests in nine corporations that have been granted concessions to operate toll roads on over 2,500 kilometers of highways located throughout Argentina averaging 185,000 toll transactions per day. The Company is the operating manager of four of the toll road concessions and CLISA's construction segment has acted as a contractor in the construction works for all but two of the toll road concessions. See "Business--Toll Road Management--Recent Developments."

The Company

Mass Transportation Management

The Company, through its 55.3%‑owned subsidiary, Metrovías, provides subway and commuter rail transportation services to the residents of Buenos Aires and the surrounding suburbs. Metrovías was granted a 20‑year concession in 1993 to manage and operate the Buenos Aires subway system (the "BAS") and Ferrocarril Urquiza (the "Urquiza Line"), a commuter rail line. The BAS is comprised of five underground lines totaling 37 kilometers of track, four of which have radial layouts originating from the center of Buenos Aires and one of which is a cross‑route line which links the four other lines, and one seven‑kilometer surface light rail line. The BAS has 76 stations and more than 400 subway cars and carries 200 million paying passengers per year. For the twelve months ended March 31, 1997, revenue for the mass transportation management segment was approximately P$165.8 million. On October 15, 1996, Metrovías entered into a contract to pay a management fee of 4.474% of fare revenues to BRH.

Before the Company took control of the BAS, ridership on the BAS had declined over 47.6%, from 275.5 million paying passengers in 1970 to 144.3 million in 1991, due to decreased service quality resulting from inadequate capital investment and maintenance. As a result, in 1991, the Argentine Federal Government offered concession rights in the BAS to the private sector to facilitate system upgrades and improve operating efficiency. Under the terms of the 20‑year concession, Metrovías was granted an operating subsidy of US$65.5 million over five years and the right to collect fares, payments for retail and advertising space and fees for use of Metrovías' rights‑of‑way. The concession contract includes a government‑funded Investment Plan (as defined below) of US$436.0 million, of which US$399.0 million is for capital expenditure projects on the BAS and US$37.0 million is for capital expenditure projects on the Urquiza Line. To the extent that the actual cost of capital improvements is more or less than the Investment Plan's US$436.0 million budget (as adjusted for inflation), the difference is received or paid by Metrovías. Metrovías can raise subway fares if it meets certain service improvement goals established in the concession. Since Metrovías assumed operations of the BAS and Urquiza in 1994, the number of paying passengers has increased 15.5% to 223.9 million, the number of subway cars in use during peak service hours has increased from 188 to 328 and service disruptions have decreased from 2,133 minutes per month to 540 minutes per month.

The US$436.0 million Investment Plan, of which US$115.6 million has already been committed to capital improvements contracts, covers: the replacement of 113 antiquated Line B subway cars with subway cars previously used in the Tokyo subway system at a cost of US$33.6 million; the installation of a system‑wide signalling system and a centralized control system; and the implementation of a track renewal program which will replace 54% of the track in lines B, C, D and E. In addition, Metrovías has initiated a station rebuilding program designed to remodel and renovate 63 of the 76 stations by the end of 1999, 11 of which were completed as of April 15, 1997. The renovated stations are clean, well‑illuminated and feature television screens and music on the boarding platforms. Larger stations feature retail outlets such as the Disney Store, Club Color (Fuji), drugstores and food outlets such as McDonald's and Dunkin' Donuts.

The Urquiza Line, which Metrovías operates under the same concession contract, has 23 stations and more than 100 cars and carries approximately 25 million paying passengers per year. The Urquiza Line extends approximately 25 kilometers from the end of Line B of the BAS to the northwestern suburbs of Buenos Aires.

Waste Management

The Company is the largest private provider of waste management services in Argentina and Uruguay, providing waste management services to 12 municipalities in Argentina with populations in excess of 100,000, more than any of its competitors. The Company also provides sanitation and waste management services for three municipalities in Uruguay and the city of Puebla in Mexico. The municipalities served by the Company have a combined population of over 5.3 million. In addition, the Company provides sanitation and waste management services under agreements with commercial and industrial clients, including Lockheed Aircraft Argentina S.A., Pirelli Cables S.A., Iveco S.A., Ciadea S.A. (a licensee of Renault S.A. and the largest automobile manufacturer in Argentina), Osram Argentina S.A.C.I. and other Argentine industrial concerns. CLISA currently provides the following services: non‑hazardous solid waste collection and disposal; park, street, beach and sewer sanitation and maintenance; medical waste collection and disposal; industrial sanitation and maintenance and landfill management. The Company's waste management business is operated through 16 Joint Ventures and two corporations, nearly all of which include Ormas S.A.I.C.I.C. ("Ormas"), an Argentine construction and engineering company, as a participant. In Uruguay and Mexico, management has sought joint venture partners that can provide local market expertise and assistance in negotiations with municipalities. The Company maintains operational control of each Joint Venture in which it participates and receives a management fee for its services which, on a weighted basis, averages 1.5% of the revenues of the Joint Ventures. For the twelve months ended March 31, 1997, the Company's share of Joint Venture revenue for the waste management segment was approximately P$71.1 million.

The Company's largest waste management Joint Ventures are Clima Ingeniería Ambiental ("Clima") and Cliba Ingeniería Ambiental S.A. ("Cliba"). In 1986, Clima was awarded a waste management concession in Córdoba, Argentina's second largest city, with a population of approximately 1.3 million. This contract requires Clima to provide solid waste collection and disposal services and street sanitation services for residential areas and government buildings throughout the city. Clima's revenues under the concession contract are based on the number of residential blocks served. In 1987, Cliba was formed to serve one‑third of the area of the Federal District of Buenos Aires, with a population of approximately 1.0 million. Cliba's revenues under the concession contract are based on the number of tons of solid waste collected. See "Business--Waste Management--Operations--Termination of Concessions."

Construction

The Company believes that it is the second largest construction company in Argentina in terms of sales and is engaged in a full range of infrastructure construction, including civil, industrial and building construction, for the public and private sectors in Argentina and other Latin American countries, principally Uruguay, Paraguay and Chile. The Company has participated in the construction of a broad range of infrastructure projects throughout Latin America, including highways and toll roads, water works, sewage systems, dams, airports and marine port facilities, and has also participated in industrial and commercial construction projects, including commercial and residential buildings, hospitals, schools, hotels, shopping centers, food processing and cement plants, oil refineries, gas pipelines and hydroelectric power plants. The Company owns over 1,000 pieces of construction equipment and employs approximately 2,400 people in its construction operations. For the twelve months ended March 31, 1997, the Company's revenue for the construction segment was approximately P$166.6 million.

Each of the Company's construction sectors provides a full range of services, including feasibility studies, technical site evaluation, conceptual design, engineering, procurement, project and construction management, construction and maintenance. The Company competes based on its ability to provide comprehensive construction services, skilled engineering capabilities, experienced management, and on its relationship and experience in negotiating with Latin American governments and private sector entities.

As of December 31, 1996, major projects under construction by the Company included the Pichi Picun Leufú hydroelectric dam in Neuquén, the Caleta Paula port in Santa Cruz, Acceso Oeste (the "Western Access Road") serving Buenos Aires, the Petropar gas storage plant in Paraguay, Telecom Argentina's Buenos Aires headquarters, the Conrad Hilton Hotel and Casino in Punta del Este, Uruguay and three hospitals in Argentina.

Toll Road Management

The Company is one of Argentina's largest toll road management companies in terms of kilometers of roadway under management, participating with other investors in nine corporations that operate four national and two provincial highways, which together make up approximately 25% of highways concessioned by the Argentine federal and provincial governments, and three other heavily travelled highways that form an integral part of the highway network in and around Buenos Aires. The Company is the operating manager of four of these nine toll roads. The Company's national highways service two major transportation corridors linking Rosario, Argentina's third largest city, both with certain northwestern provinces and with the area surrounding Córdoba, Argentina's second largest city. The Company's provincial highways service one of the two primary routes between Rosario and Santa Fe, as well as the principal route between Buenos Aires and the summer vacation resort of Mar del Plata in the Province of Buenos Aires. The three highways in the greater Buenos Aires metropolitan area include the Western Access Road, which provides access to Buenos Aires from the west, and two other highways, which provide access to Buenos Aires from the southeast and passage through the city from downtown Buenos Aires to the outskirts of the federal district. Each of the nine corporations in which the Company participates, other than Grupo Concesionario del Oeste S.A. ("GCO"), currently collects tolls pursuant to long‑term concessions. GCO, the operator of the Western Access Road, is anticipated to begin collecting tolls on June 1, 1997. The tolls for each of the Company's toll roads are indexed either to a measure of inflation in the United States or to LIBOR. For the twelve months ended March 31, 1997, revenue for the two concessionaires in the toll road management segment (whose results are combined with CLISA's) was approximately P$28.3 million.

Strategy

Beginning in 1985 with the creation of the waste management segment, the Company began pursuing a strategy of seeking concessions granted as part of Argentina's infrastructure privatization program in an effort to diversify the Company's interests away from the construction industry. The Company is now one of the largest private providers of public services in Argentina.

Management's strategy is to seek out additional opportunities presented by the modernization and expansion of the industrial and public service infrastructure of Argentina and selected other Latin American countries and the continued movement by the national, provincial and municipal governments of those countries to privatize currently public assets and services.

Key elements in the implementation of the Company's strategy to compete in the continued modernization, expansion and privatization of Latin American infrastructure include:

Maintenance of Leading Market Positions. The Company is the only private operator of a subway system in all of Latin America, the largest private provider of waste management services in Argentina and one of the largest participants in toll road concessions in Argentina. The Company will look to maintain these leading market positions by competing for new privatization opportunities in these and other industries, using its record as a quality operator of formerly state‑operated services in order to compete for new concessions. The Company is also Argentina's second largest provider of construction services and will use this position to continue to aggressively pursue both public and private construction business.

Utilization of Private Sector Management Practices. In each of its service businesses, the Company has been successful in transferring private sector management practices to formerly state‑controlled businesses which were undercapitalized, inefficient and poorly managed. In each of these businesses the Company has implemented the following initiatives: (i) investment in technology, equipment and capital improvements in order to reduce reliance on labor; (ii) enhancement of labor productivity through extensive process re‑engineering and employee training; and (iii) outsourcing of non‑core tasks which are more efficiently performed by outside specialists.

Experience Dealing with Government Entities. The Company has extensive experience dealing with Argentine and other Latin American governments, primarily as a result of its long‑established position as a primary construction contractor for large scale public works. This experience in negotiating with government entities is valuable when competing for new privatization opportunities, which are often characterized by complex and intricate bidding procedures and negotiations with multiple government agencies and regulators. Another benefit of this extensive experience is that the Company can proactively approach governments with new initiatives. For example, in 1992, the Company approached the government of Uruguay with a proposal to build a resort casino hotel in Punta del Este. The government of Uruguay approved the proposal and, after finding investors and a hotel operator, the Company was awarded a construction management contract to build the Conrad Hilton Hotel and Casino. The casino opened on January 1, 1997, and the hotel is scheduled to open in June of 1997.

The Restructuring

The Issuer's principal shareholder is Roggio, the predecessor of which was founded in 1908 by Mr. Benito Roggio. In addition to the businesses which comprise CLISA, Roggio had, as of June 30, 1996, a controlling 29.1% interest in the eighth largest local private bank in Argentina and other investments in the real estate and gas and electricity distribution industries. CLISA was formed as an intermediate holding company on October 21, 1996 (the "Restructuring") to consolidate all of Roggio's infrastructure development and service businesses under one corporate structure in order to manage more effectively those businesses and to take advantage of economies of scale in administration and finance. See "Company Background and History." An organizational chart depicting the structure of CLISA, the Guarantors and the Company's operating segments is presented below:

As part of the Restructuring, BRH, which receives management fees from its operating segments as described above, has agreed to pay a fee to CLISA equal to: (i) 4.0% of BRH's construction segment revenues; (ii) 10.0% of BRH's share of waste management segment revenues; (iii) the amount of the management fee earned by BRH with respect to the waste management segment and (iv) the amount of the management fee earned by BRH with respect to Metrovías.

THE OFFERING

Securities Offered 11 5/8% Guaranteed Senior Notes due 2004.

The Offering The Senior Notes are being offered to (i) "qualified institutional buyers" ("QIBs") in reliance on Rule 144A ("Rule 144A") under the United States Securities Act of 1933, as amended (the "Securities Act"), (ii) a limited number of institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act ("Institutional Accredited Investors") in minimum denominations of US$250,000 and (iii) persons (other than U.S. persons) outside the United States pursuant to Regulation S under the Securities Act ("Regulation S").

Guarantors Benito Roggio E Hijos S.A. and Caminos Australes S.A.

Guarantees Payments of principal of, and interest and premium and Additional Amounts, if any, on, the Senior Notes will be jointly and severally, irrevocably and unconditionally guaranteed by the Guarantors. See "Description of the Senior Notes--Ranking and Guarantees."

Maturity Date June 1, 2004.

Interest Interest on the Senior Notes will accrue from the Issue Date (as defined herein) at the rate of 11 5/8% per annum payable semi‑annually in arrears in cash on each June 1, and December 1, commencing December 1, 1997. Interest will be calculated on the basis of a 360‑day year consisting of twelve 30‑day months.

Withholding Tax All payments in respect of the Senior Notes will be made without withholding or deduction for or on account of any present or future taxes, duties, levies or other governmental charges of whatever nature imposed by or on behalf of the Republic of Argentina or any political subdivision or taxing authority thereof ("Argentine Taxes"), unless such Argentine Taxes are required by law or the interpretation or administration thereof, in which case the Company will pay such additional amounts as may be necessary so that the net amount received by the holder after such withholding or deduction will not be less than the amount that would have been received in the absence of such withholding or deduction. See "Description of the Senior Notes--Taxation; Redemption for Taxation Reasons."

Redemption upon Initial Public Offering Prior to June 1, 2000, the Issuer, at its option, may redeem up to 25% of the originally issued principal amount of Senior Notes at 111 5/8% of their principal amount, plus accrued interest to the date of redemption, with the net proceeds of an Initial Public Offering (as defined herein); provided that not less than 75% of the originally issued principal amount of Senior Notes remain outstanding immediately after giving effect to such redemption. See "Description of Senior Notes--Optional Redemption of Senior Notes upon Initial Public Offering."

Tax Redemption The Senior Notes may be redeemed at the option of the Issuer at any time in whole, but not in part, if, as a result of any amendment to or change in certain laws, regulations or rulings related to Argentine taxes or the application or official interpretation thereof, the Issuer would be obligated to pay Additional Amounts (as defined herein), at a price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest and Additional Amounts, if any, due thereon to the date of redemption. See "Description of the Senior Notes--Taxation; Redemption for Taxation Reasons."

Use of Proceeds; Refinancing The proceeds to be received by the Company from the sale of the Senior Notes, estimated to be US$95.5 million (net of the Initial Purchaser's discount and the expenses of the Issuer and of the Initial Purchaser to be reimbursed by the Issuer), will be used (i) to make capital contributions to BRH in order for BRH to partially refinance debt in the amount of US$84.5 million and (ii) to repay debt of the Issuer in the amount of US$11.0 million, all in accordance with Article 36 of the Negotiable Obligations Law. See "Use of Proceeds."

Ranking The Senior Notes will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and will rank pari passu in right of payment with all other present and future unsubordinated and unsecured obligations of the Issuer (other than the obligations preferred by mandatory provisions of law). As of March 31, 1997, after giving effect to the Offering and the application of the net proceeds therefrom as described in "Use of Proceeds," the Issuer and Guarantors would have had outstanding approximately: (i) US$1.5 million of indebtedness ranking pari passu with the Guarantees of the Senior Notes, (ii) US$19.1 million of secured indebtedness or indebtedness of Subsidiaries of the Issuer (other than the Guarantors) which is effectively senior in right of payment to the Guarantees and the Senior Notes and (iii) no indebtedness that is subordinated or junior in right of payment to the Guarantees and the Senior Notes. See "Description of the Senior Notes--Ranking and Guarantees."

Status of the Guarantees The Guarantees will constitute direct, unconditional, unsubordinated and unsecured obligations of each Guarantor and will rank pari passu in right of payment with all other present and future unsubordinated and unsecured obligations of each such Guarantor (other than the obligations preferred by mandatory provisions of law). See "Description of the Senior Notes--Ranking and Guarantees" and "Risk Factors--Certain Factors Relating to the Issuer--Risks Associated with Holding Company Structure" and "--Factors Relating to the Guarantees." Under certain circumstances, concurrent with the sale or disposition of a Guarantor, such Guarantees may be terminated.

Certain Covenants The Indenture governing the Senior Notes (the "Indenture") will contain certain covenants relating to, among other things, limitations on: (i) additional indebtedness; (ii) restricted payments; (iii) liens; (iv) dividends and other payment restrictions affecting Restricted Subsidiaries (as defined herein); (v) preferred stock issuances by Restricted Subsidiaries; (vi) asset sales; (vii) transactions with Affiliates; (viii) designations of Unrestricted Subsidiaries (as defined herein); (ix) additional guarantees; and (x) Change of Control (as defined herein). See "Description of the Senior Notes -- Certain Covenants."

Events of Default For a discussion of certain events that will permit acceleration of the principal of the Senior Notes, together with all accrued and unpaid interest and Additional Amounts, if any, thereon, see "Description of the Senior Notes--Events of Default."

Form, Denomination and Registration

of Senior Notes Senior Notes sold in reliance on Rule 144A will be represented by a single permanent global note in definitive, fully registered form deposited with the Trustee as custodian for, and registered in the name of, a nominee of The Depository Trust Company ("DTC"). Senior Notes sold in offshore transactions in reliance on Regulation S under the Securities Act will be represented by a single, permanent global note in definitive, fully registered form deposited with the Trustee as custodian for, and registered in the name of a nominee of, DTC for the accounts of the operators of the Euroclear System ("Euroclear") and Cedel Bank, société anonyme ("Cedel"). Institutional Accredited Investors who are not QIBs will receive certificates for the Senior Notes owned by them, which cannot then be traded through the facilities of DTC, except in connection with a transfer to a QIB or a transfer pursuant to Regulation S. Pursuant to Argentine Law No. 24,587, effective November 22, 1995, Argentine corporations may not issue bearer‑form securities. Instead, Argentine corporations may only issue registered‑form securities. See "Description of the Senior Notes--Book‑Entry; Delivery and Form."

Offering of the Senior Notes The Public Offering of the Senior Notes in Argentina has been authorized by Resolution No. 11,735 of the CNV dated May 15, 1997. A copy of the Spanish language version of this Offering Memorandum and of the Indenture will be available for inspection during normal business hours at the offices of the Company, the specified offices of the Trustee, the offices of The Bank of New York S.A., Buenos Aires office, as representative of the Trustee in Buenos Aires, and at the offices of the Paying Agent.

Transfer Restrictions The Senior Notes have not been registered under the Securities Act and are subject to certain restrictions on transfer. See "Notice to Investors."

Risk Factors For a discussion of certain considerations relevant to an investment in the Senior Notes, see "Risk Factors."

SUMMARY CONSOLIDATED AND COMBINED HISTORICAL

FINANCIAL INFORMATION

The following tables present selected consolidated/combined financial information and data for the Company at the dates and for the periods indicated. The information as at June 30, 1996 and 1995 and for the years ended June 30, 1996, 1995 and 1994 has been derived from, should be read in conjunction with and is qualified in its entirety by reference to the Combined Financial Statements of the Company and related notes thereto audited by Harteneck, López y Cia./Coopers & Lybrand, which, except for the balance sheet data as at June 30, 1994, are included elsewhere in this document. The Consolidated and Combined Financial Statements included herein are prepared and presented in accordance with generally accepted accounting principles in Argentina ("Argentine GAAP"), which differ in certain significant respects from generally accepted accounting principles in the United States ("U.S. GAAP"). Annex B provides a description of the principal differences between Argentine GAAP and U.S. GAAP as they relate to the Company.

The selected consolidated/combined historical financial information and data as at and for the nine‑month periods ended March 31, 1997 and 1996 as set forth below is derived from, should be read in conjunction with and is qualified in its entirety by reference to the unaudited Consolidated/Combined Financial Statements of the Company as reviewed by Harteneck, López y Cia./Coopers & Lybrand, included elsewhere in this document. In the opinion of management, the unaudited Consolidated/Combined Financial Statements include all adjustments, consisting of normal and recurring accruals which are necessary for a fair presentation of the financial position and results of operations for these interim periods. Results of interim periods are not necessarily indicative of results for a full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations by Segment."

Year Ended Nine Months

June 30, Ended March 31,

1994 1995(4) 1996 1996 1997

(Unaudited)

(In thousands of Pesos except for financial ratios)

Income Statement Data

Net sales:

Mass transportation management P$ -- P$118,335 P$135,685 P$100,972 P$131,066

Waste management 55,963 68,515 65,398 45,625 51,361

Construction 230,778 224,483 111,567 83,047 123,754

Toll road management 16,221 17,930 23,557 13,299 18,015

Total net sales 302,961 429,263 336,208 242,943 324,196

Segment operating income/(loss):

Mass transportation management -- (1,807) 952 1,593 2,882

Waste management 9,704 16,170 14,374 9,129 9,826

Construction 16,328 (2,445) (5,450) (1,792) 9,139

Toll road management 2,993 791 4,108 1,503 919

Total segment operating income 29,025 12,708 13,984 10,433 22,766

Corporate operating expenses 366 347 523 595 1,950

Total operating income 28,659 12,362 13,462 9,838 20,816

Financing income/(expense):

Generated by assets 7,306 (8,892) 15,049 9,871 9,606

Generated by liabilities (3,725) 5,089 (24,429) (20,187) (14,740)

Income from permanent investments 4,688 4,048 3,107 2,410 2,671

Other income, net 1,408 4,212 2,923 3,533 3,405

Income before income taxes and

minority interest 38,335 16,819 10,112 5,464 21,757

Income taxes (8,696) (5,166) (418) (286) (3,091)

Minority interest (4,270) (1,941) (4,020) (2,194) (4,018)

Net income P$ 25,369 P$ 9,711 P$ 5,674 P$ 2,985 P$ 14,648

Other Financial Data

EBITDA(1) P$ 52,854 P$ 43,773 P$ 46,083 P$ 35,975 P$ 48,487

Capital expenditures 23,238 35,084 23,150 16,374 28,896

Depreciation and amortization 30,688 37,044 37,244 29,735 29,623

Pro forma interest expense(2) -- -- 13,736 -- 10,302

Ratio of EBITDA to pro forma interest expense -- - - 3.3x -- 4.7x

Ratio of total debt to EBITDA 1.1x 2.7x 2.2x -- --

Ratio of earnings to fixed charges(3) 4.5x 1.8x 1.3x 1.2x 2.3x

As of June 30, As ofMarch 31,

1994 1995 1996 1996 1997

(Unaudited)

(In thousands of Pesos)

Balance Sheet Data

Net working capital P$ 37,416 P$ 21,885 P$ 34,821 P$ 18,262 P$(32,288)

Fixed assets, net 84,106 122,990 107,848 106,366 116,611

Total assets 322,907 449,746 427,815 429,363 446,370

Total debt 55,551 119,669 99,463 103,128 114,520

Minority interest 17,356 20,972 24,831 22,577 26,723

Shareholders' equity 120,028 123,531 140,873 122,540 83,730(5)

(1) EBITDA represents net income increased by the sum of income taxes, financing charges, depreciation of fixed assets, amortization of intangible assets, amortization of deferred toll road revenues, minority interests, cash dividends received from permanent investments and Unrestricted Subsidiaries, and any other extraordinary non‑cash charges less, other income, net (including, without duplication, amortization of negative goodwill and gains from sale of assets), reversal of revaluation reserve, financing income, income from permanent investments, dividends paid to minority investors in non‑wholly‑owned Restricted Subsidiaries and deferred toll road revenues recognized as net sales. The Company has included information concerning EBITDA (which is not a measure of financial performance under generally accepted accounting principles) because it understands that it is used by certain investors as one measure of an issuer's ability to service or incur indebtedness. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. See "Description of the Senior Notes" for a more detailed discussion of consolidated EBITDA.

(2) Adjusted to give pro forma effect to the Offering and the use of the net proceeds therefrom as set forth under "Use of Proceeds." Interest on the Senior Notes has been calculated at an assumed rate of 11 5/8% per annum.

(3) The ratio of earnings to fixed charges covers continuing operations, and for this purpose (i) earnings consist of income before income taxes plus fixed charges and (ii) fixed charges consist of interest expense on all debt (including capitalized interest), amortization of deferred financing costs and a percentage of rental expense deemed by management to be representative of the interest component thereof.

(4) The results of Metrovías are consolidated for the entire fiscal year 1995 despite the fact that the Company only acquired a majority stake in Metrovías in May 1995. However, the Income Statement line item "Minority interest" for such fiscal year reflects that the Company held a 33.3% interest in Metrovías until May 1995 and a 55.3% interest thereafter.

(5) Reflects the P$70.0 million reduction in shareholders' equity undertaken since March 31, 1997. See "Company Background and History."

RISK FACTORS

Prospective purchasers should consider carefully all of the information set forth herein and, in particular, the following risk factors in connection with an investment in the Senior Notes. In general, investing in the securities of issuers in emerging markets such as Argentina involves a higher degree of risk than investing in the securities of issuers in the United States and certain other jurisdictions.

Certain Factors Relating to the Issuer

Risks Associated with Holding Company Structure. The Issuer conducts its business through BRH and Caminos, both of which are Guarantors. The Guarantors have subsidiaries, Joint Ventures and affiliates in which they have minority investments. The Issuer's ability to meet its financial obligations, including its obligations under the Senior Notes, is dependent upon the cash flow and earnings of such subsidiaries, Joint Ventures and affiliates and the distribution or other payment of such earnings to the Issuer in the form of dividends, loans or other advances and payment of management fees and expenses, each of which may be subject to statutory, regulatory or contractual restrictions. Argentine law requires that dividends be paid only from available profits, as determined under applicable Argentine corporate law. Moreover, the Issuer does not have voting control over certain of the entities in which it has ownership interests and such entities may have no obligation, contingent or otherwise, to make any funds available to the Issuer, whether by dividends, advances, loans or other payments. Certain of the Issuer's subsidiaries, Joint Ventures and affiliates are, or may in the future be, subject to loan agreements that prohibit or limit the transfer of funds to the Issuer in the form of dividends, loans, or advances and/or require that any indebtedness of such subsidiaries or affiliates to the Issuer be subordinate to the indebtedness under such loan agreements. The Issuer's subsidiaries, Joint Ventures and affiliates are separate and distinct legal entities and, other than the Guarantors, will have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Senior Notes or to make any funds available therefor, whether in the form of loans, dividends or otherwise. The Issuer's subsidiaries (other than the Guarantors), Joint Ventures and affiliates will not guarantee the payment of principal of or interest on the Senior Notes. Any right of the Issuer to receive assets of any of its subsidiaries, Joint Ventures or affiliates upon its liquidation or reorganization and the consequent right of the holders of the Senior Notes to participate in the distribution of proceeds from those assets will be effectively subordinated to the claims of such subsidiaries', Joint Ventures' or affiliates' creditors (including tax authorities, trade creditors and lenders to such subsidiaries, Joint Ventures or affiliates), except to the extent that the Issuer is itself a creditor of such subsidiary, Joint Venture or affiliate, in which case the Issuer's claims would still be subordinated to any security interest in the assets of such subsidiary or affiliate and indebtedness of such subsidiary or affiliate senior to that held by the Issuer.

Leverage and Capital Requirements. Immediately following the Offering, in addition to the Senior Notes, the Company will have, on a consolidated basis, US$20.6 million of other indebtedness outstanding. See "Description of Indebtedness of the Company and its Joint Ventures." As of March 31, 1997, and after giving pro forma effect to the issuance of the Senior Notes and the application of the net proceeds therefrom, the Issuer, on a consolidated basis, would have had outstanding approximately US$120.6 million, which would equal 52.2% of its total capitalization. Following the consummation of the transaction described under "Toll Road Management--Recent Development," consolidated indebtedness, determined on such pro forma basis, is expected to increase by approximately US$20.5 million. Following consummation of the proposed capital reduction of the Company, total consolidated shareholders' equity is expected to be reduced by US$70.0 million at which point the Company's total debt to capitalization is expected to equal approximately 63.6%. See "Capitalization." The Company's leverage may impair its ability to (i) refinance its indebtedness or obtain additional financing in the future, (ii) withstand competitive pressure and adverse economic conditions (including a downturn in the Issuer's business), (iii) take advantage of significant business opportunities that may arise or (iv) invest in new or developing technologies. In addition, although the Company has obtained the Bank Commitment Letter relating to a proposed US$25.0 million senior secured revolving credit facility, such financing is subject to definitive documentation and other conditions and will therefore not be available at the closing of the Offering. See "Description of Indebtedness of the Company and its Joint Ventures." The terms of the Indenture limit but do not prevent the Issuer and its Restricted Subsidiaries from incurring additional indebtedness. See "Description of the Senior Notes."

Currency Risk and Hedging Activities. While the Issuer's revenues are generated in Pesos, it expects certain of its debt obligations (including the Senior Notes) to be denominated in U.S. dollars and, to a more limited extent, other currencies, and CLISA expects therefore to be exposed to currency exchange rate risks. See "--Certain Factors Relating to Argentina--Convertibility and Exchange Rate Risks." Although the Issuer may enter into transactions to hedge the risk of exchange rate fluctuations, there can be no assurance that it will engage in such transactions, or, if it decides to engage in such transactions, that they will be successful and that shifts in currency exchange rates will not have a material adverse effect on the Issuer. The Issuer does not currently engage in currency hedging to offset any risk of currency fluctuations.

Factors Relating to the Guarantees. BRH and Caminos will each guarantee payment in full of the Senior Notes. In the case of BRH, this Guarantee is being issued in consideration for the contribution to BRH by CLISA of approximately US$84.5 million which will be used to repay bank debt and other financing arrangements of BRH and Metrovías. No amount will be contributed to, or repaid on behalf of, Caminos. Accordingly, the Guarantee of the Senior Notes to be issued by Caminos may be considered to be gratuitous and, pursuant to the Argentine insolvency statute, remain subject to challenge and avoidance for a period of up to two years from the issuance of the Senior Notes if Caminos is declared bankrupt within such period. Therefore, in the event that Caminos is unable to meet its financial obligations (either as a result of the non‑payment of the Senior Notes or otherwise) and on or prior to the second anniversary of the issuance of the Senior Notes seeks judicial protection from its creditors or is declared bankrupt at the request of a third‑party creditor, the Guarantee granted by Caminos may be declared void and unenforceable by an Argentine bankruptcy court.

In addition, if an Argentine court in a suit by any creditor in respect of Caminos' indebtedness which was outstanding prior to the date of issuance of its Guarantee, which indebtedness had not been discharged at the time of the institution of such suit, were to find that (i) Caminos was insolvent at the time of institution of such suit, (ii) Caminos was insolvent at the time of issuing its Guarantee or that insolvency resulted from the performance of Caminos' obligation under its Guarantee and (iii) Caminos did not receive adequate consideration for the issuance of its Guarantee, the Argentine court may consider any payment made under the Guarantee to be a fraud on creditors, declare any payments made to holders of Senior Notes under the Guarantee to be ineffective as to such petitioning creditor and, accordingly, order that all amounts paid by Caminos under its Guarantee to holders of the Senior Notes be returned to Caminos to the extent of the debt owed to such creditor.

Certain Factors Relating to the Issuer's Business Segments

Mass Transportation Management

Receipt of Subsidy Payments from the Argentine Government. Pursuant to Metrovías' concession contract, the Argentine Federal Government is obligated to make certain subsidy payments to Metrovías, to reimburse certain capital expenditures and to perform certain improvements to the facilities of Metrovías. The Argentine Federal Government is also obligated to perform certain work beyond the scope of the Investment Plan. In addition, although Metrovías' concession contract provides for increases in fares for improvements in service and increases in the Company's cost, these fare adjustments may not be implemented without the approval of the Argentine Federal Government. Although the Company expects the Argentine Federal Government to perform in a timely manner under the concession contract, there can be no assurances that future fiscal constraints or political considerations will not prevent or otherwise limit the Argentine Federal Government from doing so. Any significant failure of the Argentine Federal Government to meet its obligations could have an adverse effect on the financial condition and results of operations of the Company.

Waste Management

Renewal of Concessions. The Company is a leading provider of waste management services in Argentina and Uruguay. Concessions from municipalities represent the most significant part of the Company's waste management operations. The Company's waste management concession in Buenos Aires expired in December 1996 and has been renewed for short periods until new concessions are awarded. See "Business--Waste Management--Terminations of Concessions." In addition, the Company's waste management concession in Córdoba has expired. The City of Córdoba has not yet prepared the applicable bid documentation or called for bids. The Company expects that the Córdoba concession will be renewed for at least one additional year. The Company's waste management concession in San Isidro expired in December 1996 but has been renewed while bidding documentation is being prepared. In addition, all of the Company's other waste management concessions are scheduled to expire during the term of the Senior Notes. There can be no assurance that the Company will win any part of the new concessions being awarded in Buenos Aires or that any of the Company's other waste management concessions, including the Córdoba concession, will be renewed. The expiration of such concessions without renewal may adversely affect the Company and may impair the Issuer's ability to meet its payment obligations under the Senior Notes. In addition, there can be no assurances that any new concessions granted to the Company, including any concessions granted upon the expiration of any existing concessions, will contain pricing terms as favorable as those under the Company's existing concessions. Any reduction in the pricing terms of its waste management concessions may adversely affect the Company's margins in the waste management business and may therefore impair the Issuer's ability to meet its payment obligations under the Senior Notes.

Competition. The waste management industry in Argentina and Uruguay is very decentralized and highly fragmented. The Company competes in these markets with many domestic and a limited number of foreign waste management companies, some of which may have greater financial resources than the Company and may have greater technical resources with respect to specific matters. As a result of the trend towards privatizing waste management services in Argentina, the Company has recently faced increased competition from foreign providers of waste management services. In addition, the Company competes with municipalities and other similar governmental entities which may have financial advantages due to the availability of tax revenues and tax‑exempt or other low‑cost financing or other advantages. There can be no assurance that increased domestic and foreign competition will not erode the Company's market position or pricing structure for its waste management contracts, negatively affecting the Company's results of operations.

Construction

Dependence on Public Sector Contracts. Argentine public sector projects traditionally have been the most significant contributor to the Company's construction revenues. Argentine governmental entities which award public sector projects are subject to the annual budget approval process of the Argentine Congress. Accordingly, the performance of the Company's construction segment has been dependent on public sector spending and on the Company's ability to bid successfully for such contracts. Argentine public sector spending, in turn, has been generally dependent on the state of the Argentine economy. In addition, as a result of the Argentine government's infrastructure privatization program, the number and value of public sector construction contracts has decreased in recent years. Although there has been a shift in the business of the Company's construction segment to private sector construction projects, the construction segment's performance remains dependent on the state of the Argentine economy, and in particular on the rate of GDP growth, interest rates and government spending. There can be no assurance that the present conditions in the Argentine economy will remain stable or improve or that public sector spending on construction contracts will increase. Any decrease in the value of public sector contracts awarded to the Company that is not offset by a corresponding increase in the value of private sector contracts awarded to the Company may adversely affect the ability of the Issuer to meet its payment obligations under the Senior Notes.

Cyclicality of the Construction Industry. The construction industry is highly cyclical. The financial condition and results of operations of companies in the construction industry are generally affected by general economic conditions and other factors in the markets in which they compete, including fluctuations in GDP, inflation, interest rates and other factors beyond the Company's control. A prolonged recession in Argentina or, to a lesser extent, any of the other countries in which the Company conducts construction operations could result in a significant decrease in the Company's financial performance. There can be no assurance that events having an adverse effect on the construction industry will not occur.

Competition. The construction industry in Argentina and the other countries in which the Company provides construction services are characterized by a high degree of competition from domestic and foreign companies, some of which have greater resources than the Company. International construction companies have increased their presence in the Argentine construction industry as a result of the liberalization of government rules that had previously inhibited foreign competitors. While the Company believes that its knowledge of local market practices, business relationships with local suppliers and labor, established client relationships, reputation and name recognition within the industry provide the Company with competitive advantages within the construction industry in the countries in which it competes, there can be no assurances that increased domestic and foreign competition will not erode the Company's market position and negatively affect the Company's results of operations.

Trend Towards Contractor Financing and Fixed Price Contracts. The Company's public and private sector clients are awarding more projects in which a single contractor is responsible for providing all of the necessary engineering, procurement and construction services. Frequently, these projects require that the contractor arrange for financing for the project as well. Generally, with respect to projects undertaken by a consortium, the members of the consortium may be jointly and severally liable to the client; however, each member of the consortium indemnifies the other members for its own acts. In addition, the Company expects that awards of certain projects in the future may require that the Company invest its own equity or incur significant debt in connection with such projects. The Company anticipates that its future revenues may depend on its ability to arrange or provide financing for projects; however, there can be no assurance with regard to the Company's ability to arrange such financing.

In addition, the Company is often required to bid for construction work and projects on a fixed‑price or other basis which may not fully allow for price increases or other cost overruns. Performance under such contracts has in the past resulted, and may in the future result, in losses.

Toll Road Management

Traffic Volume. The Company's major source of revenue in the toll road management segment is tolls. Such revenues are dependent on the number of vehicles that travel on these roads and pay the entry tolls. Growth in traffic, and the corresponding toll revenues, are in turn dependent on economic growth in Argentina, demographic changes, infrastructure development and maintenance plans, government macroeconomic policies, taxation, inflation, interest rates, fuel prices, social instability and other political or economic developments in or affecting Buenos Aires and Argentina at large. There can be no assurance that the number of vehicles travelling on the roads covered by the Company's concessions will remain stable or increase. Any reduction in the levels of traffic on these roads may have an adverse effect on the Company's results of operations and may impair the Issuer's ability to meet its payment obligations under the Senior Notes.

Level of Tolls. Each concession contract sets forth a schedule of tolls by category of vehicle and provisions relating to increases in such tolls. In each case, such increases must be ratified by the applicable national, provincial or municipal authority after review of supporting documentation. Toll increases in excess of the increases provided for in the concession contracts require government approval. There can be no assurance that the applicable regulator will ratify toll increases provided for in the concession contracts under its jurisdiction on a timely basis or that any toll increases in excess of those specified in the concession contracts will be approved. Failure to implement increases in tolls on a timely basis, or adjustments to the method of calculation of such increases, may impair the Issuer's ability to meet its payment obligations under the Notes. In addition, there can be no assurance that any toll increases will not have an adverse effect on the number of vehicles that travel on these roads and pay the entry tolls, thereby impairing the Issuer's ability to meet its payment obligations under the Senior Notes.

Certain Property Dedicated to the Provision of Public Services in Argentina. Under Argentine law, attachment prior to execution and attachment in aid of execution will not be ordered by an Argentine court with respect to property which is located in Argentina and determined by such courts to be dedicated to the provision of essential public services. A portion of the Company's assets may be considered by such court to be dedicated to the provision of an essential public service. If an Argentine court were to make such a determination with respect to certain of the Company's assets, such assets would not be subject to attachment, execution or other legal process as long as such determination stands and the ability of a creditor of the Company to realize a judgment against such assets of the Company may be adversely affected.

General

The Issuer and its subsidiaries are parties to various contracts, concessions and other agreements with Argentine national, provincial and municipal government entities. These entities have from time to time, sought to modify the terms of these agreements, or failed to honor on a timely basis their payment obligations thereunder. As a result, the Company has often been required to renegotiate the terms of its existing contracts in order to address the concerns of these government entities or recover past due amounts. No assurance can be given that, if it engages in such negotiations, the Company will be able to reach a satisfactory agreement with such government entities, that the terms of any revised contract or concessions will be as favorable as the existing terms of these contracts or that such amended contracts will not require the Company to undertake additional capital investments.

Each Argentine national, provincial and municipal governmental entity which has granted a concession may terminate such concession before the expiration of its term. Such termination may be without compensation if the Argentine governmental entity terminates the concession as a result of the concessionaire's failure to comply with the material terms of the concession contract. In the event of any other termination by such an Argentine governmental entity, the Argentine government may be obligated to make payment to the concessionaire for investments made during the term of the concession and for damages and, in certain more limited cases, for lost profits. There can be no assurance that no such termination will take place, or that any such termination would not impair the Issuer's ability to meet its payment obligations under the Senior Notes.

Certain Factors Relating to Argentina

Argentine Political and Economic Considerations. Each of the Issuer and the Guarantors is an Argentine sociedad anónima and substantially all of each of their facilities are presently located within Argentina. A program of reform commenced by the Argentine Government in 1989 has modified and in certain respects reduced the nature of the public sector's role in the Argentine economy. Nevertheless, the Argentine Government has exercised and continues to exercise a significant influence over many aspects of the economy, over private sector entities involved in the provision of public services, such as the Issuer, and over market conditions, prices and yields of Argentine debt securities, including those of the Issuer. Accordingly, Argentine Government actions concerning the economy have had and could continue to have a significant effect on private sector entities, such as the Company. There can be no assurance that future policies of the Argentine Government, including possible price control regulations, will not adversely affect the Issuer's financial condition or results of operations.

The Argentine economy has in recent decades experienced high levels of inflation. In March 1991, after the implementation of various plans designed to reduce inflationary pressures which were only partially or temporarily successful, the Argentine Government introduced a tax reform and a public expenditure reduction program aimed at reducing inflation, restructuring the public sector and deregulating the economy. This economic reform plan (the "Convertibility Plan") was established pursuant to Argentine Law No. 23,928 and its implementing Decree No. 529/91 (together, the "Convertibility Law") which became effective on April 1, 1991. Following the effectiveness of the Convertibility Plan, the twelve‑month trailing inflation rate as measured by the Argentine consumer price index ("CPI") declined from 84.0% as of December 31, 1991 to 0.4% as of December 31, 1996. There can be no assurance, however, that the Convertibility Law will not be amended or abrogated or that the Convertibility Plan will continue to be successful in restraining inflation in the long term. In addition, there can be no assurance that if hyperinflationary conditions were to return to Argentina, the Company would not experience adverse effects to its operations.

In addition to the requirements of the Convertibility Law discussed below under "--Convertibility and Exchange Rate Risks," the Convertibility Plan provided for the elimination of the fiscal deficit and the achievement of a surplus to service the public debt. Since the adoption of the Convertibility Plan, the Argentine Government has adhered to this plan. This has resulted in a significant decrease in the inflation rate, substantial growth in the gross domestic product ("GDP") and consumption and a large inflow of foreign investment through the end of 1996.

The Argentine financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries. Although economic conditions are different in each country, investor reaction to developments in one country can have significant effects on the securities of issuers in other countries, including Argentina.

Convertibility and Exchange Rate Risks. The Argentine currency has been devalued repeatedly during recent decades and the economic authorities in Argentina have utilized a number of exchange rate systems. Prior to December 1989, the Argentine foreign exchange market was subject to exchange controls. Although at present there are no foreign exchange controls preventing or restricting the conversion of Pesos into U.S. dollars, no assurance can be given that such controls will not be implemented in the future.

Under the Convertibility Law, the Argentine Central Bank is obligated to sell U.S. dollars at a rate of US$1.00 per P$1.00 and to back the monetary base with international reserves consisting of gold, cash, foreign exchange deposits abroad, foreign securities and certain Argentine Government obligations denominated in foreign currency. Pursuant to Communication "A" 2298, since January 12, 1995, the Central Bank has been purchasing dollars at a rate of P$1.00 per US$1.00. Prior to January 12, 1995, the Central Bank's policy was to purchase U.S. dollars at the rate of not less than 0.9980 per US$1.00.

The privatization of Argentine companies and the success of the Convertibility Plan have strengthened the Central Bank's capacity to back all Argentine currency with international reserves. The Central Bank's future capacity in this respect depends, however, upon the completion of the structural reforms and low levels of inflation, sustained economic growth, significant improvements in its current rate of unemployment and continuation of the privatization process.

The Argentine Government currently imposes no restrictions on an Argentine company's ability to transfer funds offshore in U.S. dollars. However, no assurance can be given that the Argentine Government will not institute any transfer restrictions in the future. In the event that the Argentine Government imposes any such restrictions in the future, the Company's access to U.S. dollars to meet its U.S. dollar obligations, including those under the Senior Notes, may be prevented or restricted.

There can be no assurance that the Convertibility Law will not be amended or rescinded, that the Argentine Government will not impose restrictions on the ability to convert Pesos into U.S. dollars or that the monetary authorities will not change their policy to control the exchange rate of the Peso against the U.S. dollar. In the event of a large devaluation of the Peso, the financial condition and results of operations of Argentine companies, including the Company, and the ability of Argentine companies, including the Company, to meet their obligations in foreign currencies could be adversely affected.

Public Services Regulatory Risk. The Company is subject to a wide range of federal, provincial and municipal regulation and supervision generally applicable to companies engaged in business in Argentina, including laws and regulations pertaining to labor, social security, public health, consumer protection, the environment and competition. In those segments in which the Company provides, directly or indirectly, a public service, it is subject to the requirements imposed by the applicable concessions and regulations issued by the relevant Argentine Federal and provincial agencies thereunder. There can be no assurance that existing or future legislation and regulation will not require material expenditures by the Company or otherwise have a material adverse effect on the Company's operations. See "Business--Government Regulation."

Different Corporate Disclosure and Accounting Standards; Less Extensive Securities Regulation. Publicly available information about Argentine issuers of securities is less readily available and less detailed in certain respects than the information that is regularly published by or about listed companies in the United States or certain other countries. In addition, regulations governing the Argentine securities market are not as extensive as those in effect in the United States and some other major world markets. The Company prepares its financial statements in accordance with Argentine GAAP (as defined herein), which differs from U.S. GAAP (as defined herein) in a number of respects. The financial statements presented herein are different from those that would be presented under U.S. GAAP. See "Annex B--Summary of Significant Differences Between Argentine GAAP and US GAAP."

Certain Factors Relating to the Senior Notes

Absence of Public Market for the Senior Notes; Restrictions on Transfer. The Senior Notes are a new issue of securities with no established trading market or prior trading history and there can be no assurance regarding the future development of a market for the Senior Notes, the ability of holders of the Senior Notes to sell their Senior Notes or the price for which such holders may be able to sell their Senior Notes. If such a market were to develop, the Senior Notes could trade at prices that may be higher or lower than the initial offering price, depending on many factors, including some beyond the Issuer's control. The Issuer has been advised by the Initial Purchaser that it intends to make a market in the Senior Notes but it is not obligated to do so and may discontinue market making at any time without notice. Furthermore, the liquidity of, and trading market for, the Senior Notes may be adversely affected by changes in interest rates and declines and volatility in the market for similar securities, as well as by any changes in the Issuer's financial condition or results of operations. The Senior Notes may only be offered or sold pursuant to an exemption from, or an effective registration statement under, the registration requirements of the Securities Act and applicable state securities laws. See "Description of the Senior Notes," "Notice to Investors" and "Plan of Distribution."

Limitations on Change of Control. The Indenture requires the Issuer, in the event of a Change of Control of the Issuer or its Parent, to make an offer to purchase all or any part of the Senior Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the purchase date. There can be no assurance that the Issuer or the Guarantors will have the financial resources necessary to repurchase the Senior Notes upon a Change of Control. See "Description of the Senior Notes."

USE OF PROCEEDS

The proceeds from the sale of the Senior Notes, estimated to be US$95.5 million (net of the Initial Purchaser's discount and the expenses of the Issuer and the Initial Purchaser to be reimbursed by the Issuer), will be used (i) to make capital contributions to BRH in order for BRH to partially refinance debt in the amount of US$84.5 million and (ii) to repay debt of the Issuer in the amount of US$11.0 million, all in accordance with Article 36 of the Negotiable Obligations Law.

EXCHANGE RATE INFORMATION

As a result of inflationary pressures, the Argentine currency was devalued repeatedly during the 30‑year period ending in 1991. During that period, Argentina adopted and operated under various exchange rate systems. Macroeconomic instability led to broad fluctuations in the real exchange rate of the Argentine currency relative to the U.S. dollar.

Prior to December 1989, the Argentine foreign exchange market was subject to exchange controls. Since December 1989, Argentina has had a freely floating exchange rate for all foreign currency transactions. The exchange rate system currently in effect in Argentina is governed by the Convertibility Law. Since April 1, 1991, when the Convertibility Law became effective, the Peso has been freely convertible into dollars. Under the Convertibility Law, the Central Bank (i) is obligated to sell dollars to any person who so requires at a rate of one Peso per dollar and (ii) must maintain a reserve in foreign currencies, gold, net claims on ALADI (Asociación Latinoamericana de Intercambio) and certain public bonds denominated in foreign currency (such bonds not to exceed 33% of such reserve), all valued at market prices, equal to the monetary base (which consists of currency in circulation and Peso deposits of the financial sector with the Central Bank). Pursuant to Communication "A" 2298, since January 12, 1995, the Central Bank has been purchasing dollars at a rate of P$1.00 per US$1.00. Prior to January 12, 1995, the Central Bank policy was to purchase dollars at the rate of not less than P$0.9980 per US$1.00. The Argentine Government currently imposes no restrictions on an Argentine company's ability to transfer funds offshore in U.S. dollars. See "Risk Factors--Certain Factors Relating to Argentina--Convertibility and Exchange Rate Risks."

The following table sets forth, for the periods indicated, the high, low, average and period‑end exchange rates for the purchase of dollars expressed in nominal Pesos per dollar. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.

Exchange Rate

Period

Year Ended December 31, High Low Average(1) End

1992 1.0000 0.9910 0.9915 0.9990

1993 1.0000 0.9990 0.9995 0.9990

1994 1.0000 0.9990 0.9995 1.0000

1995 1.0000 0.9995 0.9995 1.0000

1996 1.0000 1.0000 1.0000 1.0000

1997(2) 1.0000 1.0000 1.0000 1.0000

(1) Average of month‑end rates during the period.

(2) Through May 21, 1997.

Source: Banco de la Nación Argentina.

CAPITALIZATION

The following table sets forth the consolidated short‑term debt and capitalization of the Company as of March 31, 1997, prepared on the basis of the Unaudited Consolidated Combined Financial Statements for the nine months ended March 31, 1997, as adjusted to give effect to the Offering and the application of the net proceeds thereof as described under "Use of Proceeds." Such adjustment reflects the receipt by the Company of the net proceeds of the Offering which are estimated to be US$95.5 million. See "Use of Proceeds." This table should be read in conjunction with the Unaudited Consolidated/Combined Financial Statements for the nine months ended March 31, 1997. Amounts set forth below may not total due to rounding.

Actual As adjusted

March 31, for the

1997 Offering(2)

(in millions of Pesos)

(unaudited)

Short‑term debt P$ 90.3 P$ 10.7

Long‑term debt:

Bank loans P$ 24.3 P$ 9.9

Senior Notes -- 100.0

Total long‑term debt 24.3 109.9

Total debt 114.5 120.6

Minority interest 26.7 26.7

Total shareholders' equity 83.7(1) 83.7

Total capitalization P$225.0 P$231.0

(1) Reflects the P$70.0 million reduction in shareholders' equity undertaken since March 31, 1997. See "Company Background and History."

(2) Includes the repayment of P$1.2 million of short‑term debt, which is presented net of offsetting balances of P$0.5 million in the Company's balance sheet as of March 31, 1997, and P$1.1 million of short‑term debt assumed by the Company after March 31, 1997.

SELECTED CONSOLIDATED AND COMBINED HISTORICAL

FINANCIAL INFORMATION

The following tables present selected consolidated/combined financial information and data for the Company at the dates and for the periods indicated. The information as at June 30, 1996 and 1995 and for the years ended June 30, 1996, 1995 and 1994 has been derived from, should be read in conjunction with and is qualified in its entirety by reference to the Combined Financial Statements of the Company and related notes thereto audited by Harteneck, López y Cia./Coopers & Lybrand, which, except for the balance sheet data as at June 30, 1994, are included elsewhere in this document. The Consolidated and Combined Financial Statements included herein are prepared and presented in accordance with Argentine GAAP, which differ in certain significant respects from U.S. GAAP. Annex B provides a description of the principal differences between Argentine GAAP and U.S. GAAP as they relate to the Company.

The selected consolidated/combined historical financial information and data at and for the nine‑month periods ended March 31, 1997 and 1996 as set forth below is derived from, should be read in conjunction with and is qualified in its entirety by reference to the unaudited Consolidated/Combined Financial Statements of the Company as reviewed by Harteneck, López y Cia./Coopers & Lybrand, included elsewhere in this document. In the opinion of management, the unaudited Consolidated/Combined Financial Statements include all adjustments consisting of normal and recurring accruals which are necessary for a fair presentation of the financial position and results of operations for these interim periods. Results of interim periods are not necessarily indicative of results for a full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations by Segment."

Nine Months

Year Ended June 30, Ended March 31,

1994 1995(4) 1996 1996 1997

(Unaudited)

(In thousands of Pesos except for financial ratios)

Income Statement Data

Net sales:

Mass transportation management P$ -- P$ 118,335 P$ 135,685 P$ 100,972 P$131,066

Waste management 55,963 68,515 65,398 45,625 51,361

Construction 230,778 224,483 111,567 83,047 123,754

Toll road management 16,221 17,930 23,557 13,299 18,015

Total net sales 302,961 429,263 336,208 242,943 324,196

Segment operating income/(loss):

Mass transportation management -- (1,807) 952 1,593 2,882

Waste management 9,704 16,170 14,374 9,129 9,826

Construction 16,328 (2,445) (5,450) (1,792) 9,139

Toll road management 2,993 791 4,108 1,503 919

Total segment operating income 29,025 12,708 13,984 10,433 22,766

Corporate operating expenses 366 347 523 595 1,950

Total operating income 28,659 12,362 13,462 9,838 20,816

Financing income/(expense):

Generated by assets 7,306 (8,892) 15,049 9,871 9,606

Generated by liabilities (3,725) 5,089 (24,429) (20,187) (14,740)

Inc ome from permanent investments . 4,688 4,048 3,107 2,410 2,671

Other income, net 1,408 4,212 2,923 3,533 3,405

Income before income taxes and minority interest 38,335 16,819 10,112 5,464 21,757

Income taxes (8,696) (5,166) (418) (286) (3,091)

Minority interest (4,270) (1,941) (4,020) (2,194) (4,018)

Net income P$ 25,369 P$ 9,711 P$ 5,674 P$ 2,985 P$ 14,648

Other Financial Data

EBITDA(1) P$ 52,854 P$ 43,773 P$ 46,083 P$ 35,975 P$ 48,487

Capital expenditures 23,238 35,084 23,150 16,374 28,896

Depreciation and amortization 30,688 37,044 37,244 29,735 29,623

Pro forma interest expense(2) -- -- 13,736 -- 10,302

Ratio of EBITDA to pro forma interest expense -- -- 3.3x -- 4.7x

Ratio of total debt to EBITDA 1.1x 2.7x 2.2x -- --

Ratio of earnings to fixed charges(3) 4.5x 1.8x 1.3x 1.2x 2.3x

As of June 30, As of March 31,

1994 1995(4) 1996 1996 1997

(Unaudited)

(In thousands of Pesos except for financial ratios)

Balance Sheet Data

Net working capital P$ 37,416 P$ 21,885 P$ 34,821 P$ 18,262 P$(32,288)

Fixed assets, net 84,106 122,990 107,848 106,366 116,611

Total assets 322,907 449,746 427,815 429,363 446,370

Total debt 55,551 119,669 99,463 103,128 114,520

Minority interest 17,356 20,972 24,831 22,577 26,723

Shareholders' equity 120,028 123,531 140,873 122,540 83,730

(1) EBITDA represents net income increased by the sum of income taxes, financing charges, depreciation of fixed assets, amortization of intangible assets, amortization of deferred toll road revenue, minority interests, cash dividends received from permanent investments and Unrestricted Subsidiaries, and any other extraordinary non‑cash charges less, other income, net (including, without duplication, amortization of negative goodwill and gains from sale of assets), reversal of revaluation reserve, financing income, income from permanent investments, dividends paid to minority investors in non‑wholly‑owned Restricted Subsidiaries and deferred toll road revenues recognized as net sales. The Company has included information concerning EBITDA (which is not a measure of financial performance under generally accepted accounting principles) because it understands that it is used by certain investors as one measure of an issuer's ability to service or incur indebtedness. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's performance or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. See "Description of the Notes" for a more detailed discussion of consolidated EBITDA.

(2) Adjusted to give pro forma effect to the Offering, interest on the Senior Notes has been calculated at a rate of 11 5/8% per annum.

(3) The ratio of earnings to fixed charges covers continuing operations, and for this purpose (i) earnings consist of income (loss) before income taxes plus fixed charges and (ii) fixed charges consist of interest expense on all debt (including capitalized interest), amortization of deferred financing costs and a percentage of rental expense deemed to be interest.

(4) The results of Metrovías are consolidated for the entire fiscal year 1995 despite the fact that the Company only acquired a majority stake in Metrovías in May 1995. However, the line item "Minority interest" for such fiscal year reflects that the Company held a 33.3% interest in Metrovías until May 1995 and a 55.3% interest thereafter.

(5) Reflects the P$70.0 million reduction in shareholders' equity undertaken since March 31, 1997. See "Company Background and History."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS: COMBINED

FINANCIAL STATEMENTS

The following discussion should be read in conjunction with the Combined Financial Statements of the Company for, and at the end of, the years ended June 30, 1996, 1995 and 1994 and the Unaudited Consolidated Combined Financial Statements of the Company for, and at the end of, the nine‑month periods ended March 31, 1997 and 1996 and the related notes thereto included elsewhere in this Offering Memorandum. The Combined Financial Statements have been prepared in accordance with Argentine GAAP, which differs in certain significant respects from U.S. GAAP. Annex B provides a description of the principal differences between Argentine GAAP and U.S. GAAP, as they relate to the Company.

Basis of Consolidation

As discussed above, the Company was organized in October 1996. The financial statements have been prepared as if the businesses included therein were combined as of July 1, 1993. The businesses combined for purposes of the Company's financial statements were not legal subsidiaries of the Issuer as of any period ending prior to October 1996 and were subsidiaries of the Issuer for only five months of the nine‑month period ended March 31, 1997. These Combined Financial Statements present the combined assets and liabilities and results of operations of the Company at the historical amounts of the two subsidiaries, BRH and Caminos, combined with the Issuer and include adjustments based on certain assumptions as described in the notes thereto. These assumptions and related adjustments, are in the view of management, necessary to present the financial position, results of operations and cash flows as if the Company had operated on a stand alone basis for the periods presented. The Combined Financial Statements, however, are not necessarily indicative of the financial position, results of operations and cash flows in the future or what would have been attained had the Company operated independently.

The Combined Financial Statements include the consolidated financial results of the Issuer and its majority owned subsidiaries (BRH, Caminos, Metrovías, Red Vial (as defined herein), Covicentro (as defined herein), Cliba, Rail de Inversiones and Sehos). All material intercompany balances and transactions have been eliminated in the combination. Investments in affiliates representing less than 50% ownership, which the Issuer has accounted for as a long‑term investment, are accounted for under the equity method.

For fiscal year 1995, the results of Metrovías are combined for the entire fiscal year despite the fact that the Company only acquired a majority stake in Metrovías in May 1995. However, the line item "Minority interest" for such fiscal year reflects that the Company held a 33.3% interest in Metrovías until May 1995 and a 55.3% interest thereafter.

Revenue Recognition and Other Accounting Policies

Revenues from construction contracts are recognized upon approval by the customer of the work performed, and are determined based on a percentage of completion method calculated as the ratio of earned revenues to total contract price, after considering accumulated costs and estimated costs to complete. If the estimates of costs to complete long‑term contracts indicate a loss on a combined contracts basis, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Revenues received by the toll roads from toll fees are also accounted for using a percentage of completion method. Toll fees are recognized into earnings based on the expected gross margin on the project. Toll fees collected in excess of those that are earned are classified as deferred revenue. This accounting method is used to achieve proper matching of revenues to expenses.

The Company's significant accounting policies, including revenue recognition policies for other concessions and/or business segments, are summarized in Note 2(a) to the Company's Combined Financial Statements.

Inflation Accounting

To account for the effects of inflation in Argentina and in accordance with Argentine GAAP, prior to September 1, 1995, the financial statements of the Company were periodically restated based on changes in the Wholesale Price Index ("WPI") published by INDEC. However, pursuant to Resolution No. 272 issued by the CNV, pursuant to Decree No. 316/95, and Resolution No. 8/95 issued by the Inspección General de Justicia, Argentine companies are not permitted to reflect the effect of inflation on their financial statements based on changes in the WPI as of any date or for any period after August 31, 1995. Accordingly, the financial statements of the Company which cover any date or period before September 1, 1995 are required pursuant to such resolution to reflect the effects of inflation on such financial statements through August 31, 1995 but not for any date or period thereafter. Consequently, unless otherwise noted herein, financial data for fiscal years ended prior to September 1, 1995 have been restated in constant Pesos at August 31, 1995. Similarly, the financial data for the portions of fiscal years or other periods which include any period before September 1, 1995 and any period after August 31, 1995 have been so restated. No other financial data have been restated in constant Pesos. For the nine‑month period from July 1, 1996 to March 31, 1997, the change in the WPI was less than one percent. Due to the low level of inflation in Argentina after August 31, 1995, the effects of restatement for inflation are not significant. To the extent that the financial statements of the Company are not restated to reflect the effects of inflation, such financial statements will not include the restatement of nonmonetary assets and the net gain or loss on exposure of monetary assets and liabilities to price level changes.

Financial Periods Covered

CLISA is subject to the reporting rules imposed by the CNV on companies subject to its regulation. In general, such rules require that such companies report their quarterly financial results within 42 days after the end of their fiscal quarters and their annual financial results within 70 days after the end of their fiscal year. However, because four of the Company's equity method investees are not regulated by the CNV and tend to report their quarterly and annual financial results after the end of such 42‑day and 70‑day periods, CLISA is unable to report in the applicable 42‑day and 70‑day periods, its quarterly and annual financial results which include the results of such companies for the same fiscal periods. As a result and in accordance with the CNV's rules, CLISA reports the results of such equity investees with a three‑month lag. For example, CLISA's income statement and balance sheet for and at the end of its fiscal year ended June 30, 1996 took into account these investees, income statements and balance sheets for and at the end of the twelve‑month period ended March 31, 1996. See Note 1(a) to the Combined Financial Statements.

Certain amounts contained herein may not total due to rounding.

Consolidated Combined Results of Operations

Nine Months

Year Ended June 30, Ended March 31,

1994 1995 1996 1996 1997

(Unaudited)

(in millions of Pesos)

Net sales P$303.0 P$429.3 P$336.2 P$242.9 P$324.2

Cost of sales 214.6 319.7 249.8 177.9 242.0

Administrative expenses 43.9 64.8 49.0 37.4 41.0

Other operating expenses 15.8 32.4 23.9 17.8 20.4

Operating income P$ 28.7 P$ 12.4 P$ 13.5 P$ 9.8 P$ 20.8

Operating margin 9.5% 2.9% 4.0% 4.0% 6.4%

Other income, net P$ 1.4 P$ 4.2 P$ 2.9 P$ 3.5 P$ 3.4

Income from permanent investments 4.7 4.0 3.1 2.4 2.7

Financing income/(expense)

generated by assets 7.3 (8.9) 15.0 9.9 9.6

Financing income/(expense) generated by

liabilities (3.7) 5.1 (24.4) (20.2) (14.7)

Income tax (8.7) (5.2) (0.4) (0.3) (3.1)

Minority interest (4.3) (1.9) (4.0) (2.2) (4.0)

Net income P$ 25.4 P$ 9.7 P$ 5.7 P$ 3.0 P$ 14.6

Depreciation and amortization P$ 20.3 P$ 26.3 P$31.7 P$21.5 P$23.4

Amortization of deferred highway toll

revenues 10.4 10.7 5.5 8.2 6.2

Results of Operations by Segment

Nine Months

Year Ended June 30, Ended March 31,

1994 1995 1996 1996 1997

(Unaudited)

Mass Transportation (in millions of Pesos)

Net sales NA P$118.3 P$135.7 P$101.0 P$131.1

Cost of sales NA 86.2 106.9 77.4 103.9

Administrative expenses NA 21.2 16.7 13.3 15.7

Other operating expenses NA 12.7 11.1 8.6 8.6

Operating income NA P$ (1.8) P$ 1.0 P$ 1.6 P$ 2.9

Operating margin NA -1.5% 0.7% 1.6% 2.2%

Depreciation and amortization NA P$ 3.3 P$ 4.4 P$ 3.2 P$ 4.1

(Fixed assets only)

Nine Months

Year Ended June 30, Ended March 31,

1994 1995 1996 1996 1997

(Unaudited)

Waste Managemen (in millions of Pesos)

Net sales P$56.0 P$68.5 P$65.4 P$45.6 P$51.4

Cost of sales 36.8 40.2 40.7 29.6 32.3

Administrative expenses 8.5 11.1 10.1 6.9 8.9

Other operating expenses 1.0 1.0 0.2 0.1 0.3

Operating income P$ 9.7 P$16.2 P$14.4 P$ 9.1 P$ 9.8

Operating margin 17.3% 23.6% 22.0% 20.0% 19.1%

Depreciation and amortization P$ 0.4 P$ 1.2 P$ 1.0 P$ 0.6 P$ 0.7

(Fixed assets only)

Nine Months

Year Ended June 30, Ended March 31,

1994 1995 1996 1996 1997

Construction (Unaudited)

(in millions of Pesos)

Net sales P$233.8 P$236.2 P$120.9 P$89.5 P$135.2

Cost of sales 173.1 193.5 97.8 70.0 105.7

Administrative expenses 31.5 28.5 17.8 14.0 10.7

Other operating expenses 12.8 16.6 10.8 7.3 9.6

Operating income P$ 16.3 P$ (2.4) P$ (5.5) P$(1.8) P$ 9.1

Operating margin 7.0% -1.0% -4.5% -2.0% 6.8%

Depreciation and amortization P$ 14.3 P$ 13.0 P$ 9.8 P$ 6.9 P$ 6.0

(Fixed assets only)

Nine Months

Year Ended June 30, Ended March 31,

1994 1995 1996 1996 1997

(Unaudited)

Toll Road Management (in millions of Pesos)

Net sales P$16.2 P$17.9 P$23.6 P$13.3 P$18.0

Cost of sales 7.8 11.4 13.7 7.1 11.4

Administrative and other operating expenses 5.5 5.7 5.8 4.7 5.7

Operating income P$ 3.0 P$ 0.8 P$ 4.1 P$ 1.5 P$ 0.9

Operating margin 18.5% 4.4% 17.4% 11.3% 5.1%

Depreciation and amortization P$ 4.2 P$ 5.4 P$10.0 P$ 6.3 P$ 8.3

(Fixed assets only)

Nine Months Ended March 31, 1997 Compared to Nine Months Ended March 31, 1996

Overview

For the nine months ended March 31, 1997, net sales increased P$81.3 million, or 33.4%, to P$324.2 million from P$242.9 million for the same period in fiscal year 1996, primarily as a result of sales increases of P$30.1 million and P$45.7 million in the mass transportation management and construction segments, respectively.

Cost of sales increased by P$64.1 million, or 36.0%, to P$242.0 million for the nine months ended March 31, 1997 from P$177.9 million for the nine months ended March 31, 1996, largely due to increases of P$26.5 million and P$35.7 million in the mass transportation management and construction segments, respectively. Depreciation and amortization expenses totalled P$23.4 million for the nine months ended March 31, 1997 and P$21.5 million for the nine months ended March 31, 1996. Amortization expense for deferred highway toll revenues decreased by P$2.0 million to P$6.2 million for the nine months ended March 31, 1997 from P$8.2 million for the nine months ended March 31, 1996.

Administrative and other expenses increased by P$6.2 million, or 11.3%, to P$61.4 million for the nine months ended March 31, 1997 from P$55.2 million for the nine months ended March 31, 1996.

As a result of the above, operating income for the nine months ended March 31, 1997 increased by P$11.0 million, or 111.6%, to P$20.8 million for the nine months ended March 31, 1997 from P$9.8 million for the nine months ended March 31, 1996.

Please refer to the segment data presented below for a full description of the operating results for each of the Company's four segments: mass transportation management, waste management, construction and toll road management. A description and analysis of consolidated combined depreciation and amortization, other income (expense), financing income and expense, income from permanent investments, minority interest and net income follows the segment data.

Results of mass transportation management segment.

Net sales. Net sales of the Company's mass transportation business increased by P$30.1 million, or 29.8%, to P$131.1 million for the nine months ended March 31, 1997 compared to P$101.0 million during the same period in fiscal year 1996. This increase in sales was attributable to increases in each of Metrovías' three principal sources of revenues: (i) revenues from transportation services increased by P$12.5 million, or 15.2%, to P$95.0 million compared to P$82.5 million due principally to increased ridership, and to a lesser extent a P$0.0144 fare increase in October 1996; (ii) revenues from works performed pursuant to the Investment Plan increased by P$16.7 million to P$32.3 million for the nine months ended March 31, 1997 compared to P$15.6 million in the comparable 1996 period as a result of the accelerated execution of the Investment Plan including installing a new communications system and control center, installing new electrical substations and replacing tracks on Lines C and D of the Buenos Aires Subway; and (iii) sales from commercial activities increased by P$0.9 million to P$3.7 million compared to P$2.8 million as a result of leasing additional retail space at five newly renovated stations and new publicity/advertising space contracts throughout the system.

Cost of sales. Cost of sales of the Company's mass transportation business increased by P$26.5 million, or 34.2%, to P$103.9 million during the nine months ended March 31, 1997 compared to P$77.4 million during the same period in fiscal year 1996. This increase was attributable to the following: (i) cost of sales associated with providing transportation services increased P$6.7 million as a result of an increase in spare parts and outsourcing expense and in value added taxes; (ii) costs of sales associated with undertaking Investment Plan capital improvements increased by P$19.6 million to P$35.5 million during the fiscal year 1997 period compared to P$15.9 million in the same period in fiscal year 1996 as a result of the increased activity as mentioned above; and (iii) costs of sales associated with commercial activities increased by P$0.2 million to P$2.9 million for the nine‑month period ended March 31, 1997 compared to P$2.8 million in the same period in fiscal year 1996. The significant increase in cost of goods sold related to the Investment Plan resulted in the Company reporting a negative gross margin on Investment Plan sales of P$3.2 million largely arising from a P$1.3 million loss from a contract related to the installation of a car to station communication system which has been completed and a P$0.5 million loss from the replacement of tracks on lines C and D.

Administrative expenses. Administrative expenses consist of salaries, professional fees, litigation costs, other reserves and payments to Banco del Suquía (as defined herein) under its contract to distribute token and change kits each morning, collect tokens and cash each evening, reconcile cash to token sales and administer related banking activities. Administrative expenses increased by P$2.3 million, or 17.5%, to P$15.7 million compared to P$13.3 million for the same period in fiscal year 1996 due principally to increases in taxes, professional and consulting fees and outsourced services and reserves for non‑litigation contingencies which were partially offset by a decrease in salaries.

Other operating expenses. Other operating expenses consist primarily of expenses associated with the sale of tokens (primarily the salaries of token booth clerks), security costs, costs of cleaning coaches and stations and related taxes as well as expenses for professional services. Other expenses remained constant at P$8.6 million.

Results of waste management segment.

Net sales. Net sales of the Company's waste management segment increased by P$5.7 million, or 12.6%, to P$51.4 million during the nine months ended March 31, 1997 compared to P$45.6 million in the same period in fiscal year 1996. This increase in sales during the fiscal year 1997 period was attributable to: (i) P$1.8 million from a new contract obtained for services in the municipality of Ituzaingó; (ii) P$1.2 million from the provision of new cleaning and other services to various clients by Sehos; (iii) P$1.1 million from increased revenues at Cliba due to increased tonnage hauled resulting from increased economic activity in the greater Buenos Aires area and additional services provided during such period. The remaining P$1.6 million increase was spread among the Company's remaining concessions.

Cost of sales. Cost of sales increased by P$2.8 million, or 9.3%, to P$32.3 million during the nine months ended March 31, 1997 compared to P$29.6 million during the same period in fiscal year 1996. This increase was due to: (i) a P$1.1 million increase in personnel, maintenance and operating costs from the establishment of the Ituzaingó concession and (ii) a P$0.9 million increase from the cost of additional services provided to the municipality of San Isidro and three municipalities in Uruguay. The remaining P$0.8 million increase was spread among the Company's other concessions.

Administrative expenses. Administrative expenses consist of administrative personnel salaries, computer and other systems costs and related overhead charges. Because the Company's concessions are dispersed across Argentina, Uruguay and Mexico and are operated through separate Joint Ventures, each with different partners, trade name, service mix and customer base, the Company administers its Joint Ventures separately. Administrative expenses increased by P$2.1 million, or 30.1%, to P$8.9 million during the nine months ended March 31, 1997 compared to P$6.9 million for the same period in fiscal year 1996 due principally to an increase in expenses at Cliba of P$1.1 million and a P$0.5 million expense involved in the establishment of a new operation in Santa Fe.

Other operating expenses. Other operating expenses increased by P$0.2 million to P$0.3 million during the nine‑month periods ended March 31, 1997 compared to P$0.1 million during the same period in fiscal year 1996 due principally to expenses incurred at Sehos.

Results of construction segment.

Net Sales. Net sales of the Company's construction segment increased by P$45.7 million, or 51.1%, to P$135.2 million during the nine months ended March 31, 1997 compared to P$89.5 million during the same period in fiscal year 1996. This increase in sales during the fiscal year 1997 period was attributable to: (i) a P$38.5 million increase in sales to affiliated companies to P$59.9 million from P$21.4 million in the comparable fiscal year 1996 period, such increase principally related to the commencement of construction of the Western Access Road; and (ii) a P$8.3 million increase in sales to private sector customers to P$33.2 million from P$24.9 million in the comparable fiscal year 1996 period, including a P$15.3 million increase in sales related to the construction of the headquarters building for Telecom Argentina S.A. This increase more than offset a decrease in sales to public sector entities to P$42.1 million in the fiscal year 1997 period from P$43.2 million in the same period in fiscal year 1996, which was attributable primarily to a P$3.0 million decrease in revenues from the dam project at Pichi Picun Leufú offset by an increase in revenues from the project at Puerto Pesquero Caleta Paula of P$1.1 million. Approximately P$11.4 million and P$6.4 million of the sales reported above represent sales to other subsidiaries of the Issuer during the nine‑month periods ended March 31, 1997 and 1996, respectively, which have been eliminated in combination (which differs from sales to affiliated companies which includes sales to companies which are not majority‑owned).

Cost of sales. Cost of sales of the Company's construction business increased by P$35.7 million, or 51.1%, to P$105.7 million during the nine months ended March 31, 1997 compared to P$70.0 million during the same period in fiscal year 1996. This increase in cost of sales during the fiscal year 1997 period was due to the increased construction activity which resulted in the increased sales described above.

Administrative expenses. Administrative expenses reflect head office expenses of the construction segment and also those allocated to the Company from its various construction Joint Ventures. Administrative expenses decreased for the nine months ended March 31, 1997 by P$3.2 million, or 23.2% to P$10.7 million from P$14.0 million in the same period in fiscal year 1996 due principally to the continuing restructuring and reorganization of the construction segment which reduced head office expenses. These reorganization initiatives began in 1994, and since June 1995 have resulted in a 190‑person reduction in personnel and the continuing implementation of cost‑saving measures, including, for example, the outsourcing of various engineering and other services. In addition, administrative expenses from Joint Ventures declined by P$2.2 million as the percentage of the Company's construction segment operations undertaken as Joint Ventures declined during the period.

Other operating expenses. Other operating expenses consist primarily of application fees, consulting fees and various other costs associated with evaluating requests for proposals and submitting bids. These expenses increased by P$2.3 million, or 31.3%, to P$9.6 million for the nine months ended March 31, 1997 due to the overall increase in both construction activity and the number of construction projects being evaluated by the Company.

Results of toll road management segment.

Net sales and cost of sales. As mentioned above, the Company accounts for the operations of each of the projects forming its consolidated toll road management segment in accordance with the percentage of completion method. Pursuant to this accounting treatment, the Company, at the inception of a toll road project, estimates the capital expenditures and other improvements required by such project as well as the anticipated project revenues. Based on these estimates, the Company calculates a projected gross margin over its costs for each toll road concession. Each fiscal period, costs of sales for a toll road project are recorded based on (i) current expenses which are deemed investments per the original projections and (ii) depreciation expense for work completed on such project to determine its aggregate costs to date. To this amount, the Company applies the project margin to determine the cumulative revenues to date which should have been recorded by the project (for each such fiscal period, the "Cumulative Projected Earned Revenues"). At the end of each fiscal period, the subsidies earned and tolls collected by the project are recorded as revenues only to the extent necessary for (i) the aggregate revenues recorded by the project since inception until the end of such period to equal (ii) the Cumulative Projected Earned Revenues for such period. (Subsidies earned and toll fees collected in excess of Cumulative Projected Earned Revenues for a fiscal period are classified as deferred revenue which may be applied in future periods as expenses are incurred for the project). Management and advisory fees earned by Caminos during a fiscal period are added to subsidy and toll revenues earned for such period to arrive at total sales for such period.

Cost of sales of the Company's toll road management business increased by P$4.2 million, or 59.4%, to P$11.4 million during the nine months ended March 31, 1997 compared to P$7.1 million during the same period in fiscal year 1996. This increase was largely attributable to an increase in current investment of P$2.2 million and a P$2.0 million increase in depreciation expense attributable primarily to increases in capital expenditures. Net sales recognized by the Company increased by P$4.7 million, or 35.5%, to P$18.0 million during the nine months ended March 31, 1997 compared to P$13.3 million during the same period in fiscal year 1996 due to the increase in cost of sales. The actual toll fees collected, subsidies earned, taxes, deferred revenues and management fees recorded by the Company during the nine months ended March 31, 1997 and 1996 are set forth in the table below:

Nine Months Ended

March 31,

1997 1996

(in millions of Pesos)

Actual tolls collected P$17.0 P$13.7

Subsidies earned 7.0 7.5

Taxes (0.1) (0.3)

Subtotal 24.0 20.8

Deferred revenue (6.2) (8.2)

Management fees 0.3 0.7

Total revenues P$18.0 P$13.3

The increase in tolls collected during the nine‑month period ended March 31, 1997 compared to the same period in fiscal year 1996 period was due to (i) increased traffic on Covicentro and Red Vial which resulted from, in management's opinion, increased economic activity in the area served by both concessions and (ii) an increase in tolls charged by Covicentro effective as of September 1, 1996.

Administrative and other operating expenses. Administrative expenses consist of all expenses related to the operation of a toll road concession which are not allocable to improvements to the highway. Administrative and other expenses increased by P$1.1 million, or 22.7%, to P$5.7 million compared to P$4.7 million for the same period in fiscal year 1996 due principally to subcontracting increases of P$0.4 million, salaries and fee increases of P$0.4 million and other costs increases of P$0.3 million.

Consolidated results.

Depreciation and amortization. On a consolidated combined basis, depreciation and amortization charges for fixed assets increased P$2.1 million to P$19.0 million in the nine months ended March 31, 1997 as compared to P$17.0 million for the same period in fiscal year 1996 as a result of the Company's deployment of more fixed assets in operations. As the Company proceeds with its capital expenditure and investments programs in each of its business segments, it believes depreciation and amortization expenses will increase as more assets are placed into operation. In addition to the depreciation and amortization expenses reported above, the Company recorded an additional P$4.4 million of amortization expense related to goodwill associated with the acquisition of Metrovías shares and capitalization of costs related to the start‑up of Metrovías. The Company also recorded amortization for deferred highway toll revenues of P$6.2 million as a reduction in net sales for the nine months ended March 31, 1997 as compared to P$8.2 million for the same period in fiscal year 1996.

Financing income and expense.Interest and other financing income generated by assets decreased by P$0.3 million to P$9.6 million for the nine months ended March 31, 1997 as compared to P$9.9 million for the same period in fiscal year 1996. This decrease was attributable primarily to a reduction in interest rates charged and principal amounts outstanding on intercompany loans with Roggio as well as the cessation of the accrual of interest on such loans after October 1996. See "Certain Transactions with Related Parties--Intercompany Balances". As a result of the enactment of a decree of the Argentine Federal Government and a CNV regulation which prohibited inflation adjustments after August 31, 1995, the Company recorded no inflation adjustments to financing income related to its financial assets during the nine‑month period ended March 31, 1997 as compared to a P$1.0 million charge in the same period in fiscal year 1996 to compensate for the effects of inflation during July and August of 1995.

Interest and other financing results generated by liabilities decreased by P$5.4 million to P$14.7 million for the nine months ended March 31, 1997 compared to P$20.2 million for the same period in fiscal year 1996. The principal reason for this decrease was a P$7.3 million decrease in the interest expense during the nine months ended March 31, 1997 as compared to the same period in fiscal year 1996. Principal amounts outstanding during the nine months ended March 31, 1997 accrued interest at rates ranging from 4.2% to 23.0% per annum compared to rates ranging from 4.2% to 27.0% during the same period in fiscal year 1996. For the reasons described in the preceding paragraph, the Company recorded no inflation adjustments for such income generated by financial liabilities during the nine‑month period ended March 31, 1997 as compared to a P$1.4 million gain in the same period in fiscal year 1996 to compensate for the effects of inflation during July and August of 1995.

Income from permanent investments and minority interest. The Company's income attributable to permanent investments increased by P$0.3 million to P$2.7 million for the nine‑month period ended March 31, 1997 as compared to P$2.4 million for the same period in fiscal year 1996. This increase was attributable to P$0.6 million increase in net income attributable to the Eriday Joint Venture (as defined herein).

The Company's charges for minority interests held by others in consolidated companies increased by P$1.8 million to P$4.0 million for the nine‑month period ended March 31, 1997 from P$2.2 million in the same period in fiscal year 1996. This increase was attributable to the increased net income of Metrovías and the Company's construction segment.

Other income (expense), net. Other income (expense), net decreased by P$0.1 million for the nine months ended March 31, 1997 to P$3.4 million from P$3.5 million for the nine months ended March 31, 1996. and consisted primarily of (i) a non‑recurring P$1.0 million gain in March 1996 from the subscription of shares in Coviares and (ii) a P$1.0 million gain in March 1997 on the assignment of the Company's preemptive rights to IJM (as defined herein) in connection with the capital increase at GCO.

Net income. As a result of the factors discussed above for the nine months ended March 31, 1997, the Company recorded net income of P$14.6 million as compared to net income of P$3.0 million for the nine months ended March 31, 1996.

Fiscal Year 1996 Compared to Fiscal Year 1995

Overview

For the fiscal year ended June 30, 1996, net sales decreased P$93.1 million, or 21.7%, to P$336.2 million from P$429.3 million for the comparable 1995 period, primarily as a result of a sales decrease of P$115.3 million in the construction segment partially offset by sales increases of P$17.4 million and P$5.6 million in the mass transportation management and toll road segments, respectively.

Cost of sales decreased by P$69.9 million, or 21.9%, to P$249.8 million for the fiscal year ended June 30, 1996 from P$319.7 million for the fiscal year ended June 30, 1995, principally due to a decrease in cost of sales of P$95.7 million in the construction segment partially offset by increases of P$20.7 million and P$2.3 million in the mass transportation management and toll road segments, respectively. Depreciation and amortization expenses totaled P$31.7 million for the fiscal year ended June 30, 1996 and P$26.3 million for the fiscal year ended June 30, 1995. Amortization expense for deferred highway toll revenues decreased by P$5.2 million to P$5.5 million for the fiscal year ended June 30, 1996 from P$10.7 million for the fiscal year ended June 30, 1995.

Administrative and other expenses decreased by P$24.3 million, or 25.0%, to P$72.9 million for the fiscal year ended June 30, 1996 from P$97.2 million for the fiscal year ended June 30, 1995, primarily related to a restructuring of the Company's construction segment.

As a result of the above, operating income for the fiscal year ended June 30, 1996 increased by P$1.1 million, or 8.9%, to P$13.5 million from P$12.4 million for the fiscal year ended June 30, 1995.

Please refer to the segment data presented below for a full description of the operating results for each of the Company's four segments: mass transportation management, waste management, construction and toll road management. A description and analysis of combined depreciation and amortization, other income (expense), financing income and expense, income from permanent investments, minority interest and net income follows the segment data.

Results of mass transportation segment.

Net sales. Net sales of the Company's mass transportation business increased by P$17.4 million, or 14.7%, to P$135.7 million in the fiscal year ended June 30, 1996 compared to P$118.3 million during fiscal year 1995. This increase in sales during fiscal year 1996 was attributable to increases in each of Metrovías' three principal sources of revenues: (i) revenues from transportation services decreased by P$2.7 million to P$111.1 million compared to P$113.8 million due to a reduction of P$4.6 million in the operating subsidy received from the government, which was partially offset by an increase in ridership revenues; (ii) revenues from the Investment Plan increased by P$18.8 million, to P$20.5 million compared to P$1.7 million in fiscal year 1995 as a result of the acceleration of the Investment Plan including replacing signalling systems, installing a new communications system, installing new electrical substations and control center and replacing tracks on Lines C and D of the Buenos Aires Subway; and (iii) sales from commercial activities increased by P$1.2 million, or 44.3%, to P$4.0 million compared to P$2.8 million as a result of leasing additional retail space at two newly renovated stations and increases in revenues from advertising.

Cost of sales. Cost of sales increased by P$20.7 million, or 24.0%, to P$106.9 million during the fiscal year ended June 30, 1996 compared to P$86.2 million during fiscal year 1995. This increase was attributable to the following:

(i) costs associated with providing transportation services decreased by P$4.9 million, or 5.8%, to P$79.7 million compared to P$84.6 million in 1995 due to decreases of (a) P$3.4 million in reduced salary expense resulting from a 450 person reduction in head‑ count effectuated throughout the year; (b) P$0.4 million in security expenses from the outsourcing to Centauro S.A.; (c) P$1.0 million in litigation expense; and (d) P$0.7 million in insurance costs, due to the Company renegotiating its firmwide coverage with Johnson & Higgins (these decreases more than offset increased maintenance costs resulting from the CAF contract and the introduction into service of the recently purchased Japanese coaches to replace the antiquated coaches previously operating on Line B for which the Company had reduced maintenance costs in anticipation of retirement);

(ii) costs associated with the Investment Plan increased by P$23.3 million to P$24.6 million compared to P$1.3 million in fiscal year 1995 as a result of the significant increase in capital investments undertaken during such period; and

(iii) costs associated with commercial activities increased by P$2.4 million to P$2.6 million due primarily to increased marketing expenditures.

Administrative expenses. Administrative expenses consist of salaries, professional fees, litigation costs, other reserves and payments to Banco del Suquía under contract to distribute token and change kits each morning, collect tokens and cash each evening, reconcile cash to token sales and administer related banking activities. Administrative expenses decreased by P$4.5 million, or 21.3%, to P$16.7 million for fiscal year 1996 compared to P$21.2 million for fiscal year 1995 due primarily to reductions of (i) P$1.8 million in personnel costs, (ii) P$1.0 million in taxes, (iii) P$0.8 million in repair and maintenance expenses, (iv) P$0.1 million in costs associated with the Banco del Suquía contract, (v) P$0.3 million in rental expenses and (vi) P$1.0 million in various other costs which were offset by a P$1.4 million increase in professional and consulting fees.

Other operating expenses. Other operating expenses consist primarily of expenses associated with the sale of tokens (primarily the salaries of token booth clerks), security costs, costs of cleaning coaches and stations and related taxes as well as expenditures for professional services. Other operating expenses decreased by P$1.6 million, or 12.7%, to P$11.1 million for the fiscal year ended June 30, 1996 from P$12.7 million during fiscal year 1995 primarily as result of personnel reductions which reduced salary expense by P$1.7 million.

Results of waste management segment.

Net sales. Net sales decreased by P$3.1 million, or 4.5%, to P$65.4 million during the fiscal year ended June 30, 1996 compared to P$68.5 million in fiscal year 1995. This decrease was attributable to a P$2.4 million decline in sales at Cliba as a result of a decline in the tonnage of waste collected in the greater Buenos Aires region during such period; (ii) a decline in sales of P$2.0 million at Clima due to a reduction in street sweeping and other ancillary services related to provided to the municipality of Córdoba related to certain special events in the prior year and a decline in sales of P$1.7 million at Sehos, all of which were partially offset by a P$3.0 million increase in revenues from additional services provided to municipalities in Uruguay and other concessions.

Cost of sales. Cost of sales increased by P$0.5 million, or 1.2%, to P$40.7 million compared to P$40.2 million in fiscal year 1995. This increase was due to increases of (i) P$0.8 million in costs associated with the start‑up of Zaneco; (ii) P$1.1 million in costs related to new services provided for the concessions in Uruguay; and (iii) P$1.1 million in costs allocated among the Company's other concessions which offset a P$2.6 million decrease in costs at Sehos attributable to the discontinuation of certain services.

Administrative expenses. Administrative expenses consist of administrative personnel salaries, computer and other systems costs and related overhead charges. Administrative expenses decreased by P$1.0 million, or 9.0%, to P$10.1 million compared to P$11.1 million for fiscal year 1995 due principally to a restructuring of Cliba's head office operations.

Other operating expenses. Other operating expenses declined by P$0.8 million to P$0.2 million in fiscal year 1996 from P$1.0 million in fiscal year 1995 due primarily to decreased maintenance expense at Clima.

Results of construction segment.

Net sales. Net sales of the Company's construction segment decreased by P$115.3 million, or 48.8%, to P$120.9 million during the fiscal year ended June 30, 1996 from P$236.2 million during fiscal year 1995. This decrease was attributable to: (i) a P$8.0 million, or 20.9%, decrease in sales to affiliated companies to P$30.1 million from P$38.1 million for fiscal year 1995 related to the completion or suspension of various highway projects; (ii) a P$26.9 million decrease in sales to private sector customers to P$38.9 million from P$65.8 million in fiscal year 1995 due to a general decline in construction activity in Argentina and Uruguay; and (iii) a P$80.5 million, or 60.8%, decline in sales to public sector entities attributable primarily to a slow‑down or suspension of spending by federal, provincial and municipal governments due to the widespread decline in economic activity, including a P$32.6 million decrease in revenues from the dam project at Pichi Picun Leufu. Approximately P$9.3 million of the sales recognized by the construction segment during the fiscal year ended June 30, 1996 were intracompany sales which were eliminated in the combination.

Cost of sales. Cost of sales decreased by P$95.7 million, or 49.5%, to P$97.8 million during fiscal year 1996 compared to P$193.5 million during fiscal year 1995. This decrease in cost of sales was due to the decreased construction activity which resulted in the lower sales described above.

Administrative expenses. Administrative expenses reflect head office expenses of the construction segment and also those allocated to the Company from its various construction Joint Ventures. Administrative expenses decreased by P$10.8 million, or 37.7%, to P$17.8 million due principally to the restructuring and reorganization undertaken during fiscal year 1996 and the last quarter of fiscal year 1995 which reduced head office and other expenses of the construction segment. This reorganization included a 190‑person reduction in head office personnel during fiscal year 1996 and the implementation of cost‑saving measures, including the outsourcing of various engineering and other services. In addition, administrative expenses allocated to the Company's construction Joint Ventures declined by P$7.3 million as many of its construction projects undertaken as Joint Ventures were suspended or completed.

Other operating expenses. Other operating expenses consist primarily of application fees, consulting fees and various other costs associated with evaluating requests for proposals and submitting bids. Other expenses decreased by P$5.8 million to P$10.8 million due to the overall decrease in construction activity and in the number of construction projects being evaluated by the Company during fiscal year 1996.

Operating income. Operating income declined to a loss of P$5.5 million during the fiscal year ended June 30, 1996 from a loss of P$2.4 million primarily as a result of efforts to complete work on two projects which had generated significant losses, particularly the San Martín‑Libertador gas pipeline and the Swift meat processing plant.

Results of toll road management segment.

Net sales and cost of sales. Cost of sales increased by P$2.3 million, or 19.8%, to P$13.7 million during the fiscal year ended June 30, 1996 compared to P$11.4 million during fiscal year 1995. This increase was attributable to an increase in depreciation expense of P$4.6 million, offset by a decrease in current investment expenses of P$2.4 million. Sales recognized by the Company increased by P$5.7 million, or 31.8%, to P$23.6 million from P$17.9 million in fiscal year 1995 due to the increase in costs of sales. The actual toll fees collected, subsidies earned, taxes, deferred revenues and management fees recorded by the Company during the fiscal years ended June 30, 1996 and 1995 are set forth in the table below:

Year Ended June 30,

1996 1995

(in millions of Pesos)

Actual tolls collected P$18.6 P$19.3

Subsidies earned 10.0 9.7

Taxes (0.3) (0.5)

Subtotal 28.2 28.6

Deferred revenues (5.5) (10.7)

Management fees 0.9 0.0

Total revenues P$23.6 P$17.9

Administrative and other operating expenses. Administrative and other operating expenses consist of all expenses related to the operation of a toll road concession, which are not allocable to improvements to the highway. Administrative and other expenses increased by P$0.1 million during the fiscal year ended June 30, 1996 to P$5.8 million compared to P$5.7 million for fiscal year 1995.

Combined results

Depreciation and amortization. On a combined basis, depreciation and amortization charges for fixed assets increased P$2.2 million to P$25.1 million in fiscal year ended June 30, 1996 compared to P$22.9 million for fiscal year 1995. In addition, the Company recorded P$6.6 million of amortization expense related to intangible assets, including goodwill associated with the acquisition of Metrovías shares and capitalization of costs related to the start‑up of Metrovías compared to P$3.4 million in fiscal year 1995. The Company also recorded amortization of deferred highway toll revenues of P$5.5 million as a reduction in net sales for the fiscal year ended June 30, 1996 compared to P$10.7 million for fiscal year 1995.

Financing income and expense.Interest and other financing income generated by assets increased to a gain of P$15.0 million in the fiscal year June 30, 1996 as compared to a loss of P$8.9 million for fiscal year 1995. Actual interest earned on financial assets increased P$7.6 million to P$15.2 million for fiscal year 1996 compared to P$7.5 million for fiscal year 1995. This increase was attributable primarily to an increase in the principal amount of the intercompany loan with Roggio. During fiscal year 1996, the Company recorded a loss of P$0.9 million due to the inflation adjustment for financial assets as compared to a P$16.4 million loss in 1995. This decreased loss is attributable to: (i) the adjustment of such income for inflation recorded only during July and August of 1995 in order to comply with the Argentine law which prohibited inflation adjustments after August 31, 1995, whereas during the previous fiscal year the Company's adjustment reflected inflation for the entire fiscal year; and (ii) during 1995, the inclusion in financial assets of a large amount of past due payments from government entities which accrue interest (and against which the Company takes a reserve), and remain subject to monetary correction for inflation.

Interest and other financing charges generated by liabilities totaled P$24.4 million for the fiscal year ended June 30, 1996 compared to a P$5.1 million gain for the 1995 fiscal year. Actual interest expense was P$25.7 million for fiscal year 1996 compared to P$13.7 million for fiscal year 1995. This increase was attributable to an increase in the average debt of the Company during the fiscal year ended June 30, 1996 of P$10.2 million to P$107.3 million as compared to P$97.1 million for the 1995 fiscal year. During fiscal year 1996, the Company recorded a gain of P$1.3 million from the effects of monetary correction for financial liabilities for inflation during July and August 1995 as compared to a gain of P$20.0 million for fiscal year 1995.

Income from permanent investments and minority interest. The Company's income attributable to permanent investments decreased by P$0.9 million, or 23.2%, to P$3.1 million for the fiscal year ended June 30, 1996 compared to P$4.0 million for fiscal year 1995. This decrease was attributable to (i) a P$0.7 million decrease in the Company's share of the net income at Concanor, (ii) a P$0.8 million decrease in the Company's share of the net income from GCO, (iii) a P$0.7 million decrease in the Company's share of net income from the Eriday Joint Venture offset by (iv) a P$0.9 million increase in the Company's share of the net income at Covimet and (v) a P$0.8 million increase in the Company's share of the net income at Covisur.

The Company's charges for minority interests held by others in combined companies increased by P$2.1 million, to P$4.0 million for the fiscal year ended June 30, 1996. This increase was attributable to the increased profitability of Metrovías (1.4 million) and the toll road companies, Covicentro (0.4 million) and Red Vial (0.4 million).

Other income (expense), net. Other income (expense), net decreased by P$1.3 million for the fiscal year ended June 30, 1996 to P$2.9 million from P$4.2 million for fiscal year 1995. For fiscal year 1996, such income was attributed to a P$0.9 million gain on the sale of fixed assets and non‑operating assets offset by a P$1.1 million increase in reserves of labor claims and other liabilities.

Net income. As a result of the factors discussed above, during fiscal year 1996, the Company recorded net income of P$5.7 million as compared to net income of P$9.7 million for the fiscal year 1995.

Fiscal Year 1995 Compared to Fiscal Year 1994

Overview

For the fiscal year ended June 30, 1995, net sales increased P$126.3 million, or 41.7%, to P$429.3 million from P$303.0 million for the comparable 1994 period, principally as a result of consolidating the operations of Metrovías. As a result, mass transportation management segment sales increased from P$0.0 million to P$118.3 million. The increase in sales was also attributable to a P$12.6 million sales increase in the waste management segment and a P$2.4 million increase in sales in the construction segment.

Cost of sales increased by P$105.1 million, or 49.0%, to P$319.7 million for the fiscal year ended June 30, 1995 from P$214.6 million for the fiscal year ended June 30, 1994, primarily due to the consolidation of Metrovías which resulted in a P$86.2 million increase in cost of sales and a P$20.4 million increase in the cost of sales in the construction segment. Depreciation and amortization expenses totaled P$26.3 million for the fiscal year ended June 30, 1995 and P$20.3 million for the fiscal year ended June 30, 1994. Amortization expense for deferred highway toll revenues increased by P$0.3 million to P$10.7 million for the fiscal year ended June 30, 1995 compared to P$10.4 million for the fiscal year ended June 30, 1994.

Administrative and other expenses increased by P$37.5 million, or 62.8%, to P$97.2 million for the fiscal year ended June 30, 1995 from P$59.7 million for the fiscal year ended June 30, 1994 primarily as a result of the Metrovías consolidation.

As a result of the factors described above, operating income for the fiscal year ended June 30, 1995 decreased by P$16.3 million, or 56.9%, to P$12.4 million from P$28.7 million for the fiscal year ended June 30, 1994.

Please refer to the segment data presented below for a full description of the operating results for each of the Company's four segments: mass transportation management, waste management, construction and toll road management. A description and analysis of combined depreciation and amortization, other income (expense), financing income and expense, income from permanent investments, minority interest and net income follows the segment data.

Results of mass transportation segment.

During the fiscal year ended June 30, 1994, the Issuer, through BRH held less than a majority of the common stock of Metrovías. As a result, the operating results of Metrovías were accounted for using the equity method and, are not included on a consolidated basis in the Company's combined financial statements for the fiscal year ended June 30, 1994. Accordingly, no comparison of the results of the mass transportation management segment has been provided for the periods ended June 30, 1995 and 1994.

Results of waste management segment.

Net sales. Net sales of the Company's waste management segment increased by P$12.6 million, or 22.4%, to P$68.5 million during the fiscal year ended June 30, 1995 compared to P$56.0 million in fiscal year 1994. This increase was mainly attributable to (i) P$3.7 million in increased sales for additional services rendered to the cities of Córdoba and Buenos Aires, (ii) P$2.0 million in increased sales from the commencement of operations of Tecsan, and (iii) P$1.6 million attributable to Clifer as sales for a full year for this concession were realized in 1995 as compared to only six months of sales in the previous fiscal year.

Cost of sales. Cost of sales increased by P$3.5 million, or 9.5%, to P$40.2 million in fiscal year 1995 compared to P$36.8 million during fiscal year 1994. This increase was primarily due to (i) a P$1.8 million increase in personnel, maintenance and operating costs due to the commencement of operations by Tecsan and (ii) a P$1.5 million increase in personnel, maintenance and operating costs from the commencement of operations at Clifer, Zaneco and Clibar.

Administrative expenses. Administrative expenses increased by P$2.6 million, or 30.9%, to P$11.1 million in fiscal year 1995 compared to P$8.5 million for the same period in 1994 due principally to (i) a P$2.4 million increase in expenses at Cliba due to the attempt to consolidate administrative expenses for Tescan and Ayres, which was partially offset by a P$0.6 million decrease in expenses at Ayres and (ii) a P$0.8 million increase in administrative costs among the Company's various concessions.

Other operating expenses. Other operating expenses remained constant at P$1.0 million during the fiscal year ended June 30, 1995 and 1994.

Results of construction segment.

Net sales. Net sales of the Company's construction segment increased by P$2.4 million, or 1.0%, to P$236.2 million during the fiscal year ended June 30, 1995 compared to P$233.8 million during fiscal year 1994. This increase in sales during the 1995 period was attributable to (i) a P$7.3 million increase in sales to the public sector to P$132.4 million from P$125.1 million in fiscal year 1994, primarily due to a P$15.7 million increase in revenues from the dam project at Pichi Picun Leufú and (ii) a P$13.2 million increase in sales to affiliated companies to P$38.1 million from P$24.8 million for fiscal year 1994, which together more than offset a P$18.2 million decrease in sales to private sector customers, including a decrease of P$33.4 million from the termination of a project to install cell towers for the cellular telephone company, CTI Compania de Teléfonos del Interior, and an increase of P$12.8 million related to the San Martín‑Libertador gas pipeline. Approximately P$11.7 million and P$3.1 million of the sales reported above represent sales to other subsidiaries of the Issuer during the fiscal years ended June 30, 1995 and 1994, respectively, which have been eliminated in combination.

Cost of sales. Cost of sales of the Company's construction business increased by P$20.4 million, or 11.8%, to P$193.5 million during the fiscal year ended June 30, 1995 compared to P$173.1 million during fiscal year 1994. This increase was due to the increased construction activity generating the increased sales described above.

Administrative expenses. Administrative expenses decreased for the fiscal year ended June 30, 1995 by P$3.0 million, or 9.5%, to P$28.5 million from P$31.5 million in the comparable 1994 period due principally to the commencement of the restructuring and reorganization which reduced head office expenses of the construction segment. This reorganization included a 230‑person reduction in head office personnel during fiscal year 1995 and the implementation of cost‑saving measures, including the outsourcing of various engineering and other services.

Other operating expenses. Other operating expenses consist primarily of application fees, consulting fees and various other costs associated with evaluating requests for proposals and submitting bids. Other expenses increased by P$3.8 million, or 29.2%, to P$16.6 million as a result of the increased construction activity described above.

Results of toll road management segment.

Net sales and cost of sales. Cost of sales of the Company's toll road management business increased by P$3.7 million, or 47.2%, to P$11.4 million during the fiscal year ended June 30, 1995 compared to P$7.8 million during fiscal year 1994. This increase was attributable to a P$1.2 million increase in depreciation expense and a P$2.4 million increase in current costs incurred for the improvement of the Red Vial toll road. Sales recognized by the Company increased by P$1.7 million, or 10.5%, to P$17.9 million during fiscal year 1995 compared to P$16.2 million during fiscal year 1994 primarily due to the increase in cost of sales for Red Vial. The actual toll fees collected, subsidies earned, taxes, deferred revenues and management fees recorded by the Company during the fiscal years ended June 30, 1995 and 1994 are set forth in the table below:

Year Ended June 30,

1996 1995

(in millions of Pesos)

Actual tolls collected P$19.3 P$18.6

Subsidies earned 9.7 8.5

Taxes (0.5) (0.5)

Subtotal 28.6 26.6

Deferred revenues (10.7) (10.4)

Management fees 0.0 0.0

Total revenues P$17.9 P$16.2

Administrative and other operating expenses. Administrative and other operating expenses consist of all expenses related to the operation of a toll road which are not allocable to improvements to the highway. Administrative and other operating expenses increased by P$0.2 million to P$5.7 million during the fiscal year ended June 30, 1995 compared to P$5.5 million during fiscal year 1994.

Combined results.

Depreciation and amortization. On a combined basis, depreciation and amortization charges for fixed assets increased P$4.1 million to P$22.9 million in the fiscal year ended June 30, 1995 compared to P$18.8 million for fiscal year 1994. In addition, in fiscal year 1995, the Company recorded P$3.4 million of amortization expense related to intangible assets, including goodwill associated with the acquisition of Metrovías shares and capitalization of costs related to the start‑up of Metrovías in fiscal year 1995 compared to P$1.5 million in fiscal year 1994. The Company also recorded amortization of deferred highway toll revenues of P$10.7 million as a reduction in net sales for the fiscal year ended June 30, 1995 as compared to P$10.4 million for fiscal year 1994.

Financing income and expense. Interest and other financing income generated by assets decreased to a net expense of P$8.9 million for the fiscal year ended June 30, 1995 as compared to income of P$7.3 million for the comparable period in 1994. Actual interest accrued in respect of financial assets decreased by P$1.7 million to P$7.5 million in fiscal year 1995 compared to P$9.2 million in fiscal year 1994. This decrease was attributable to a reduction in the overall amount of receivables and other accounts accruing interest during the fiscal year. This decrease was offset by the effects of the monetary correction for financial assets, which for the fiscal year ended June 30, 1995 resulted in a loss of P$16.4 million as compared to a loss of P$2.1 million for fiscal year 1994.

Interest and other financing results generated by liabilities decreased by P$8.8 million to a gain of P$5.1 million for the fiscal year ended June 30, 1995 compared to an expense of P$3.7 million for fiscal year 1994. Actual interest expense increased by P$8.1 million to P$13.7 million in fiscal year 1995 compared to P$5.6 million in fiscal year 1994 due primarily to the increase in interest rates during the first half of fiscal year 1995 resulting from the Mexican Peso crisis. This increase in expense was offset by the effects of the monetary correction for financial liabilities which for the fiscal year ended June 30, 1995 resulted in a gain of P$20.0 million as compared to a gain of P$2.5 million for fiscal year 1994.

Income from permanent investments and minority interest. The Company's income attributable to permanent investments decreased by P$0.6 million to P$4.0 million for the fiscal year ended June 30, 1995 compared to P$4.7 million for fiscal year 1994. This decrease was attributable to the removal of Metrovías as a consolidated subsidiary beginning in May 1995.

The Company's charges for minority interests held by others in consolidated companies decreased by P$2.3 million, or 54.5%, to P$1.9 million for the fiscal year ended June 30, 1995. This decrease was largely attributable to the reduced profitability of BRH (P$1.3 million), Caminos (P$0.3 million) and Red Vial (P$0.6 million).

Other income (expense), net. Other income (expense), net increased by P$2.8 million for the fiscal year ended June 30, 1995 to P$4.2 million from P$1.4 million for fiscal year 1994. Other income for fiscal year 1995 was mainly attributable to (i) a P$1.1 million recovery of advanced costs from partners of Metrovías, (ii) a P$1.6 million gain at Metrovías from exchange rate adjustments relating to the purchase of Japanese coaches, (iii) a P$0.4 million gain at Caminos and (iv) a P$0.4 million gain at Sehos.

Net income. As a result of the factors discussed above for the fiscal year ended June 30, 1995, the Company recorded net income of P$9.7 million as compared to a net income of P$25.4 million for the fiscal year ended June 30, 1994.

Liquidity and Capital Resources

Liquidity

The Issuer has no substantial operations and, consequently, must fund its capital requirements through other sources, including cash dividends, management fees and intercompany loans from its subsidiaries and its Joint Ventures and from borrowings.

The Company's total cash flows from operating activities for the nine months ended March 31, 1997 and 1996 were P$40.8 million and P$22.8 million, respectively. The Company's total cash flows from operating activities for the fiscal years ended June 30, 1996, 1995 and 1994 amounted to P$32.4 million, P$31.7 million and P$6.0 million, respectively.

Cash used by the Company in investing activities for the nine months ended March 31, 1997 and 1996 amounted to P$22.9 million and P$23.8 million, respectively. For the fiscal years ended June 30, 1996, 1995 and 1994, the cash used by the Company in investing activities amounted to P$32.6 million, P$38.8 million and P$38.8 million, respectively.

Cash provided by (used by) the Company in financing activities for the nine months ended March 31, 1997 and 1996 amounted to P$(14.4) million and P$0.7 million, respectively. The Company used P$0.5 million during fiscal year 1996 and generated P$6.6 million and P$31.3 million during fiscal years 1995 and 1994, respectively. The increase in the amount of funds used during the nine months ended March 31, 1997 compared to the same period in 1995 was due primarily to an increase in other assets and a decrease in borrowings.

The Company's total cash flows for the nine months ended March 31, 1997 and 1996 were P$3.4 million and P$(0.3) million, respectively. For the fiscal years ended June 30, 1996, 1995 and 1994, the total funds used by the Company amounted to P$0.7 million, P$0.5 million and P$1.5 million, respectively. The increase in cash flows during the nine months ended March 31, 1997 compared to the same period in fiscal year 1996 was due primarily to an increase in cash provided by operating activities.

At March 31, 1997, the Company's consolidated indebtedness was approximately P$114.5 million, comprised of P$90.3 million of short‑term loans and overdrafts and P$24.3 million of long‑term indebtedness.

The Company will use the proceeds of the Offering to make capital contributions to BRH of U.S.$84.5 million and to repay debt held by CLISA in the amount of U.S.$11.0 million. BRH will use such capital contributions to repay bank debt and other financing arrangements of BRH and Metrovías in accordance with Article 36 of the Negotiable Obligations Law. See "Use of Proceeds."

COMPANY BACKGROUND AND HISTORY

BRH was founded by Mr. Benito Roggio in 1908 and incorporated as a sociedad anónima in 1955. BRH operated principally as a construction company until 1985. In 1985, BRH adopted a strategy of diversifying out of the construction business and between 1985 and 1994 developed or acquired interests in waste management, toll roads, subway management, real estate, energy and real estate services to complement its construction business and the banking, real estate and mining businesses that BRH had acquired prior to 1985. Due to management, legal and tax considerations, BRH underwent a restructuring in 1994 (the "1994 Restructuring") whereby a holding company, Roggio, was created.

As part of the 1994 Restructuring, members of the Roggio family and related companies, together holding approximately 89.9% of the stock of BRH, contributed their BRH shares to Roggio, a newly organized holding company, in exchange for 100% of the shares of Roggio. At that time, Angel Sargiotto, a long‑standing employee of BRH, formed Inversar to hold his 2.3% stake in BRH. Immediately after such transfers of shares and the creation of Roggio and Inversar, the toll road management, real estate and energy businesses of BRH were transferred to Caminos, Promotora del Centro S.A., and Servicios del Centro S.A., respectively, each a newly organized subsidiary of Roggio. Certain other miscellaneous businesses of BRH, including Banco del Suquía S.A., were transferred to SICSA S.A., a newly organized subsidiary of Roggio, and BRH continued to own and operate the remaining construction and waste management businesses. As part of the 1994 Restructuring, Inversar and Roggio received equity interests in each of such newly formed subsidiaries in proportion to their holdings of BRH.

In 1996, the management of Roggio decided to consolidate all infrastructure development and service businesses under one corporate structure in order to more effectively manage the businesses and to take advantage of economies of scale in administration and finance. On October 21, 1996, Roggio and Inversar, the owners of 94.2% and 99.4% of BRH and Caminos, respectively, organized CLISA with a share capital of P$12,000. Shortly thereafter, Roggio and Inversar transferred all of their equity interests in BRH and Caminos, having a book value of P$158.4 million, to CLISA in exchange for its obligation to pay such shareholders a similar amount in cash. Roggio and Inversar agreed to capitalize P$140.0 million of such liability in exchange for Class B Shares, par value P$1.00 per share, of CLISA. After giving effect to such capitalization, CLISA owes Roggio and Inversar approximately P$18.4 million from the transfer of their equity interests in BRH and Caminos, which partially offsets P$31.9 million owed by Roggio to CLISA. Following the completion of the Offering, there will be no intercompany balances between CLISA and Roggio.

In March 1997, the shareholders of CLISA initiated a P$70.0 million reduction in share capital, which reduced the Issuer's total shareholders' equity to P$75.6 million. All actions necessary to effect such share reduction have been taken except for final authorization by the Inspección General de Justicia, which is expected to be received during 1997. Pursuant to this reduction, P$70.0 million will be available for distribution to the Issuer's shareholder's as a return of capital. However, the Company, will apply P$68.3 million of the amounts generated from this reduction in share capital to repay a similar amount of certain intercompany loans owed to it by Roggio. The remaining P$1.7 million is payable to Inversar, which has assigned its right to receive such distribution to Roggio in repayment of amounts advanced by Roggio on behalf of Inversar. Roggio will instruct CLISA to apply this P$1.7 million assigned to Roggio to repay the intercompany loans owed to the Issuer by Roggio. As a result, the capital reduction will not reduce the cash available at the Issuer or result in new funds being distributed to CLISA's shareholders.

In connection with the Offering of the Senior Notes, the shareholders of BRH have voted to increase its authorized capital and upon consummation of the Offering, CLISA will contribute US$84.5 million to BRH in exchange for newly issued capital stock. After giving effect to such stock issuance, CLISA will hold 97.1% of the capital stock of BRH.

BUSINESS

Overview

The Company has been a principal participant in Argentina's infrastructure privatization program and is currently one of the leading Argentine infrastructure development and management companies. The Company is comprised of four major operating segments: mass transportation management, waste management, construction and toll road management. For the twelve months ended December 31, 1996, the Company generated revenues of P$368.1 million and EBITDA of P$51.5 million.

Mass Transportation Management. CLISA conducts its mass transportation management business through its 55.3%‑owned subsidiary, Metrovías, which has a concession through 2013 to operate and manage a commuter railroad, which carries approximately 25 million paying passengers per year, and the entire Buenos Aires subway system, which carries approximately 200 million paying passengers per year. The Buenos Aires subway system is a 37‑kilometer network of five separate lines which travels within downtown Buenos Aires and between the downtown area and outlying commuter railway stations which serve densely populated areas.

Waste Management. The Company operates and manages the largest private waste management operation in Argentina in terms of number of inhabitants served, providing solid waste collection, street, park and beach cleaning services and other sanitation and cleaning services. The Company provides solid waste collection and street cleaning services to ten municipalities in Argentina representing 4.1 million inhabitants and four municipalities in Uruguay and Mexico representing over 1.2 million inhabitants. The Company also provides landfill management services to the City of Buenos Aires and the City of Córdoba and industrial and hospital waste management services to private companies and municipalities.

Construction. CLISA is the second largest provider of construction services in Argentina, serving three major sectors: civil, industrial and building construction. The Company's numerous completed construction projects include the IBM Building in Buenos Aires, the Sheraton Hotel in Buenos Aires, the International Airport in Santiago, Chile, and the Piedras Moras Water Dam and the Chateau Carrera Córdoba Soccer Stadium in the Province of Córdoba.

Toll Road Management. The Company has ownership interests in nine corporations that have been granted concessions to operate toll roads on over 2,500 kilometers of highways located throughout Argentina averaging 185,000 toll transactions per day. The Company is the operating manager of four of the toll road concessions and CLISA's construction segment has acted as a contractor in the construction works for all but two of the toll road concessions. See "Business--Toll Road Management--Recent Developments."

Mass Transportation Management

Overview

The Company, through its 55.3%‑owned subsidiary, Metrovías, provides subway and commuter rail transportation services to the residents of Buenos Aires and the surrounding suburbs. Metrovías was granted a 20‑year concession in 1993 to manage and operate the BAS and the Urquiza Line, a commuter rail line. The BAS is comprised of five underground lines totaling 37 kilometers of track, four of which have radial layouts originating from the center of Buenos Aires and one of which is a cross‑route line which links the four other lines, and one seven‑kilometer surface light rail line (the "Premetro"). The BAS has 76 stations and more than 400 subway cars and carries approximately 200 million paying passengers per year. For the twelve months ended December 31, 1996, revenue for the mass transportation management segment was approximately P$153.0 million. Since October 15, 1996, BRH has received a management fee of 4.474% of Metrovías' fare revenues.

The Privatization

Prior to 1994, the BAS was operated by Subterráneos de Buenos Aires Sociedad del Estado (the Buenos Aires Subway Company) ("SBASE"), a company owned by the Buenos Aires Government and the commuter rail lines serving Buenos Aires were operated by Ferrocarriles Metropolitanos S.A. ("FEMESA"), a company owned by the Argentine Federal Government. During the 1980s, the operation of the BAS and the commuter rail lines operated by FEMESA required large subsidies. In 1990, the subsidy to FEMESA, which operated five lines in addition to the Urquiza Line, totaled US$250 million and consumed 0.3% of Argentina's GNP, while SBASE required US$30.0 million per year to support operations, or 3.0% of Buenos Aires' annual budget. Because of the large operating subsidy, Buenos Aires and the Argentine Federal Government were unable to invest in capital improvements for the system, and as a result of the deteriorating service, the commuting population progressively increased its reliance on private automobiles and commuter buses to meet its intra‑urban transportation needs. By 1991, subway revenue ridership had declined by more than 45% from the level achieved in 1970. In 1991, the Federal Government decided to grant a concession allowing the concessionaire to assume responsibility over the assets of the BAS and the Urquiza Line and requiring the concessionaire to maintain, improve and insure these assets, as well as operate the system.

In 1993, Metrovías was awarded a 20‑year concession to operate the BAS and the Urquiza Line by the Ministerio de Economía y Obras y Servicios Públicos (Ministry of Economics and Public Works and Services) ("MEYOSP") of the Argentine Federal Government. At the time that Metrovías submitted its bid to MEYOSP, Metrovías was owned by a consortium including BRH, Burlington Northern Railroad Co. ("Burlington Northern"), Morrison Knudsen Corporation ("Morrison Knudsen"), Cometrans S.A. ("Cometrans") and S.K.S. S.A.C.C.I.F.A. y M. ("SKS"). In February 1995, the Company increased its stake in Metrovías by acquiring all of the shares of Metrovías held by Morrison Knudsen. As of December 31, 1996, Metrovías was owned by BRH (55.3%), Cometrans (28.0%) and Burlington Northern (16.7%). See "-- Legal Proceedings--Burlington Northern Arbitration."

Strategy

Upon assuming control of the BAS, management implemented a strategy to quickly turn around the performance in order to improve the perception of the system with the riding public. The initial initiatives implemented included: (i) increasing the number of trains operated, (ii) upgrading the reliability of the service through better maintenance, (iii) substantially improving the cleanliness of both stations and cars by hiring outside cleaning services and (iv) providing increased security by hiring an outside security force. These early improvements attracted passengers back to the BAS, resulting in a 38.0% increase in daily revenue ridership between June 1993 and June 1995. Now that the initial turnaround of the service is complete and ridership levels continue to increase, Metrovías has adopted a long‑term strategy for the BAS.

Metrovías' profitability is largely driven by four factors: (i) increased revenue ridership, (ii) fare increases, (iii) lower operating costs and (iv) development of ancillary revenue opportunities. Management's strategy is to rapidly improve the capacity and reliability of the service which has the twofold effect of increasing ridership and token fares, as fare increases are tied to performance milestones. Management will also continue to focus efforts on cost control and the full development of ancillary revenue opportunities.

Management intends to accelerate or improve upon the Investment Plan, which calls for US$399.0 million of capital improvements to be made by Metrovías over the life of the concession, all of which are to be reimbursed by the Argentine Federal Government. Such Investment Plan includes the replacement of old tracks, the refurbishment of railbeds, the installation of new electric substations, the installation of a centralized control center and electronic signalling system, the purchase of 80 new subway cars and the completion of new repair facilities. The completion of the Investment Plan will allow Metrovías to operate more trains, with more cars, at higher speeds during peak demand hours, resulting in increased ridership volume and token sales. The Company believes such improvements will also increase service quality, as defined in the concession contract, and will allow Metrovías to obtain governmental approval of fare increases pursuant to the terms of the concession. The Company is also considering improvements above and beyond the Investment Plan, including the purchase of additional cars, installation of an automatic fare collection system and a new high‑voltage substation, for which the Company will seek partial government funding.

Management's initial efforts to improve operating efficiency were geared towards increasing the use of outsourcing. As a result, the Company currently outsources station and car cleaning, rolling stock maintenance, security, and token and cash collection. Presently management is focusing on improving productivity through employee training and process re‑engineering with the help of Booz, Allen & Hamilton. Finally, management continues to evaluate labor cost reductions through capital improvements. Metrovías is presently considering replacing tokens with electronic turnstiles which use magnetic cards similar to those available in Paris and New York City.

In order to maximize ancillary revenues, Metrovías plans to refurbish 63 of the 76 stations in the system, of which 11 have been completed as of April 15, 1997, in order to increase rentable retail and advertising space and improve the retail environment in each of the stations. The Company has contracted with five leading Argentine outdoor advertising companies to sell its available advertising space. Presently the Company collects payments from electricity utilities and cable companies for use of the BAS rights‑of‑way. With competition in telephone and cable service likely to increase in the future, the Company will look to secure additional rights‑of‑way payments from new providers.

The Concession Contract

The terms of the concession contract require Metrovías to operate the BAS and the Urquiza Line in accordance with a pre‑determined service schedule stated in the concession contract and entitle Metrovías to collect fares, payments for retail and advertising space and fees for use of Metrovías' rights‑of‑way and, in the initial years of the concession, to receive an operating subsidy. Metrovías is responsible for all of the operating costs of the BAS and the Urquiza Line. In addition, the concession contract requires Metrovías to make specific improvements, and permits Metrovías to make other optional improvements, to the infrastructure of the BAS and the Urquiza Line and entitles Metrovías to receive payment from the Argentine Federal Government for the execution of the Investment Plan. The concession contract also requires SBASE and MEYOSP to complete certain improvements to the facilities of the BAS.

Operating Revenues. At the time the concession was granted, the concession contract permitted Metrovías to charge fares for the BAS equal to P$0.45, subject to certain fare increases described below. As of October 1996, the basic fare for the BAS was raised to P$0.50, of which P$0.4644 is for the account of Metrovías and the remaining portion is for the account of the MEYOSP. As of February 1, 1997, the amount of the basic fare that is for the account of Metrovías was increased to P$0.4793. The Urquiza Line has three fare zones with an average fare of approximately P$0.55. Metrovías offers discounted fares to senior citizens and students during off‑peak hours and monthly passes for the Urquiza Line that range in price from P$17 to P$31. For the twelve months ended December 31, 1996, fare revenues accounted for P$116.0 million, or 75.8% of Metrovías' net sales.

The concession contract established quality standards for Metrovías, including on‑time performance and cars‑dispatched indexes. The concession contract requires that the quality of service provided by Metrovías be measured on a monthly basis. If the performance of Metrovías under the concession exceeds certain thresholds, the Argentine Federal Government is required, upon confirmation of such improvement and a request from Metrovías, to increase the subsidy paid or the fare received by Metrovías by 3.2% on an annual basis, up to a maximum of 24.7% over the term of the concession; similar provisions allow fare increases on the Urquiza Line up to a maximum of 17.2% over the term of the concession. Conversely, the concession contract provides that if the performance of Metrovías falls under certain standards, Metrovías may be subject to penalties, including cash payments per minute of interruption above certain thresholds.

Metrovías will receive an operating subsidy of P$65.5 million from MEYOSP during fiscal years 1994 through 1998, of which P$51.7 million had been accrued and paid by December 31, 1996, and will pay a fee to MEYOSP during the remaining years of the concession. For the six months ended December 31, 1996 and the fiscal year ended June 30, 1996, the subsidy accounted for P$6.7 million, or 7.9%, and P$15.4 million, or 11.3%, of Metrovías' revenues, respectively. The subsidy or fee is equal to the amount by which the fare revenue projected at the time the concession was granted (as reflected in the business plan of Metrovías that was presented as part of its bid for the concession) is exceeded by or exceeds the assumed cost of operating the BAS (as reflected in such business plan). The concession contract includes a mechanism to increase the revenues that Metrovías receives, or decrease the payments Metrovías is required to make, based on increases in costs during the term of the concession. This mechanism operates by applying certain price indices to the assumed cost structure included in such business plan. In the event that the projected cost of operating the BAS and the Urquiza Line in any month, adjusted by actual inflation, exceeds the assumed cost included in the business plan by more than 6.0%, MEYOSP will incur indebtedness to Metrovías in an amount equal to the difference between the projected revenues included in the business plan and the projected costs (minus 10.0%), restated to reflect a 6.0% increase in such costs. MEYOSP has the option to authorize Metrovías to collect this money through a fare increase or to amortize any such indebtedness through the receipt of an increased subsidy (or the payment of a reduced fee) over the term of the concession. After any such cost adjustment, the cost adjustment mechanism will be reset to measure cost increases based on the restated assumed cost structure.

Investment Plan. The Investment Plan sets forth the technical specifications for certain required improvements to be made to the BAS and the Urquiza Line and a schedule for completion of these improvements. MEYOSP is required to pay Metrovías the prices established for these improvements as stated in the concession contract. Under the concession contract, the reimbursement amounts for investment projects undertaken for the BAS and the Urquiza Line were established, based on the price level in effect in April 1992, at US$399.0 million and US$37.0 million, respectively. The amounts actually paid to Metrovías for each completed work are adjusted for changes in the "Consumer Price Index--All Items" of the United States during the period from April 1992 through the date on which such work is certified by the government. In the event that Metrovías is able to perform elements of the Investment Plan for less than the budgeted amounts, the excess amounts accrue to Metrovías. Conversely, Metrovías is responsible for any cost overruns in the performance of the improvements required by the Investment Plan.

The improvements to the BAS required by the Investment Plan include replacement of tracks, substitution of the signalling and communication systems, installation of electric substations, replacement of old and installation of new escalators in stations, and other facilities and equipment. The Investment Plan also contemplates the construction of a new central repair shop and the acquisition of 80 new cars. The improvements to the Urquiza Line required by the Investment Plan include the construction of grade crossings, renovation of track sections, modernization of a repair shop and rehabilitation of the fleet.

The concession contract was amended in August 1994 to provide for the acquisition of a new fleet for Line B of the subway as part of the Investment Plan. Metrovías purchased from the Tokyo Rapid Transit Association used cars with technical characteristics that make them fully compatible with Line B. This fleet was put in service in March 1995, replacing cars that were at least 60 years old.

Under the Investment Plan, Metrovías has commenced a track renewal program, the installation of a new signalling system, the construction of a centralized control center, the renovation of power substations and the installation of new escalators. The renovation of the roadbeds and tracks of Lines B and C is being performed through a Joint Venture formed by BRH with Techint Compañía International S.A.C. e I. In addition, Metrovías had commenced a series of improvements to the Urquiza Line that includes track renewal, the replacement of cables and the installation of new communications systems. The Company estimates that the cost of the improvements that have already been contracted is US$148.4 million for the BAS and US$7.5 million for the Urquiza Line.

In addition to the improvements required by the Investment Plan, the concession contract provides that MEYOSP or Metrovías may suggest additional improvements to the system which will be made if the parties mutually agree. The concession contract provides that MEYOSP will pay for such additional improvements up to a maximum of 15.0% of the amount of the Investment Plan (US$65.4 million) during the term of this concession.

Other Facilities Improvements. The concession contract provides that MEYOSP and SBASE also will be responsible for the management of and payment for certain improvements to the BAS not included in the Investment Plan. MEYOSP is responsible for improvements to Line A including upgrading the signalling apparatus, refurbishing the railbeds, improving the power stations and enlarging the turning radius on certain sections of track to accommodate cars of greater length. Under the terms of this concession contract, this work is to be completed by January 1, 1998. The Company expects that this work will be delayed as bids for this work have not yet been requested. SBASE is responsible for certain fleet improvements including the delivery of 102 new or fully renovated cars. Under the terms of the concession contract, these cars were required to have been delivered on or prior to January 1, 1995. As of March 31, 1997, 38 of these cars had not been delivered.

Prior to the granting of the concession, SBASE had contracted with a Joint Venture led by BRH for the extension of Line D. The concession contract provides that this project will be completed and paid for by SBASE. See "-- Construction--Selected Current Projects--Line D Extension."

Operations

Rail Lines. The BAS subway is 37 kilometers long, has 63 stations and is connected to the Premetro, which is seven kilometers long and has 13 stations. (Please refer to the back cover for a map of the BAS and Premetro).

The BAS operates from 5:00 a.m. to 10:00 p.m., Monday through Saturday, and from 8:00 a.m. to 10 p.m. on Sundays. Trains run approximately three to four minutes apart during peak rush hours at operating speeds (including station stops) of between 21.9 kilometers per hour and 27.3 kilometers per hour, depending on the line served. Scheduled travel time for the length of Line A is 19 minutes, 21 minutes for Line B, 13 minutes for Line C, 18 minutes for Line D and 22 minutes for Line E. Trains consist of three to six cars, depending on the line served, with a capacity of between 34 and 45 seated and between 146 and 197 standing passengers, giving the lines of the BAS a maximum one‑direction loading capacity of between approximately 12,700 and 28,500 passengers per hour during peak periods.

The Premetro operates from 5:30 a.m. to 9:00 p.m., Monday through Saturday, and from 8:00 a.m. to 9:00 p.m. on Sundays. Trains run approximately six minutes apart at an operating speed of 21.1 kilometers per hour. Scheduled travel time for the length of the Premetro is approximately 20 minutes. Trains consist of one car with a capacity of 24 seated and 112 standing passengers, giving the Premetro a maximum one‑direction loading capacity of approximately 1,400 passengers per hour.

The Urquiza Line is 26 kilometers long and has 23 stations. The Urquiza Line operates 24 hours a day, seven days a week. Trains run eight minutes apart during peak rush hours, 15 minutes apart during daytime off‑peak hours and one hour apart during nighttime off‑peak hours. Trains run at an operating speed of 32 kilometers per hour. Scheduled travel time for the length of the Urquiza Line is 49 minutes. Trains consist of six cars, each with a capacity of 48 seated and 197 standing passengers, giving the Urquiza Line a maximum one‑direction loading capacity of approximately 11,000 passengers per hour during peak periods.

Passengers. Improvements in the speed, convenience, reliability, comfort and safety of the BAS and the Urquiza Line have resulted in growth in the number of passengers carried since Metrovías was granted the concession as paying passengers increased from 210 million in 1995 to 220 million in 1996. The Company believes that future passenger growth will depend primarily on better service resulting from improvements in its fleet and infrastructure. Passenger growth will also depend upon competition from alternative modes of public and private transportation, the Argentine economy as well as demographic factors.

Number of paying passengers in year ended (in millions)

December 31, 1994 December 31, 1995 December 31, 1996

Line A 38.3 39.4 39.9

Line B 50.5 54.4 59.6

Line C 32.8 37.8 41.0

Line D 34.9 38.5 41.2

Line E 13.8 14.7 14.7

Premetro 1.1 2.5 2.6

The Urquiza Line 22.5 23.3 24.9

Total 193.9 210.6 223.9

Maintenance. Metrovías has a program of regular repairs and maintenance of the plant and equipment of the system which is intended to improve customer service and reliability. Metrovías personnel regularly inspect and repair rolling stock and conduct a preventive maintenance program. Metrovías personnel also inspect the tracks daily both visually and with modern ultrasonic equipment. Sections of track known to be subject to significant wear are replaced in accordance with a predetermined program, and both rails and rail car wheels are frequently reground to insure a consistent wheel to rail profile. In addition, Metrovías has teams to maintain the different technical elements that make up the rail system, such as the power supply, escalators and pumps.

Outsourced Services. Management believes that certain support functions required for the operation of the BAS and the Urquiza Line are performed more efficiently by specialized companies that can better focus their attention on specific problems related to these support functions. In an effort to improve the quality of, and to achieve predictable and sustainable costs for, many of these services, Metrovías has initiated an active outsourcing policy.

Metrovías has contracted with Construcciónes y Auxiliares de Ferrocarriles S.A. ("CAF") of Spain to provide the fleet maintenance service for the cars used on Line B of the BAS and on the Urquiza Line and with GEC Alsthon ("GEC") of France to provide the same service for Line D and the Premetro. The contracts obligate CAF and GEC to ensure 97% daily fleet availability as well as to supply all the materials required for fleet upkeep. Metrovías believes that it benefits from the greater worldwide spare parts procurement capability of both CAF and GEC and from the increased fleet availability and trouble‑free fleet operation required by the contracts. The Company currently provides fleet maintenance for the cars on Lines A, C and E but is currently soliciting proposals for maintenance services for these lines from third‑party vendors.

Metrovías contracted with Banco del Suquía to provide fare collection and reconciliation services. See "Certain Transactions With Related Parties." The services contracted include: early morning delivery to each station of a "sale set" composed of a predetermined number of tokens and change money, review of the cash and remaining tokens at the end of each day, draining and counting tokens from the turnstiles, reconciling tokens sold against tokens used and transferring and depositing money collected to Metrovías' bank account. Because Banco del Suquía assumes responsibility for the money collected at the time that it is collected from the stations, Metrovías is able to reduce its risk from robbery.

Management believes that the personal security of passengers while on Metrovías' premises is critical to the quality of the transportation service delivered. In the interest of preventing pick‑pocketing, assaults and other crimes as well as reducing fare evasion and vandalism, Metrovías has contracted with Centauro S.A. to provide private security services for the stations of the BAS and the Urquiza Line to supplement the official security provided by the Buenos Aires' police force.

Management believes that this additional security service contributes substantially to the public perception that the BAS and the Urquiza Line are safe environments.

Management believes that clean trains and stations are also critical elements of service quality. Metrovías has contracted with its waste management affiliate to provide cleaning services for its stations and cars.

Electric Power. One of the principal resources used by Metrovías is electric power. Metrovías is one of the largest consumers of electric power in the Buenos Aires metropolitan region. In an effort to stabilize the cost of electrical power, in 1995 Metrovías entered into a three‑year contract with Central Térmica Guemes S.A. to provide power to Metrovías at a fixed rate.

Metrovías Shareholders Agreement

In March 1995, BRH sold its interest in Trenes de Buenos Aires S.A., the concessionaire of the Mitre and Sarmiento railways ("TBA"), to Cometrans in exchange for Cometrans' rights to a portion of Burlington Northern's interest in Metrovías and an additional 5.3% interest in Metrovías held by Cometrans. In connection with this sale, BRH, Rail de Inversiones S.A., a subsidiary of BRH, Cometrans, and a subsidiary of Cometrans entered into a shareholders' agreement (the "Metrovías Shareholders' Agreement"). See "Legal Proceedings -- Burlington Northern Arbitration."

Pursuant to the Metrovías Shareholders' Agreement, BRH granted Cometrans and its subsidiary the irrevocable right to require BRH to purchase the remainder of the interests of Cometrans and its subsidiary in Metrovías for US$19.0 million, which can be paid, with interest, over two years. This option may be exercised by Cometrans and its subsidiary if, among other things, (i) Metrovías does not list its shares on the Buenos Aires Stock Exchange prior to May 19, 1997, or (ii) Metrovías decides to increase its capital stock prior to May 19, 1997 and Cometrans and its subsidiary do not agree to subscribe for such capital stock.

Property and Equipment

The tunnels, roadbeds, tracks, stations, cars and most other operating equipment used by Metrovías under the concession are owned by SBASE and FEMESA. Under the concession contract, Metrovías has the right to use these facilities during the term of the concession. Metrovías also leases certain equipment from third party and related vendors for use in the system.

The right to use all property and equipment owned by SBASE and FEMESA will revert to SBASE and FEMESA upon the expiration or termination of the concession. Under the terms of the concession contract, Metrovías will be responsible for returning the property and equipment used under the concession in well‑maintained working condition, allowing for normal wear and tear and the passage of time. In addition, title to any equipment purchased by Metrovías for which Metrovías is reimbursed under the Investment Plan will be transferred to SBASE or FEMESA upon the termination of the concession.

Competition

According to the Comisión Nacional Reguladora del Transporte (National Regulatory Transportation Commission) ("NRTC"), the public transportation system of the Buenos Aires metropolitan region also includes 299 bus lines, approximately 61,000 taxis and radio cars and six other commuter rail lines. The 299 bus lines have routes which cover 25,000 kilometers, a fleet of approximately 13,000 buses and are operated by approximately 250 different privately owned companies. The other commuter rail lines do not compete with the Urquiza Line. Recent estimates by the NRTC indicate that there are also approximately three million private cars in Buenos Aires.

Waste Management

Overview

The Company is the largest private provider of waste management services in Argentina and Uruguay, providing waste management services to 12 municipalities in Argentina with populations in excess of 100,000, more than any of its competitors. The Company also provides sanitation and waste management services for three municipalities in Uruguay and the city of Puebla in Mexico. The municipalities served by the Company have a combined population of over 5.3 million. In addition, the Company provides sanitation and waste management services under agreements with commercial and industrial clients, including Lockheed Aircraft Argentina S.A., Pirelli Cables S.A., Iveco S.A., Ciadea S.A. (a licensee of Renault S.A. and the largest automobile manufacturer in Argentina), Osram Argentina S.A.C.I. and other Argentine industrial concerns. The Company currently provides the following services: non‑hazardous solid waste collection and disposal; park, street, beach and sewer sanitation and maintenance; medical waste collection and disposal; industrial sanitation and maintenance and landfill management. For the twelve months ended December 31, 1996, the Company's share of Joint Venture revenues for the waste management segment was approximately P$69.0 million.

Industry Overview

Historically, environmental services in Argentina were almost exclusively provided by public sector entities, funded by local tax revenues. Since the mid‑1980s, municipal governments have sought to grant concessions to private sector entities to provide private sanitation services, including solid waste collection, street sweeping and park maintenance. Typically, such contracts have required the concessionaires to accept refuse from residences up to a specified threshold measured in kilograms and/or liters of solid waste per collection and have permitted the concessionaires to contract separately for the collection of larger amounts of residential solid waste and solid waste generated by commercial entities. As was the case prior to privatization, municipalities generally continue to fund these services through the collection of tax revenues.

As their experience with contracted waste management services has increased, municipalities have begun to require providers of waste management services to manage the municipal landfills in which the waste is deposited. As environmental awareness has grown, legislative initiatives designed to further environmental protection have been adopted by the federal and provincial governments such as Federal Law No. 24,051, concerning hazardous waste, and Buenos Aires Provincial Laws No. 11,338, concerning hazardous and radioactive waste, No. 11,347, concerning medical waste, and No. 11,720, concerning the sanitation, handling, storage, transportation, treatment and disposal of toxic waste. As a result of this heightened environmental awareness, municipalities are beginning to seek providers of recycling services and hazardous and medical waste disposal services.

As of December 31, 1996, 23 municipalities in Argentina with populations in excess of 100,000, or 71.9% of such municipalities, have granted concessions for the provision of waste management services to private sector entities. The Company believes that the provision of waste management services will increasingly be privatized, with smaller municipalities seeking private sector providers of such services and the range of services provided expanding. The Company believes that because the trend toward privatization of waste management is recent, there are relatively few established competitors in this market. The Company believes that industry conditions in Argentina, including the trend towards increased privatization of waste management, are generally representative of the conditions in Uruguay.

Background and History

The Company first entered the waste management market in 1985. The Company decided to enter the waste management industry with a partner, both to reduce the risk to the Company and to utilize the combined resources of the partners to enter this relatively new market. The Company obtained its first concession to provide waste management services in Córdoba, Argentina in 1986. The Company expanded its waste management business by winning concessions to provide such services in Buenos Aires (1987), Montevideo, Uruguay (1989) and 14 other municipalities throughout Argentina, Uruguay and Mexico. As of January 1, 1997, the Joint Ventures in which the Company participates have concessions to provide waste management services in 15 municipalities in Argentina and Uruguay and one municipality in Mexico. In Uruguay, the Company and Ormas provide sanitation services to the municipalities of Montevideo, Canelones and Maldonado through Equipos y Servicios Limitada. Currently, the Company has operational control of the Joint Ventures in which it participates and receives management fees from these Joint Ventures.

Strategy

The Company seeks to grow its waste management business by capitalizing on its leading market position in Argentina and Uruguay to win business for newly privatized municipalities in these and other Latin American countries and by continuing to expand its client roster and the scope of its activities in industrial waste management for private sector entities.

The Company has a dedicated public marketing team which focuses its attention as follows: (i) bidding for municipal contracts put out to tender following the expiration of an existing contract; (ii) presenting the benefits of private waste management to Argentine and Uruguayan municipalities which have not privatized their waste management services; (iii) making presentations to municipalities which have partially privatized their waste management services, but, for example, continue to operate landfills; and (iv) meeting with municipal leaders in Brazil, Mexico, and Peru to discuss the benefits of privatization. The Company's marketing efforts have resulted in revenues from municipal waste management services growing from P$38.6 million in fiscal 1991 to P$65.4 million in fiscal 1996, a compound annual growth rate of 11.1%.

The Company's strategy with regard to the operation of its waste management operations focuses on utilizing modern equipment and disposal methods to reduce labor costs. The Company's fleet of trucks uses modern compacting technology which increases the tonnage of waste each truck can collect and, therefore, reduces the number of trucks and crews required to service a municipality. The Company believes it is the only waste management concern in Argentina whose entire fleet is so equipped. The Company's strategy in landfill services is to operate environmentally sound and technologically advanced landfills. The Company points to the ISO 9002 certification each of the two Company operated landfills has received, the first and only landfills in Latin America so recognized, when marketing to new municipalities.

The Company will continue to seek to grow its industrial waste management business through the addition of new clients and services. The Company currently provides hauling services for industrial and commercial customers and hauling and incineration services for medical providers and is considering adding other services to its industrial waste management operations.

Operations

The Company provides municipal collection services to residents of 16 municipalities. Business is obtained through public bids for concessions granted by municipalities. The following table sets forth certain summary information relating to these concessions.

Share of Joint

Participation of Venture Net

Company in Sales for twelve

Population Joint months ended Services

City Served Ventures(%) 12/31, 1996(1) Provided(2) Equipment(3) Personnel

Buenos Aires, Argentina 1,000,000 55.0 P$21,476,000 C/S/E/M 86 876

Córdoba, Argentina 1,276,000 55.0 14,227,000 C/S/E 150 1,100

San Isidro, Argentina 300,000 50.0 7,245,000 C/S/E/M 58 530

Tres de Febrero, Argentina 400,000 50.0 3,295,000 C/S/P 38 180

Ituzaingó, Argentina 158,000 50.0 1,223,000 C/S/E 26 120

Merlo, Argentina 450,000 50.0 1,905,000 C/S 23 110

Bahía Blanca, Argentina 270,000 50.0 1,930,000 C 18 180

Puebla, Mexico 650,000 50.0 1,800,000 C/S 57 250

Montevideo, Uruguay 300,000 33.3 905,000 C/S/E 17 147

Rosario, Argentina 400,000 50.0 1,478,000 C/S/P 12 190

San Carlos de

Bariloche, Argentina 100,000 50.0 635,000 C/E 10 35

Maldonado, Uruguay 100,000 39.0 1,049,000 C/S 9 70

Villa Carlos Paz, Argentina 100,000 50.0 160,000 C/S 6 50

Canelones, Uruguay 60,000 42.5 304,000 C/S 6 35

Santa Fe, Argentina(4) 237,000 50.0 97,000 C/S/E 28 140

Partido de la

Costa, Argentina(4) 75,000(5) 50.0 86,000 C/S/M 33 47

(1) Revenues included in this table do not reflect all of the Company's Waste Management segment revenues.

(2) C -- Collection

S -- Street sweeping (manual and mechanical)

E -- Special services

M -- Maintenance of public spaces, including parks, plazas and open spaces

P -- Clearing of pedestrian walkways

(3) Numbers of trucks, street sweepers and sewer cleaning machines.

(4) Service under these concessions commenced on January 12, 1997.

(5) Increases to approximately 475,000 during the summer months of December, January and February.

Buenos Aires Concession. The Company currently conducts its waste management operations in Buenos Aires through Cliba, a Joint Venture formed with Ormas in 1987. The Joint Venture provides services to approximately one‑third of Buenos Aires, including collection and disposal of waste, street‑sweeping and park maintenance. The concession provides for the Company to collect refuse and transport it to landfills and to sweep streets every day. The Company must accept all residential refuse up to a specified threshold per collection expressed in tons and liters of refuse. The concession provides for payments based on the tons of solid waste collected to be made on a monthly basis by Buenos Aires directly to the Company. Buenos Aires funds such payments through taxes imposed on the public receiving the services.

Córdoba Concession. The Company conducts its waste management operations in Córdoba, through Clima, a Joint Venture with Ormas. Clima provides services to Córdoba, including collection and landfill disposal of waste, street‑sweeping and park maintenance. The concession provides for the Company to collect refuse and transport it to landfills six times a week and to sweep streets every day. The Company must accept all residential refuse up to a specified threshold per collection expressed in tons and liters of refuse. The concession provides for payments based on the number of city blocks served to be made on a monthly basis by Córdoba directly to the Company. As part of its municipal solid waste collection service in Córdoba, the Company also engages in collection of recyclable materials.

Other Concessions. The scope, specifications, services provided and duration of waste management service contracts vary substantially, with some concessions encompassing landfill disposal of collected waste, street sweeping, park maintenance, clearing utility lines of tree branches and shredding and disposing of the branches and other related municipal services. Typically, these concessions provide for payment by the municipality directly to the Company on a monthly basis. Pricing for municipal contracts is based on the tons of solid waste collected, the number of municipal blocks serviced or a fixed monthly fee.

Terminations of Concessions. Several of the waste management concessions under which the Company operates have expired or are scheduled to expire prior to the end of 1997. The Company's waste management concession in Córdoba expired in July 1994. Under the terms of a municipal decree, the Company has continued to provide waste management services according to the terms of the concession. The Company's waste management concession in Buenos Aires expired in December 1996. Buenos Aires has received bids for four‑year concessions for five collection zones, rather than the three currently existing. Under this plan, while a bidder might bid on more than one of these zones, no bidder may be granted a concession for more than one. The Company has submitted bids for each of the four concessions. This concession plan could lower the net sales and/or operating margin of the Company's Buenos Aires concession. The City of Buenos Aires has not set a date for awarding the concessions. The Company's waste management concession in San Isidro expired in December 1996, but the Company has continued to provide waste management services to the municipality. In addition, the Company's concessions in the municipalities of Villa Carlos Paz, Merlo and Bahía Blanca are scheduled to expire prior to the end of 1997. The Company believes that its existing service to these municipalities provides a competitive advantage in the bidding process for any of these concessions.

Landfills. The Company operates two landfills, one in Buenos Aires and one in Córdoba, under concessions from provincial authorities. The Company began operation of a municipal landfill in Buenos Aires in 1991 under a concession granted to its subsidiary Tecsan S.A. by Cinturón Ecológico Area Metropolitana S.E. ("CEAMSE"), a public sector entity owned by Buenos Aires and the Province of Buenos Aires. The Company began operation of a municipal landfill in Córdoba in 1993 under a concession granted by the City of Córdoba. There is a current trend in the waste management industry in Argentina for municipalities accepting tenders for waste management services to require the service provider to manage such municipalities' landfills.

Each of the landfills operated by the Company has received ISO 9002 and IRAM DQM certifications and the Company was the first and is the only entity in Latin America to have facilities in this industry so qualified. The landfills have (i) on‑site inspectors, (ii) wire mesh integrated in the landfill liner to enable the Company to pinpoint the location of and repair any ruptures and (iii) peripheral wells to enable the Company to perform groundwater contamination testing. The Company believes that each of these landfills is in compliance with the applicable provincial environmental laws and regulations. In addition, the liability of the Company, as operator rather than owner of the landfill, is limited to damages caused by the negligent performance under the concession contracts by the Company and does not include liability for contamination damages caused by use of the landfills in the ordinary course of business.

Industrial Cleaning. In addition to its core municipal services, the Company has diversified to provide industrial cleaning services through its subsidiary, Taym, and hospital maintenance services through its subsidiary, Sehos. For the twelve months ended December 31, 1996, Sehos and Taym together recorded P$25.5 million in revenues.

The Company provides specialized industrial cleaning, maintenance, recycling and janitorial services to many of the customers for which it provides industrial solid waste collection services. The Company performs various types of industrial cleaning services for customers, primarily in the automotive industry, including water blasting and industrial vacuuming. The Company's industrial solid waste collection services are generally contracted for by individual establishments. A representative list of clients of Taym includes Osram Argentina S.A.C.I., Pirelli Cables S.A., Fate S.A., the Air Force of Argentina, Ciadea S.A. and Iveco S.A. The Company's industrial customers typically utilize solid waste storage containers that are provided by the Company as part of its services. Stationary compactors, which reduce the volume of the stored waste prior to collection, are also sometimes used. Containerization and compaction enable the Company to use fewer employees and decrease the frequency of collection. The Company's industrial collection services are generally performed under one‑ or two‑year service agreements which vary substantially between types of customer and types of services included under the contract. The Company's hospital maintenance and sanitation services are provided pursuant to a seven‑year concession granted in March 1992 that is renewable for a three‑year term.

Property and Equipment

The Company generally leases the real properties from which it operates its environmental services business. The Company owns property used in its waste services business in Buenos Aires, Montevideo and Punta del Este. The Company does not own the landfills that it manages.

The Company purchases trucks from Ford Motor Argentina S.A., Mercedes Benz de Argentina S.A. and Fiat Auto Argentina S.A. to service its concessions and, as of December 31, 1996, owned 519 vehicles. The Company does not operate any vehicles pursuant to long‑term leases and limits its leasing activities to the occasional rental of specialized equipment.

Capital Expenditures

The Company's capital expenditures related to its waste management business are closely tied to the timing and scope of the concessions and contracts granted by municipalities or corporations. Generally, these expenditures are limited to the purchase and maintenance of equipment and the preparation and outfitting of a nearby maintenance and operational facility to serve as a base of operations. The vast majority of these expenditures are incurred at the commencement of the concession as the Company purchases a new fleet of trucks and other equipment. In later years, expenditures are generally limited to amounts sufficient to maintain the operation of the existing fleet and the occasional replacement or upgrading of equipment. During the fiscal years ended June 30, 1996, 1995 and 1994, the waste management segment's capital expenditures were P$1.0 million, P$2.0 million and P$1.4 million, respectively.

Competition

In the waste management segment, the Company has historically competed primarily with Manliba S.A., a joint venture between the Macri Group and Waste Management International, and 9 de Julio S.A., a local corporation, and a large number of small local providers of waste management services. Recently, the Company has faced increased competition from other foreign providers of environmental services, including Fomento de Construcciones y Contratos S.A. ‑ FCC, Urbaser Argentina S.A., Dycasa S.A., Compagnie Générale des Eaux and Browning Ferris International. The Company believes that it ranks first in terms of number of residents served, service quality and experience as a service provider among Argentine and Uruguayan companies. The Company believes that its experience, reputation, equipment, trained personnel, capacity and efficiency position it as a leading provider of environmental services in Argentina.

Construction

Overview

The Company believes that it is the second largest construction company in Argentina in terms of sales and is engaged in a full range of infrastructure construction, including civil, industrial and building construction, for the public and private sectors in Argentina and other Latin American countries, principally Uruguay, Paraguay and Chile. The Company has participated in the construction of a broad range of infrastructure projects throughout Latin America, including highways and toll roads, waterworks, sewage systems, dams, airports and marine port facilities, and has also participated in industrial and commercial construction projects, including commercial and residential buildings, hospitals, schools, hotels, shopping centers, food processing and cement plants, oil refineries, gas pipelines and hydroelectric power plants. The Company owns over 1,000 pieces of construction equipment and employs approximately 2,400 people in its construction operations. For the twelve months ended December 31, 1996, the Company's revenue for the construction segment was approximately P$132.2 million.

Construction Industry in Argentina

Public sector construction spending declined during the 1980s primarily due to fiscal constraints. The implementation of the Convertibility Plan in April 1991, in connection with the trend toward privatization, contributed to rapid growth in the construction industry during 1991 and 1992. The devaluation of the Mexican Peso in December 1994 set off a severe recession in Argentina and other countries. See "Risk Factors--Factors Relating to Argentina--Convertibility and Exchange Rate Risks." This recession was accompanied by a significant slowdown in public sector construction spending which adversely affected the Argentine construction industry. Management believes that the slowdown in public sector spending has been partially offset by the growth in private sector construction spending.

Prior to 1991, companies in the Argentine construction industry faced high levels of inflation in the costs of labor and supplies. As a result, companies competing in the construction industry placed emphasis in their management of construction contracts on managing the timing of payments and purchases to hedge against inflation. With the passage of the Convertibility Law, such emphasis has become less important for these companies. In response to this change and in an effort to reduce its fixed costs, and thus its exposure to the cyclical nature of the construction industry, the Company reengineered its methods for conducting business in the construction segment.

Strategy

In response to the losses generated by the construction segment in fiscal year 1995, the Company reorganized this business and has sought to improve the financial results of this segment by implementing a strategy of (i) providing integrated construction services in Argentina and in selected other Latin American markets; (ii) focusing on projects with a contract value in excess of US$10.0 million; (iii) increasing the proportion of private sector business in its project portfolio (projects in the private sector accounted for approximately 57.1% of the construction segment's revenues for the fiscal year ended June 30, 1996 and approximately 44.0% of the construction segment's backlog as of June 30, 1996); (iv) decentralizing project management while maintaining centralized purchasing and administration functions for the project portfolio; (v) employing modern construction equipment; (vi) controlling costs; and (vii) reducing capital investment and risk associated with its projects by continuing to utilize Joint Ventures as project‑specific contracting vehicles. The Company also seeks to maximize synergies between the construction segment and its other businesses. See "--Mass Transportation Management--The Concession Contract--Other Facilities Improvements" and "--Toll Road Management--Highway Investment Program--Western Access Road."

Operations

The Company provides a variety of construction services to clients in a broad range of industries. The ability to provide such services enables the Company to provide clients, by itself or as part of a Joint Venture, with single‑source project responsibility for complex projects. To the extent that the Company undertakes construction projects as part of a Joint Venture, the Company is often the leader of the Joint Venture, a position which typically involves the largest scope of work and allows the Company to better manage the risks and control the timing and execution of the project.

The Company performs construction services in three operating sectors: civil, industrial and building construction. The boundaries between these sectors are flexible, permitting the use of personnel and equipment in projects in each sector. In each sector, the Company provides a range of related services, including feasibility studies, conceptual design, engineering, procurement, project and construction management, construction, maintenance, and technical site evaluation.

Civil Construction. Projects in the civil construction sector include the construction of hydroelectric dams, the construction and refurbishment of other aquatic projects, such as ports, and road and highway construction projects. In addition, this sector is responsible for the extension and modernization project of Line D of the BAS as well as for the renovation of certain other parts of the BAS. A representative list of the Company's recent clients for civil construction services includes Municipalidad de la Ciudad de Santa Fe, Grupo Concesionario del Oeste, Dirección Nacional de Vialidad, Covisur S.A., Dirección Provincial de Hidraúlica de la Provincia de Córdoba, Covicentro, Concanor S.A., Covinorte S.A. and Red Vial.

Industrial Construction. The Company's industrial projects sector specializes in the construction of manufacturing and industrial process plants. A representative list of the Company's recent clients for industrial construction services includes Swift Armour S.A., Municipalidad de la Ciudad de San Francisco, Córdoba, Transportadora de Gas del Sur S.A. and Telecom Argentina‑France Telecom S.A.

Building Construction. The Company's building projects sector specializes in the construction of office and residential buildings, hospitals and other medical facilities, hotels and resorts, parking garages, shopping centers, bus terminals, housing developments and sports facilities. A representative list of the Company's recent clients for building construction services includes Dirección Provincial de Arquitectura y Planeamiento de la Provincia de Mendoza, Irsa S.A., Telecom Argentina S.A. and Empalme S.A.

Project Management. The Company manages its larger construction contracts as individual profit centers. The Company participates in several of these contracts as a member of a Joint Venture and is often the leading participant in the Joint Venture. Each of the larger projects is coordinated by a project manager who reports to the appropriate manager at the Company's headquarters. The project manager's responsibilities include: client contact related to the project, oversight of the engineers and other personnel necessary for the project, determination and procurement of requisite materials and equipment, and determination of which components of the project the Joint Venture will build and which components to subcontract. In the execution of several of its smaller construction contracts, the project management functions are performed at the Company's headquarters and the construction chief assigned to such projects has responsibility only for the work conducted at the work site.

Most projects require that the Joint Venture executing the project provide all the resources necessary for the project, such as technical and administrative personnel, labor, equipment and materials and subcontractors. Each Joint Venture hires employees directly for its own particular project and the project manager makes the hiring and layoff decisions. As a result, the Company has flexibility in its construction staffing and payroll. Large orders for materials and equipment for Company‑managed projects are purchased in bulk through the Company's headquarters to take advantage of the cost savings that result from the Company's purchasing power.

Revenue Origination

New business opportunities for the construction segment result primarily from its long‑standing reputation in the industry and from good relationships with existing customers. In the public sector, BRH generates new construction business by researching and reviewing the budgets and publications outlining ongoing construction requirements and by maintaining continuous contact with the various public agencies which plan public construction activities and with which the Company has long‑standing relationships. In the private sector, BRH generates new business by monitoring requests for bids and by maintaining strong relationships with its clients. A growing portion of the Company's private sector revenue is generated by affiliated clients. See "--Mass Transportation Management--The Concession Contract--Other Facilities Improvements"; "--Toll Road Management--Highway Investment Program." Recently, the Company has begun to develop projects to present to interested investors as business opportunities. Although these investors are able to select other construction companies to implement the projects developed by the Company, the Company believes that its knowledge of the requirements of the projects it develops provides the Company with a competitive advantage in its ability to win bids for such projects.

Significant Completed Projects

The following table sets forth a listing of the most significant projects completed by the Company's construction segment since January 1, 1994, together with the completion date of each project, the total revenues received by the Company with respect to such project and a short description of such project.

Amount in

Completion Pesos in

Date Millions Description

Civil Construction Projects

Los Molinos Canal 03/94 P$32.0 24‑kilometer channel in the province of Córdoba.

City Beltway connecting

Highway 9 (N) and (S) 12/94 53.0 Road construction

Camatindi--Palmar Grande

Highway 06/95 23.0 Road construction

Buenos Aires--La Plata

Highway 12/95 30.0 Road construction

Highway 210 05/96 42.0 Road construction

Highway 2--Buenos Aires 06/96 32.0 Road construction

Industrial Construction Projects

Meat Processing Plant 03/94 82.0 62,000‑square‑meter meat processing plant in Villa Gobernador Gálvez

San Francisco Gas Pipeline 02/95 15.0 High pressure gas pipeline connecting Angélica and San Francisco

San Martín Gas Pipeline 04/95 17.0 Two sections of gas pipeline connecting San Antonio and Garayalde and Pico Truncado and Garayalde

Telephone Cables 10/96 50.0 Lay telephone cables for Teléfonica and Telecom

Building Construction Projects

Warehouses Five and Six in

Puerto Madero 02/94 20.0 Renovation of Old English Port Warehouses at Puerto Madero in Buenos Aires

Argentine Embassy in Paraguay 10/94 22.0 Embassy Building

Selected Current Projects

Conrad Hilton Hotel and Casino. The Company, through a Joint Venture, currently is undertaking the construction of the Conrad Hilton Hotel and Casino in Punta del Este, Uruguay. This project was developed by the Company and other investors and authorized by the Government of Uruguay. The Company determined that an attractive market existed for a convention center, hotel and casino complex in the resort city of Punta del Este and approached the Government of Uruguay to discuss the feasibility and attractiveness of the project. The Joint Venture won the bid to construct this project from the company which was granted the concession to own and operate this facility. When completed, this facility will include a convention center with 3,500 square meters of floor space, a casino with 5,000 square meters of floor space and a 310‑room hotel. This project was 85% completed at December 31, 1996. The casino opened on January 1, 1997 and the hotel is scheduled to open in June of 1997. The contract for this P$170 million project provides for total project management revenues to the Company over the period of construction of approximately P$13.2 million. The other member of the Joint Venture is Companhia Brasileira de Projetos e Obras S.A.

Telecom Building. The Company is undertaking the construction of a 13‑story office complex for Telecom. The bidding process for this office complex required that the Company select a site, present a design for this facility and propose a price and financing plans. The Company proposed a design for a building currently under construction on a site on the Río de la Plata near Puerto Madero in Buenos Aires. After the Company's bid was accepted, Telecom determined that it would not require the Company to finance this facility and currently pays progress payments to the Company in cash. This project was 65% completed at December 31, 1996. The contract for this project provides for total revenues to the Company over the period of construction of approximately P$52.6 million.

Line D Extension. The Company, through a Joint Venture, is constructing a 3.7‑kilometer extension of the subway tunnel for Line D as well as four subway stations for SBASE. This project was 65.6% completed at December 31, 1996. The contract for this project provides for total revenues to the Company over the period of construction of approximately P$71.5 million. The other members of the Joint Venture are Construcciones Civiles J. M. Aragón S.A and Sitra S.A.

Puerto Pesquero Caleta Paula. The Company, through a Joint Venture, is constructing a port facility, Puerto Pesquero Caleta Paula, in Santa Cruz, Argentina for Unidad Ejecutora Portuaria de Santa Cruz. When completed, this facility will include workshops and administrative buildings (1,300 square meters) and will be able to accommodate as many as three 6,000‑ton vessels and two additional 500‑ton vessels. This project is to be executed in two stages. The first stage of this project was 78% completed and the second stage was 34% completed at December 31, 1996. The contract for this project provides for total revenues to the Company over the period of construction of approximately P$22.5 million.

Western Access Road. The Company is the leading contractor for the construction of the Western Access Road. The Western Access Road project, on which construction began in November 1996, is the largest in terms of revenue of the Company's current highway construction projects. The contract for this project provides for total revenues to the Company over the period of construction of approximately P$107.0 million.

Backlog

The following table sets forth the Company's backlog as of December 31, 1996. Backlog represents the total revenues that the Company expects to receive from all signed or awarded construction contacts as of a specified date less the aggregate amount of revenues earned with respect to such contracts as of such specified date.

As of December 31,

1996 % Total

(in millions of Pesos)

Public sector backlog P$158.1 47.7%

Private sector backlog

Affiliated parties 133.1 40.2

Non‑affiliated parties 40.0 12.1

Total backlog P$331.2 100.0%

The amount of backlog is not necessarily indicative of the future earnings of the Company related to the performance of such work. The backlog amounts assume that (i) neither the Company nor any customer defaults on its obligations under any construction contract and (ii) payments to the Company under signed contracts are made on a timely basis. Although backlog represents only business that is considered to be firm, there can be no assurance that cancellations or adjustments will not occur.

Property, Equipment and Supplies

The Company owns equipment, including cranes, transportation equipment, water pumps, air compressors, backup generation plants, electrical equipment, concrete mixers and dispensers and other equipment related to construction. The Company also provides maintenance services for the equipment. The net book value of the equipment held by the Company for use in the construction segment was P$33.9 million at December 31, 1996.

The Company negotiates purchases of materials and supplies, including piping and tubing materials, valves and fittings, wires, cables, cement, steel products and timber for all of its Joint Ventures in order to obtain the benefits of bulk purchase. While the sourcing and financing of materials and supplies required by the Company's projects are centralized, project managers determine their requirements and account for their inventories. The Company purchases materials and supplies from a wide variety of sources and has not encountered problems with suppliers or shortages which have adversely affected its operations.

Capital Expenditures

The Company's capital expenditures related to its construction business are closely tied to the timing and nature of the projects awarded to the Company. Generally, these expenditures consist of construction equipment or, in the case of long‑term contracts, start‑up of operations. The vast majority of these expenditures are incurred at the commencement of a project as the Company purchases specialized equipment for use on site. During the fiscal years ended June 30, 1996, 1995 and 1994, the Company's construction segment capital expenditures were P$3.2 million, P$7.6 million and P$8.0 million, respectively.

Competition

Of the Argentine domestic construction companies, the Company competes principally with Techint Compañía Técnica Internacional S.A.C. e I., Sade S.A.C.C.I.F.I.M., Sideco Americana S.A. and Dragados y Construcciones Argentina S.A. The Company believes that it ranks second among Argentine construction companies in terms of annual construction sales. The Company also faces competition from (i) a large number of smaller domestic construction companies and (ii) international construction companies following the liberalization of government rules that had previously inhibited the entry of foreign competitors into the domestic market. International firms' participation in the Argentine market has typically been through consortia which include a local partner. While international firms are seeking to increase their presence in the Argentine construction industry, the Company believes that local firms benefit from knowledge of local market practices, business relationships with local suppliers and labor, established client relationships and reputation and name recognition within the industry. The Company believes that its experience, reputation, equipment, trained personnel, capacity and efficiency position it as a leading provider of construction services in Argentina.

Toll Road Management

Overview

The Company is one of Argentina's largest toll road management companies in terms of kilometers of roadway under management, participating with other investors in nine corporations that operate four national and two provincial highways, which together make up approximately 25% of Argentina's concessioned highways, and three other heavily travelled highways that form an integral part of the highway network in and around Buenos Aires. The Company is the operating manager of four of these nine toll roads. The Company's national highways service two major transportation corridors linking Rosario, Argentina's third largest city, both with certain northwestern provinces and with the area surrounding Córdoba, Argentina's second largest city. The Company's provincial highways service one of the two primary routes between Rosario and Santa Fe, as well as the principal route between Buenos Aires and the summer vacation resort of Mar del Plata in the Province of Buenos Aires. The three highways in the greater Buenos Aires metropolitan area include the Western Access Road, which provides access to Buenos Aires from the west, and two other highways, which provide access to the City of Buenos Aires from the southeast and passage through the city from downtown Buenos Aires to the outskirts of the federal district. Each of the nine corporations in which the Company participates, other than GCO, currently collects tolls pursuant to long‑term concessions. GCO, the operator of the Western Access Road, is anticipated to begin collecting tolls on June 1, 1997. For the twelve months ended December 31, 1996, revenue for the toll management segment was approximately P$25.0 million.

Background and History

The Argentine highway system consists primarily of (i) national routes, which typically connect significant urban areas or regions of the country, (ii) provincial roads that provide a transportation network linking smaller population centers within a province and (iii) urban networks, which provide access to and passage through or around the urban areas served (the "Highway System"). Historically, the Highway System was built principally under programs of the public sector, including federal, provincial and local governments and state‑controlled enterprises, which served to stimulate private sector investment. Similarly, maintenance and operation of the Highway System was undertaken by public sector and government‑controlled entities. The costs of Highway System projects, as well as the maintenance and operational expenses associated with the Highway System, were traditionally financed through fuel levies and other taxes which were dedicated to the preservation of the Highway System.

During the 1980s, the federal and provincial governments in Argentina faced serious budgetary and fiscal constraints and amounts previously dedicated to Highway System projects were reduced. The resulting decrease in maintenance and capital expenditures resulted in a significant deterioration of the Highway System. In order to remedy this situation, the Argentine federal government began in 1990 to privatize both the maintenance and operation and the improvement and/or expansion of the existing Highway System. Through this program, Argentine national, provincial and municipal government entities have awarded concessions with respect to approximately 9,400 kilometers of existing federal and provincial highways and roads.

As part of the privatization of the Highway System, the Argentine government awarded concessions in 1991 to various consortia to widen and improve the network of access roads into the federal district as well as the expressways within Buenos Aires (the "Buenos Aires Highway Access Network"). These roads were generally in need of modernization as well as expansion to address the significant increase in vehicular traffic experienced by Buenos Aires in recent years. As a result, each concession provides for required capital expenditures, agreed‑upon improvements and other additional works (collectively, "Highway Investments"). In particular, each of the concessions granted to improve the Buenos Aires Highway Access Network includes a significant construction component for the widening, extension, expansion or other improvement of the existing roadway as well as the continued maintenance and operation of the highways. The concession granted to Coviares (as defined herein) requires the concessionaire to expand, operate and maintain the 63‑kilometer expressway leading from La Plata to Buenos Aires. The concession granted to Covimet (as defined herein) requires the concessionaire to expand, operate and maintain the ten‑kilometer expressway within Buenos Aires that links the downtown business area with General Paz Highway, the beltway on the outskirts of Buenos Aires which generally marks the boundary of the federal district. The concession granted to GCO requires the concessionaire to expand, operate and maintain the 55‑kilometer Western Access Road.

Strategy

The Company intends to continue to hold significant ownership interests in its toll road concessions; however, the Company may increase or decrease its participation in particular concessions. In addition, the Company plans to bid for attractive toll road concessions for highways that are being privatized both in Argentina and elsewhere in Latin America and plans to seek a position as the manager of each toll road for which it bids. In determining whether to participate in new consortia, management intends to consider the benefits that may accrue to its construction segment as a result of any construction that may be required on the concessioned highway and the potential profitability of operating the toll road due to increases in traffic volume and tolls.

Toll Road Concessions

The following chart summarizes information relating to those highways in which the Company holds an equity participation.

Kilometers December

Company Operated 1996

Ownership by Average

of Conces- Trans-

Name of Subsidiary Concession- sion- Toll No. of actions Concession

(Name of Road) Corridor Served aire(%) aire Rate(1) Lanes per Day Expiration

Covicentro S.A.* Rosario--Córdoba 53.8% 332 P$5.20 2 11,000 2003

(National Route 9)

Red Vial Centro S.A.* Cruz del Eje--

(National Routes 38, Córdoba -- Río

36 and A005) Cuarto 57.0 309 5.60 2 12,150 2003

Aufe S.A.

(Provincial Highway #1) Rosario--Santa Fe 24.0 170 3.50 4 20,000 2009

Concanor S.A.* Santiago del Estero

(National Routes 9 and 34) --San Pedro 38.5 481 7.30 2 7,200 2003

Coviares S.A. La Plata--Buenos

(Southern Access Road) Aires 16.2 63 3.80 4 75,000 2014

Covimet S.A.

(9 de Julio Expressway) Intra‑Buenos Aires 16.2 10 0.50 8 46,000 2016

Covinorte S.A.* Rosario--Santiago

(National Route 34) del Estero 38.5 714 10.50 2 5,800 2003

Covisur S.A. Buenos Aires--

(National Route 2) Mar del Plata 25.0 363 14.00 4 8,000 2012

Grupo Concesionario Luján--Buenos

del Oeste S.A. Aires 25.5 55 (2) 8 (3) 2016

(Western Access Road;

National Routes 7 and 5)

* Indicates highway managed by the Company.

(1) Rate is the total amount for entire length travelled by a two‑axle vehicle.

(2) The concession contract, as modified, provides for a two‑axle toll rate of P$0.60, beginning on the later of (i) June 1, 1997 and (ii) the completion of certain capital investments on this highway. The toll rate will increase to P$1.30 upon completion of the Western Access Road.

(3) The Company estimates that 150,000 vehicles per day used existing local street alternatives to the Western Access Road in December 1996.

National and Provincial Highways.

MAP

Covicentro. Covicentro S.A. ("Covicentro") operates the part of National Route 9, which links the city of Rosario with the city of Córdoba (pop. 1.3 million). This highway is an important commercial corridor between the second and third largest cities in Argentina and links important industrial and manufacturing centers, such as automobile plants in Córdoba, with the main urban areas of Argentina and the countries in the Mercado Común del Sur ("Mercosur") (an agreement among Argentina, Brazil, Paraguay and Uruguay to promote economic integration among the member countries). As a result, this route also has a high level of truck and commercial traffic. Although there are local roads which generally follow the route of this highway, there are no parallel routes which provide access to the full distance served by this portion of National Route 9.

Red Vial. Red Vial del Centro S.A. ("Red Vial") operates National Routes 5, 36 and 38, which connect Córdoba and Río Cuarto (pop. 150,000), the two principal cities in the province of Córdoba, as well as the mountainous recreational area to the west of the city of Córdoba. National Routes 5 and 36 link two large manufacturing and commercial centers within the province and accordingly have a higher level of truck and other commercial traffic. Route 38 runs through the tourist areas of Carlos Paz, Cosquín and La Cumbre and traffic on this highway consists primarily of passenger cars with little commercial traffic. There are no parallel routes or railway lines which compete with these highways.

Covinorte. Covinorte S.A. ("Covinorte") operates the part of National Route 34, which runs from the city of Rosario (pop. 1.2 million) to the city of Santiago del Estero (pop. 264,000). This highway connects the city of Rosario to a number of agricultural areas and is the principal route for produce and agricultural products from the northwestern region of the country to be shipped to Buenos Aires or abroad for export. As a result, this route also has a high incidence of truck and commercial traffic. There are no parallel routes which compete with this portion of National Route 34; however, a recently privatized railway does operate from Tucumán to Rosario which could provide competition in the future for freight and other commercial traffic once service and reliability on that rail line is improved.

Concanor. Concanor S.A. ("Concanor") operates National Routes 9 and 34, which run north from the terminus of Covinorte's concession in Santiago del Estero (pop. 264,000), linking this city with Salta (pop. 370,000) and Tucumán (pop. 630,000). These highways travel through a number of agricultural areas, including the principal sugar growing area in Argentina, and have a high incidence of truck and commercial traffic. There are no parallel routes or railway lines which compete with these highways.

Aufe. Aufe S.A. ("Aufe") operates Provincial Highway 1, which connects Rosario and Santa Fe. This four‑lane divided highway with limited controlled access is an important commercial corridor which provides access to the port at Rosario and has a high level of truck and commercial traffic. National Route 11, operated by Concesionaria Servicios Viales, runs parallel to Provincial Highway 1 and also links Rosario and Santa Fe. Route 11 is an older two‑lane road that runs through the downtown area of several small cities and is toll free.

Covisur. Covisur S.A. ("Covisur") operates National Route 2, which links the greater metropolitan area of Buenos Aires (pop. 14 million) with the summer resort city of Mar del Plata (pop. 520,000) located on the Atlantic Ocean in the southern portion of the Province of Buenos Aires. This highway runs for approximately 363 kilometers and experiences a surge in traffic during the summer months of December, January and February as vacationers travel to the beach areas of Mar del Plata. Although there are local roads which generally follow this highway, there are no parallel routes which provide access to the full distance served by the highway. Railroad competition is provided by passenger trains operated by the Province of Buenos Aires with daily service between Buenos Aires and Mar del Plata and between Buenos Aires and Pinamar. There are no cargo trains operating on this route. Competition from the railroad is minimal and not likely to affect the traffic volume on this highway significantly.

Buenos Aires Highway Access Network

MAP

Coviares. Coviares S.A. ("Coviares") holds the concession for the construction and operation of the expressway (the "Southern Access Road") from Buenos Aires to La Plata, the capital of the Province of Buenos Aires. This route also serves as one of the principal southern access roads to Buenos Aires and is one of the most heavily traveled in the Greater Metropolitan Buenos Aires area. The primary competition for the Coviares highway is a network of avenues running through the densely populated southern suburbs of Buenos Aires which lead to La Plata. Traffic on this road consists primarily of automobiles and other light vehicles and does not include large numbers of trucks or other commercial vehicles. Traffic volume is the second heaviest of any of the highways in which the Company holds an equity participation, averaging approximately 75,000 toll transactions per day.

Covimet. Covimet S.A. ("Covimet") holds the concession for the construction and operation of the expressway (the "9 de Julio Expressway") between the northern portion of Avenida General Paz to Avenida 9 de Julio in downtown Buenos Aires. Traffic on this road is also heavy (averaging approximately 46,000 toll transactions per day) and consists primarily of automobiles and other light vehicles.

Western Access Road. The Western Access Road is a 50‑kilometer divided highway leading into Buenos Aires from Luján and the densely populated western suburbs. This highway connects with National Routes 5 and 7, serving the western portion of the Province of Buenos Aires. In its present state, the Western Access Road is inadequate to serve the current traffic needs in terms of volume, safety and security. While the highway has not been upgraded in the last ten years, traffic volume in certain segments has increased approximately 50% in the same period. More importantly, the Western Access Road does not extend completely to Buenos Aires, requiring users to travel on local streets to access the Avenida General Paz beltway. The Company currently holds a 25.5% equity interest in GCO, the corporation holding the long‑term concession to widen, remodel, maintain and operate the Western Access Road. Companhia Brasileira de Projectos e Obras, Grupo Mexicano de Desarrollo S.A. and IJM Corporation Berhad each hold a 24.8% equity interest in GCO.

Toll Road Concession Contracts

The terms of the concession contracts generally govern termination of the concessions, the work to be undertaken by the concessionaire and the government, operational and maintenance standards, government supervision, maintenance reserve funds, certain fees payable to (or subsidies to be received from) the government, the tolls to be charged and any adjustment mechanism thereto. The concessionaire is required to correct any defects in the highway that arise during the term of the concession. In return for operating, maintaining and, in certain circumstances, building the highway in accordance with the terms of the concession contract, the concessionaire has the right to retain all of the revenues derived from operation of the concessioned highway for the term of the concession. Concessionaires may assign their rights and duties under the concession only with the prior approval of the government. Upon termination of the concession, the right to operate the highway and to collect toll revenues reverts to the government. The highway itself and the fixtures related to its operation remain the property of the government throughout the term of the concession, although vehicles and equipment purchased by the concessionaire are not required to be delivered to the government upon expiration of the concession.

Toll Revenues. Each concession contract sets forth a schedule of tolls by category of vehicle. The federal concessions provide for tolls denominated in U.S. Dollars and allow concessionaires to increase tolls annually each August 1st by a percentage equivalent to 80% of the average three‑month LIBOR over the previous six months. The provincial concessions permit annual increases in accordance with changes in the United States Consumer Price Index. In each case, such increase must be ratified by the Dirección Nacional de Vialidad (National Directorate of Roads) (the "DNV") or applicable provincial highway authority after review of supporting documentation. Other toll increases above the levels set forth in the concession contracts require government approval. Under all of the concession contracts, the concessionaire is permitted to offer discounts or other special pricing arrangements, subject to the maximum tolls set forth in the concession contracts.

Subsidies and Fees. The concession contracts for Covinorte, Concanor, Covicentro and Red Vial were amended in 1991 to modify the toll structure in order to significantly reduce the amount paid by customers. In exchange for the concessionaires' agreement to reduce tolls, the Argentine government agreed to pay subsidies of P$265,641 per month to Covinorte, P$253,972 per month to Concanor, P$503,553 per month to Covicentro and P$282,576 per month to Red Vial to defray operating and maintenance costs. In addition, Covisur currently receives a subsidy of P$1.7 million per month from the Dirección de Vialidad de la Provincia de Buenos Aires to defray operating costs. Aufe currently pays a fee of P$255,000 per month to the Santa Fe provincial government for usage of the concessioned highway. As of March 31, 1997, the Argentine Federal Government was in arrears with respect to approximately P$14.8 million in subsidy payments to the Company's subsidiaries and Joint Ventures operating four national highways. Pursuant to Decree No. 489/95, the Argentine Federal Government has announced its intention to renegotiate the federal highway concessions to extend such concessions for an additional 15 years in exchange for (a) the elimination or reduction of the existing monthly subsidy and (b) an increase in the required Highway Investments, a portion of which may be funded by the government and which may involve additional work for the construction segment.

Termination. The grantors of the concessions have the right to terminate the concessions without compensation before the expiration upon the occurrence of specified events, including interruption of highway services without cause, modification or alteration of the conditions under which the highway is operated without the consent of the DNV, failure to make payment of any amounts due to the government, failure to comply with the conditions specified in the concession, negligence in the operation of the highway, failure to maintain the highway or the establishment of tolls in excess of those approved by the DNV. In the case of the national and provincial highways, the Argentine national or provincial government, as applicable, may also terminate a concession without cause prior to the expiration of the concession, in which event the concessionaire is entitled to compensation for all investments made during the term of the concession and for damages and lost profits. In the case of Coviares and Covimet, the Organo de Control de la Red de Accesos a Buenos Aires (Controlling Organ of the Buenos Aires Highway Network) ("OCRABA") may also terminate the concession without cause prior to expiration of the concession but compensation to the concessionaire is limited to investments made during the term of the concession less accumulated depreciation and does not include the loss of anticipated profits.

The concession for the Western Access Road may be terminated upon the occurrence of specified events, including material failure to comply with the terms of the concession contract, mutual agreement between GCO and the government and the liquidation or dissolution of GCo. The Argentine government may also terminate the concession without cause prior to the expiration of the concession, in which event GCO is entitled to be compensated for all investments made during the term of the concession, of which amount not less than 85% must be paid in cash to the consortium members upon termination.

Highway Investment Program

National and Provincial Highways. For most of the national and provincial highways in which the Company participates, the Highway Investments required of the concessionaire are limited to improvements of the existing roadway. As a result, the amounts required to be invested are limited and are clearly provided in the concession contract. Specifically, Covinorte, Concanor and Covicentro are required to make Highway Investments of P$96.0 million, P$76.0 million and P$166.0 million, respectively, during the term of their concessions. Similarly, pursuant to their concessions, Red Vial and Aufe are required to make Highway Investments of P$56.0 million and P$95.0 million, respectively. However, Covicentro has proposed to increase the level of Highway Investments to P$323.0 million in exchange for a 15‑year extension of its concession contract until 2018. Red Vial is also considering presenting a similar proposal for an increase in its required Highway Investment in exchange for a 15‑year extension of the expiration of the concession. As of December 31, 1996, Covinorte, Concanor, Covicentro, Red Vial and Aufe had made Highway Investments of P$33.6 million, P$27.1 million, P$50.9 million, P$27.1 million and P$15.0 million, respectively.

Unlike the other national and provincial highway concessionaires, Covisur was required, as part of its concession contract, to make significant investments in the concessioned highway, including widening shoulders, adding new lanes and creating a divided highway in order to ease overcrowding during the peak season and reduce traffic fatalities on the heavily‑travelled highway. The total cost of the Highway Investments required to be made during the term of this concession is estimated to be P$300.0 million. As of December 31, 1996, Covisur had widened the shoulders throughout the entire length of the highway to permit traffic to pull to one side when passed and thereby reduce the number of head‑on collisions. In addition, Covisur has added two additional lanes and created a divided highway on the northern half of the route from Buenos Aires to Dolores. As of December 31, 1996, the total cost of the Highway Investments made by Covisur was P$143.5 million.

Coviares. Pursuant to its concession contract, Coviares is required to build a four‑lane divided highway, which, over time, may be expanded to eight lanes. This highway is one of the most significant public works undertaken in and around the federal capital in recent years, requiring Highway Investments of approximately P$787.0 million. As of December 31, 1996, approximately P$407.0 million had been so invested and Coviares anticipates making an additional investment of approximately P$83.0 million for the completion of a second spur running from Hudson to La Plata. Additional investments of approximately P$30.0 million are also expected to be made to widen the expressway to eight lanes from Buenos Aires to Quilmes. The concession granted to Coviares also provides for the construction of a six‑kilometer highway running parallel to the Río de la Plata (the River Plata) and linking the Buenos Aires‑La Plata expressway in the south to the 9 de Julio Expressway to the north. The contract provides for an elevated highway covering the span with an estimated construction cost of approximately P$140.0 million.

Covimet. Pursuant to its concession contract, Covimet is required to build an eight‑lane divided highway which would relieve the congestion on local streets leading north to Avenida General Paz. The plan for the 9 de Julio Expressway also requires that the Buenos Aires municipal government obtain easements for the construction of such expressway on property currently occupied by one of the airports serving Buenos Aires and an adjacent railway line. The total cost of the Highway Investments required to be made during the term of this concession is estimated to be approximately P$301.0 million. As of December 31, 1996, the total cost of the Highway Investments made by Covimet was P$161.0 million.

Western Access Road. Under the terms of its concession contract, GCO must remodel, repave, maintain and operate the Western Access Road and construct a six‑kilometer extension which will link the existing highway with the Avenida General Paz beltway. The first stage of the project calls for the widening of the Western Access Road to a width varying from eight to twelve lanes and the construction of the six‑kilometer extension. In connection therewith, the Argentine government was to obtain, by public domain, the land needed to construct the six‑kilometer extension. These proceedings were originally scheduled to have been completed within 12 months after the award of the concession; however, because of delays in commencing the public domain process and an increase in the compensation payable to property holders, the deadline for the government to deliver the necessary property was extended to March 31, 1997. On March 7, 1997, the government delivered substantially all of such property to GCo. The term of the concession runs for 20 years from the earlier of (i) January 31, 1999, at which time the Company is required to have completed all necessary work on the concession, or (ii) the date upon which the Company begins to charge full tolls on the Western Access Road. See "--Construction--Selected Current Projects--Western Access Road." Pursuant to the original concession contract, GCO's right to begin charging full tolls on the Western Access Road was to commence upon completion of the construction of the extension. However, in the recent extension negotiations, the Argentine government agreed to permit the charging of interim tolls of P$0.60 beginning on June 1, 1997.

Under the terms of the concession contract, GCO is also required to provide the following services in addition to maintenance and operation of the highway: emergency services, towing, public telephones, restrooms and landscaping. The concession contract permits GCO to grant sub‑concessions to other companies for roadside services, such as service stations, restaurants, motels and shopping malls to be located in the stretch of land between the highway and the municipal line.

Recent Developments

On January 7, 1997, the Company entered into a preliminary agreement with the controlling shareholders of Polledo S.A. ("Polledo"), a publicly held Argentine corporation whose shares are traded on the Buenos Aires Stock Exchange, pursuant to which the Company and Polledo through a spin‑off and merger would consolidate their respective equity interests in Covimet and Coviares as well as their interests in a multiparty Joint Venture ("Eriday") which constructed the Yacyreta hydro‑electric dam. Under the terms of the preliminary agreement, the Company would (i) spin‑off (through an Argentine legal procedure known as an "escisión") Caminos equity interests in Coviares and Covimet, (ii) transfer the interests of BRH in Eriday to Caminos which would in turn spin‑off this Joint Venture interest and (iii) merge these transferred equity and Joint Venture interests into Polledo. These Caminos interests would then be joined with the assets of Polledo which consist primarily of similar interests in Coviares, Covimet and Eriday. After the consummation of the spin‑off and merger, Polledo's direct and indirect holdings in Coviares and Covimet will increase to 31.8%. If this spin‑off/merger is consummated, CLISA would acquire not less than 57.2% of the Common Stock of Polledo in this merger and the current controlling shareholders of Polledo will reduce their interest in Polledo not more than 21.8%. The final 21.0% of Polledo's stock will remain in the hands of the public and will continue to be traded on the Buenos Aires Stock Exchange.

The Company and Polledo have agreed to close this transaction prior to October 1997. Closing of the transaction is contingent on (i) the consummation of the escisión by Caminos and BRH of their interests in Coviares, Covimet and Eriday; (ii) the approval of the merger by the shareholders of Polledo and certain creditors of Polledo; and (iii) registration of the escisión and subsequent merger with, and approval of these transactions by, the Inspección General de Justicia.

The preliminary agreement also contemplates a put option with the controlling shareholders of Polledo which allows such shareholders to sell their shares to the Company in the event the merger is not consummated. This option may be exercised by the controlling shareholders: (i) at any time, if trading of the Polledo shares on the Buenos Aires Stock Exchange is suspended, Polledo delists its shares or if the Company defaults on the obligation to periodically renew a performance bond issued in favor of the controlling shareholders of Polledo; or (ii) any time after 18 months from January 7, 1997, subject to extension for an additional three months in certain circumstances.

In each case, the put option expires on, and is only exercisable prior to, the fourth anniversary of the exercise date specified in (ii) above. Amounts under the put option are payable by the Company as follows: 20.0% within five business days of exercise of such option, and the remaining 80.0% in four equal annual installments commencing on the first anniversary of the exercise of the put option, plus interest on the unpaid balance at a rate of LIBOR plus 3.0% per annum. The Company's obligations under the put option are valued at P$14.0 million. This obligation may be terminated upon consummation of the proposed merger and release of certain escrowed shares to the controlling shareholders of Polledo.

Prior to the execution of the preliminary agreements, Polledo discontinued substantially all of its operations. In connection therewith, Polledo took a number of extraordinary charges which resulted in a loss during fiscal year 1996. Given that Polledo no longer has any significant operations, the Company believes that the presentation of pro forma financial statements and results of operations would misrepresent the anticipated results of the combined company after consummation of the escisión/merger. As a result, no such pro forma financial statements have been included herein. Had such statements been prepared in accordance with Argentine GAAP, the loss of Polledo would have exceeded the Company's net income for fiscal year 1996.

It is anticipated that following the merger with Polledo, the consolidated debt of the Company will increase by P$20.0 million, of which P$15.5 million will be secured by certain assets of Polledo. Polledo will be an Unrestricted Subsidiary of the Issuer (as defined below) and none of the debt owed by Polledo will be guaranteed by the Issuer, the Guarantors or any other subsidiary or affiliate of the Issuer. In addition, Polledo will only contribute income from permanent investments. See "Description of Indebtedness of the Company and its Joint Ventures--Polledo Indebtedness."

Other

The Argentine Federal Government has recently commenced negotiations with the Company regarding the payment of the P$14.8 million in subsidies owed to Covicentro and Red Vial. Although no agreement has been reached with the government, it is anticipated that a settlement of these arrears could involve (i) a partial payment of such past due amounts with the balance payable in installments over future years, (ii) the extension of the concession agreements for the highways operated by these companies and (iii) an increase in Highway Investments. See "Risk Factors--Toll Road Management--Renegotiation of Contracts; Termination of Concessions."

Insurance

The Company believes that it maintains the types and amounts of insurance customary in the industries in which it operates, including coverage for employee‑related accidents and injuries, property damage, fire and theft. The Company considers its insurance coverage to be adequate both as to risks and amounts for the business conducted by the Company.

Also, under Metrovías' concession contract, the Argentine Federal Government has agreed to be responsible for all liabilities in excess of US$2.0 million. The Company currently maintains adequate insurance to cover the portion of the liabilities up to US$2.0 million including coverage for employee‑related, accidents and injuries, property damage and theft.

Employees

Mass Transportation Management. At December 31, 1996, the mass transportation management segment of the Company employed approximately 2,500 persons, of whom approximately 1,900 were union employees and approximately 600 were nonunion employees. Metrovías' employees belong to four unions. The Company's collective bargaining agreement with Unión Ferroviaria is in force and the Company's collective bargaining agreements with the unions representing signalmen and supervisory personnel are signed and pending governmental approvals. The Company's collective bargaining agreements with the other two unions have expired.

Waste Management. At December 31, 1996, the waste management segment employed 3,553 persons, of whom 3,098 were union employees and 455 were non‑union employees. The waste management segment's employees belong to four unions, each of which have entered into collective bargaining agreements with the Company. The Company has 502 employees based outside of Argentina in its waste management segment.

Construction. At December 31, 1996, the construction segment of the Company directly employed 1,081 persons, of whom 677 were union employees and 404 were non‑union employees. The construction segment's employees belong to three unions. The Company has entered into collective bargaining agreements with each of these unions.

Toll Road Management. At December 31, 1996, Caminos employed four people and the companies in the toll road management segment employed approximately 1,340 persons, of whom 64 were union employees and 1,276 were non‑union employees. The Company maintains a collective bargaining agreement with a single union to which all the Company's toll road employees belong. This agreement is in effect and runs for an indefinite term.

Although Argentina has recently experienced general strikes in which the Company's employees have participated, the Company has not been the target of any strikes directed at the Company in the past five years. The Company believes its relationship with its employees and their labor unions is good.

Government Regulation

General. Generally, the Company is not subject to any special governmental regulation other than the terms imposed by governmental entities in the concession contracts to which the Company is a party. The Company believes that it is in material compliance with Argentine laws and regulations relating to its business.

Environmental Matters. The Company believes that its current operations are in material compliance with Argentine laws and regulations relating to the protection of human health and the environment as these have been historically interpreted and enforced, and it has not been required or requested, nor is management of the Company aware of any circumstances which would require the Company to remediate any of its operations. Until recently, environmental protection legislation in Argentina was adopted primarily at the provincial level. However, the Federal Government has recently initiated various measures to regulate, monitor and improve environmental standards. In 1992, the Federal Congress enacted Law No. 24,051 (the "Environmental Law"), calling for a balancing of economic development with the conservation of natural resources, the improvement of the environment and the prevention and amelioration of the effects of pollution. In August 1994, the Argentine Constitution was amended to, among other things, stipulate the right of all residents of Argentina to a healthy environment and grant the Federal Government authority to establish minimum standards of environmental protection which are to be supplemented by the provinces' own standards. The 1994 amendments to the Constitution also provide that damage to the environment must be repaired as provided for in the applicable law.

Under the Environmental Law, the Secretariat of the Environment is empowered to bring administrative proceedings against companies that violate environmental laws. Also pursuant to the Environmental Law, the Argentine Government has enacted regulations concerning the handling of hazardous materials and waste, including a requirement that businesses operating in the federal district of Buenos Aires that own, generate and handle hazardous wastes register with the National Registry of Hazardous Wastes and pay an annual fee based upon the volume of waste owned, generated and handled. Because none of the Company's waste management operations involves the handling of hazardous waste, the Company believes that this registration requirement will not apply to CLISA.

Labor Law. In the conduct of its operations, the Company must comply with labor legislation enacted by the Federal Government and with extensive regulations issued by the Ministry of Labor and Social Security and various other agencies thereunder. The legal framework for labor contracts in Argentina is established by Argentine Law No. 20,744, as amended, and as supplemented by Law No. 24,013, which provides certain terms with which all labor contracts must comply, including duration, vacations and termination. In addition to certain basic conditions, management and union representatives in each industry may, from time to time, negotiate collective agreements providing for specific wage scales and other conditions. Employees are entitled to an annual bonus, in addition to their salaries or wages, which is paid in two installments in June and December, each installment equivalent to 50% of the highest monthly wage received during the preceding semester. Employers are also required to contribute amounts equal to specified percentages of its payroll to a family allowance fund, to the National Social Security Institute and to various social welfare agencies. Such percentages vary by region and are equal to 9%, 18% and 6%, respectively, in the City of Buenos Aires. Argentine law does not require compulsory profit‑sharing.

Argentine Law No. 24,557 (the "Work Risks Law") established a compulsory insurance scheme to cover work‑related injuries and illnesses on a comprehensive basis. In addition, the statute sets a cap on the amount of indemnification payable by employers depending on the extent of their liability under the Work Risks Law. Employers not otherwise exempted are required to insure themselves against work‑related injuries and illnesses of personnel with any of the government‑authorized insurance companies. Premiums are set by such insurance companies following certain guidelines and approved by the Federal Government. Employers may deduct the amount of premiums paid from their earnings for income tax purposes. The Work Risks Law, which became effective July 1, 1996, exempts employers from civil liability for workrelated injuries and illnesses, except in cases of employer "fraud," which, depending on the construction used by Argentine courts, may or may not include gross negligence. The Company must further comply with the provisions of Argentine Law No. 19,587, as amended, on Work Hygiene and Safety, and in particular with the recently enacted regulations on work hygiene and safety in the construction industry set forth in Decree No. 911/96. The new regulations establish minimum standards which must be met by all employers in the construction industry falling under the scope of Decree No. 911/96, covering on‑site safety and sanitary conditions such as living conditions of personnel, ventilation of installations, handling of tools and machines and noise and air pollution, among others.

Property

The Company's headquarters are located at Leandro N. Alem 1050, 9th Floor, 1001 Buenos Aires, Argentina. The Company owns its headquarters. The headquarters of the mass transportation management segment and the facilities of the BAS and the Urquiza Line are owned by SBASE and MEYOSP and are used by the Company pursuant to Metrovías' concession contract. Each of the Company's waste management Joint Ventures leases the headquarters and other facilities necessary to conduct its business. The headquarters of the construction segment are located in Córdoba. The Company owns the headquarters for the construction segment as well as facilities in Córdoba for the storage of the construction segment's equipment. The construction segment also leases offices in Santiago, Chile, Asunción, Paraguay, and Montevideo, Uruguay. The rights‑of‑way, highways and related facilities of the concessioned highways are owned by municipalities and provincial and federal authorities and are used by the Company pursuant to the concession contracts relating to such highways.

Legal Proceedings

Burlington Northern Arbitration

BRH is currently involved in arbitration proceedings with Burlington Northern with respect to disputes arising under an agreement dated September 16, 1993, among BRH, Cometrans, Morrison Knudsen and Burlington Northern (the "Burlington Northern Agreement"). Pursuant to the agreement, Burlington Northern agreed to transfer all of its rights and obligations as a shareholder of Metrovías to BRH and Cometrans or their designees on an equal basis in the event that Metrovías was awarded the concession to operate the BAS and the Urquiza Line. As consideration for such transfer, BRH and Cometrans agreed: (i) to pay the amount of Burlington Northern's stock subscription in Metrovías, (ii) to reimburse Burlington Northern for US$1,275,000, the amount of the expenses incurred by Burlington Northern during the transition organization and start‑up plan for Metrovías, and (iii) to indemnify Burlington Northern against any claims made by third parties, including the Argentine Federal Government, against Burlington Northern, its agents, employees, representatives, directors and officers related to or arising from (a) any shareholder or contractual liability Burlington Northern might incur as a result of its being a signatory to the agreements executed pursuant to the Burlington Northern Agreement, (b) the failure of the Argentine Federal Government to approve the transfer of Burlington Northern's shares to BRH and Cometrans within one year after application was made and to release Burlington Northern from any commitments or liabilities based on Burlington Northern's participation in Metrovías, or (c) Burlington Northern's performance under a technical assistance agreement, except for any claims arising out of gross negligence or willful misconduct of Burlington Northern. The parties to the Burlington Northern Agreement agreed to deliver guarantees in favor of Burlington Northern in the event that any indemnifiable claims should arise.

In December 1995, Burlington Northern requested that BRH and Cometrans (i) designate the persons in whose favor Burlington Northern should transfer its interest in Metrovías, (ii) pay the amount of US$1,275,000 as described in the preceding paragraph, and (iii) deliver the guarantees required by the Burlington Northern Agreement.

BRH notified Burlington Northern that its shares of Metrovías had to be transferred to BRH pursuant to the Metrovías Shareholders' Agreement. It also tendered the total amount of money owed as reimbursement for expenditures plus interest and requested Burlington Northern to execute documents transferring Burlington Northern's Metrovías shares and letters requesting the government to authorize such stock transfer. BRH informed Burlington Northern that the guarantees requested were not required under the Burlington Northern Agreement as no situation giving rise to the obligation to deliver the guarantees had taken place.

In January 1996, Burlington Northern declared the Burlington Northern Agreement had terminated because BRH had not complied with its obligations thereunder. Burlington Northern submitted to arbitration a claim against BRH for damages derived from such termination. BRH answered Burlington Northern's claim and counterclaimed requesting the arbitral tribunal to (i) declare the Burlington Northern Agreement in force and that the Burlington Northern Agreement had not been terminated by the actions of Burlington Northern; (ii) require Burlington Northern to accept as payment under the Burlington Northern Agreement a check for the amount of US$1,096,888 representing the amount due Burlington Northern from BRH, including interest; (iii) to require Burlington Northern to formally transfer its Metrovías shares to BRH and to execute letters seeking governmental authorization for the stock transfer; (iv) declare that the guarantees are not and have not become due yet; and (v) declare BRH's right to damages. Burlington Northern has been notified of BRH's counterclaim and its response is currently pending.

ESVAL Arbitration

Consorcio Oceánico LTDA ("Oceánico"), a consortium formed by BRH and CBPO, is currently involved in arbitration proceedings with Empresa de Obras Sanitarias de Valparaíso ("ESVAL"), a company owned by the government of Chile. The arbitration is taking place in Valparaíso, Chile. Oceánico entered into an agreement with ESVAL for the construction of the sewer system Gran Valparaíso--Sewer Viña del Mar--Valparaíso in Chile on September 29, 1992 (the "ESVAL Agreement").

The arbitration was initiated by Oceánico in January 1995 in connection with a dispute between Oceánico and ESVAL as to which party was responsible for, and should bear the economic costs resulting from, changes in project specifications and cost overruns. Oceánico requested the arbitral tribunal (i) to terminate the ESVAL Agreement based on ESVAL's exclusive fault and liability and (ii) to order ESVAL to pay damages which were originally estimated at 6,684,942,731 Chilean Pesos (approx. US$16.0 million) and were later increased to an as yet undetermined amount. In the arbitration proceedings, ESVAL (i) claims damages in the amount of 10,773,319,597 Chilean Pesos (approx. US$26.0 million) and (ii) seeks restitution in the amount of 606,697,629 Chilean Pesos (approx. US$1.5 million) corresponding to advances made by ESVAL to Oceánico; however, in the opinion of BRH's Chilean counsel, ESVAL's claims were not made in compliance with the procedures of the ESVAL Agreement and Chilean law. The obligations of Oceánico under the ESVAL Agreement are jointly and severally guaranteed by BRH and CBPO, acting through their agencies in Chile. Accordingly, ESVAL's claim filed with the arbitrator was made against each of Oceánico, BRH and CBPO, acting through their respective Chilean agencies. Under Chilean law, BRH is liable for the operations of its agency.

The arbitration proceeding is currently in the evidentiary stage. Pursuant to the arbitral rules, the arbitration should be completed before May 29, 1998. Chilean counsel to Oceánico has advised the Company that, in the opinion of such counsel, Oceánico's claim is legally and contractually founded and, as a result, Oceánico should succeed in its claims. Moreover, in the opinion of such Chilean counsel, ESVAL's claims should be dismissed due to ESVAL's failure to satisfy the procedural and other requirements of the ESVAL Agreement and Chilean law.

As described above, Oceánico has received an advance payment from ESVAL of approximately US$1.5 million for work to be performed under the ESVAL Agreement. In the case of the Company, its percentage share of such advance is recorded as a liability under "Other liabilities" in its combined financial statements. To the extent such advance may be required to be returned, it may be offset against any award granted to Oceánico. Management believes that the dispute is unlikely to have a material adverse effect on the financial condition of the Company.

Province of Buenos Aires Tax Claim

The tax authority of the Province of Buenos Aires has requested that Coviares pay a stamp tax related to the concession contract entered into between Coviares and the national government. The total tax claimed by the Province of Buenos Aires, plus penalties, interest and other charges totaled P$44.9 million as of September 30, 1996. Coviares is contesting such claim in the Supreme Court of the Province of Buenos Aires. Coviares' management believes that since the concession was granted by the national government, it is not subject to payment of provincial or municipal taxes related to such concession. Based on the foregoing and on the opinion of Coviares' legal counsel, Coviaries' management believes that its position will prevail and therefore no provision has been made for this claim in the Company's financial statements.

General

Metrovías is involved in certain legal proceedings most of which involve accidents caused by the derailment or decoupling of cars. As of December 31, 1996, claims filed against Metrovías for accidents which occurred at the Dorrego Station (Line B), the Pueyrredón Station (Line D), on the Urquiza Line and on the Premetro line, amount to US$6.3 million. Metrovías is also involved in litigation relating to a railroad crossing accident in which two people died. The amount of such claims is US$0.5 million.

The Company is involved in certain legal proceedings related to accidents caused by stray animals on the highways that it manages. The aggregate amount of such claims is US$8.8 million. The Company believes that it is not liable for any of these claims.

The Company is involved in several legal actions arising in the ordinary course of business, many of which involve labor‑related proceedings. The Company does not believe that the outcome of any such litigation or the cumulative effect of all such legal actions considered as a whole would have a material adverse effect on the Company's financial condition or future results of operations as a whole.

MANAGEMENT

Directors and Executive Officers

The Company is managed by its Directorio ("Board of Directors"). In accordance with the Company's charter, the Board of Directors may consist of three to nine members as determined by the ordinary shareholders meeting. The directors are elected at the ordinary shareholders' meeting for a term of one fiscal year and there is no limit on the number of terms a director can serve. In addition, certain directors also have managerial responsibilities for various segments of the Company's operations and serve as managing directors (each a "Managing Director.") The Company also has a Comisión Fiscalizadora ("Supervisory Board"), which is in charge of the supervision of the Company. Under Argentine law, the Supervisory Board is responsible for overseeing the Company's compliance with its by‑laws and Argentine law and, is required to present to the shareholders at the annual ordinary general meeting a report in respect of the financial information presented to such holders by the Board of Directors. The síndicos (members of the Supervisory Board) also are authorized (i) to call ordinary or extraordinary shareholders' meetings under certain circumstances, (ii) to place items on the agenda for meetings of shareholders, (iii) to attend meetings of shareholders and (iv) generally to monitor the affairs of the Company. The Company's By‑Laws provide that the Supervisory Board will be formed by three members and three alternate members appointed at the shareholders' meeting for a term of one fiscal year with the possibility of re‑election.

Listed below is certain information concerning the directors and certain officers of the Company:

Name Position Age

Aldo Benito Roggio Chairman of the Board 52

Angel Alberto Sargiotto Vice President of the Board; 75

Managing Director--Construction Operations

Sergio Oscar Roggio Managing Director--Waste Management 39

Operations

Alberto Estéban Verra Managing Director--Finance 47

Roberto Macías Managing Director--Mass 50

Transportation and Toll Road Operations

Carlos Alfredo Ferla Managing Director--Legal 43

Alejandro Carlos Roggio Director 37

Graciela Amalia Roggio de Lejarza Director 48

Roberto Labarthe Chief Financial Officer 46

The members of the Supervisory Board of the Company are Sergio Mario Muzi, Julio Antonio Carri Pérez and Arístides Jorge Ruival. The alternate members of the Supervisory Board of the Company are Clara María Cordeiro, Luis Alejandro Fadda and Carlos José Molina.

Biographical Information

Aldo Benito Roggio is the Chairman of the Board of CLISA. He holds a degree in civil engineering from the Universidad Nacional de Córdoba. He joined BRH in 1968. Since 1978 he has held executive positions in various subsidiaries of BRH. Currently, he is Executive Vice President and Chief Executive Officer of BRH, President of Roggio, President of SICSA, S.A., Vice President of Benito Roggio E Hijos S.A. Uruguay, Vice President of Las Heras S.A., President of Total S.A., Director of Banco del Suquía S.A., Alternate Director of Inversora del Suquia S.A., and Vice President of Doya S.A. Mr. Roggio is a grandson of Benito Roggio.

Angel Alberto Sargiotto is the Vice President of the Board and the Managing Director--Construction Operations of CLISA. He holds a degree in civil engineering from the Universidad Nacional de Córdoba. He joined BRH in 1951 and has overseen many of BRH's construction projects. Since 1980, he has served as Production Manager for, and been Vice President of, BRH. Mr. Sargiotto holds a 2.3% stake in CLISA through Inversar S.A., which he formed in 1994 to hold his interest in BRH.

Sergio Oscar Roggio is the Managing Director--Waste Management Operations of CLISA. He holds a degree in civil engineering from the Universidad Católica Argentina and a Master of Science in Engineering from The University of California--Santa Barbara. He is a member of the American Society of Engineers and of the College of Civil Engineers of the Province of Córdoba. He joined BRH in 1980 and has worked on some of BRH's most important construction projects. Currently, Mr. Roggio runs the Company's waste management operations. He became a Director of BRH in 1986 and of Roggio in 1995. Mr. Roggio is a grandson of Benito Roggio.

Roberto Macías is the Managing Director--Mass Transportation and Toll Road Operations of CLISA. He holds a degree in accounting from the Universidad Nacional de Córdoba. He joined BRH in 1984 to assist in the renegotiation of various contracts. In 1985, he was responsible for the organization and startup of Clima in Córdoba. In 1987 he performed a similar task for Cliba in Buenos Aires and has served as President of the Board of Directors of Cliba. Since 1987, Mr. Macías has been in charge of BRH's expansion into new businesses. He has been the head of toll road segment of the company and has served as a Director of Covinorte, Covicentro, Concanor and Red Vial. Currently, he is also President of the Board of Directors of GCO and General Manager and a Director of Metrovías. Mr. Macías has been a Director of BRH since 1992.

Alberto Estéban Verra is the Managing Director--Finance of CLISA. He holds a graduate degree in accounting from the Universidad Nacional de Córdoba. After heading the accounting department for BRH, he left in 1987 to work for Grupo Macri, one of BRH's main competitors. He was the Administrative Director of Accounting and Finance, President, Vice President and a Director for various Grupo Macri entities until 1992, when he returned to BRH. Mr. Verra is also Managing Director of Inversar S.A. Mr. Verra is also the Chief Financial Officer of Roggio S.A.

Alejandro Carlos Roggio is a Director of CLISA. He holds a degree in architecture from the Universidad de Buenos Aires. He has worked in Buenos Aires as an architect since 1984. He joined BRH as an Alternate Director in 1986 and has served as a Director of BRH since 1992. Mr. Roggio is a grandson of Benito Roggio.

Graciela Amalia Roggio de Lejarza is a Director of CLISA. She holds a degree in computer system analysis from the Instituto Superior Pascal. She joined BRH as a Director in 1984. She is Coordinator of Administrative Systems for BRH and Roggio. Ms. de Lejarza is a granddaughter of Benito Roggio.

Carlos Alberto Ferla is the Managing Director--Legal of CLISA. He holds a degree in law from the Universidad Nacional de Córdoba. He has also studied negotiation and mediation at the University of San Francisco and at Harvard University. He has served as counsel to the Secretary of Public Works and Services of Argentina, Director of El Comercio de Córdoba Cia. Arg. de Seg. S.A., member of the Legislation Department of the Argentine Industrial Union and as a consultant to a number of construction, service and banking companies.

Roberto Labarthe is the Chief Financial Officer of CLISA. He holds a Bachelor of Sciences degree in Mathematics from the American University in Washington D.C. He joined BRH in 1993 and in January 1994 was named the Chief Financial Officer of Metrovías. Prior to coming to BRH, Mr. Labarthe was a Vice President in the Corporate Finance Department of the Chase Manhattan Bank N.A., with assignments in Río de Janeiro, New York and Buenos Aires.

Compensation of Directors and Executive Officers

If the Issuer had been in existence on January 1, 1996, and each of its consolidated subsidiaries had been held by the Issuer on such date, the aggregate compensation paid by the Company to all directors and officers would have been P$0.8 million. The Company's directors, Managing Directors, officers and members of the Supervisory Board have not been compensated for their services by the Issuer since the Issuer's formation in October 1996. Subject to the approval by the shareholders of CLISA, such compensation will be payable retroactively from the date of formation of the Issuer. Under the Indenture, the Company has agreed that so long as the Senior Notes are outstanding, the aggregate annual remuneration paid to the directors (including Managing Directors) and executive officers in each fiscal year shall not exceed the greatest of (i) US$2.0 million (as adjusted for changes in the "Consumer Price Index--All Items" of the United States since the date of issuance of the Senior Notes), (ii) P$2.0 million (as adjusted for changes in the "Consumer Price Index" of Argentina since the date of the issuance of the Senior Notes) and (iii) P$2.0 million plus 8.0% of the Company's Consolidated EBITDA in excess of P$50.0 million for such fiscal year. The Indenture further provides that compensation attributable to the value of options to purchase common stock of the Company shall be excluded from the calculation of such aggregate remunerations. Currently, the Company's directors, Managing Directors, officers and members of the Supervisory Board do not hold options to purchase shares of CLISA, and there is no stock option or similar plan in effect.

There are no labor contracts between the Company and its directors or members of its Supervisory Board. There are no contracts between the Company and its directors, members of its Supervisory Board or executive officers in which such directors, members of its Supervisory Board or executive officers have an interest contrary to the interest of the Company according to Section 272 of the Argentine Corporation Law.

PRINCIPAL SHAREHOLDERS

The Company has two classes of common stock, each with a par value of P$1.00 per share: Class A Shares with the right to five votes per share, and Class B Shares with the right to one vote per share. The following table sets forth certain information as of March 31, 1997 regarding the beneficial ownership of the share capital of the Company: (i) each person known to the Company to own beneficially 5% or more of the outstanding share capital of the Company, (ii) each member of the Board of Directors and each executive officer of the Company and (iii) all directors and executive officers as a group. See "Company Background and History."

Percentage of Percentage of

Name of Number of Class A Number of Class B

Beneficial Owner Class A Shares Shares Class B Shares Shares

Roggio S.A. 4,689 97.7% 68,327,034 97.6%

Inversar S.A. 111 2.3% 1,680,166 2.4%

Directors and Executive Officers(1) -- -- 46,760 --

(1) Includes 12,137 Class B Shares held by Aldo Benito Roggio, 11,125 Class B Shares held by Graciela Roggio de Lejarza, 11,749 Class B Shares held by Sergio Oscar Roggio and 11,749 Class B Shares held by Alejandro Carlos Roggio.

The predecessor to Roggio, the parent of CLISA, was founded in 1908 by Benito Roggio. Currently, Roggio is owned and controlled principally by Aldo Benito Roggio and Graciela Roggio de Lejarza, both children of Remo Roggio, one of Benito Roggio's sons, and Sergio Oscar Roggio and Alejandro Carlos Roggio, both sons of Héctor Marcelo Roggio, another of Benito Roggio's sons.

As of March 31, 1997, Roggio's capital stock consisted of 5,090,000 shares of class A common stock, each with par value of P$1.0 per share and one vote per share ("Roggio Class A Stock"). As of March 31, 1997: (i) Aldo Benito Roggio owned 929,969 shares of Roggio Class A Stock, or 18.27% of the outstanding Roggio Class A Stock; (ii) Graciela Roggio de Lejarza owned 852,430 shares of Roggio Class A Stock, or 16.75% of the outstanding Roggio Class A Stock; (iii) Sergio Oscar Roggio owned 900,236 shares of Roggio Class A Stock, or 17.69% of the outstanding Roggio Class A Stock; (iv) Alejandro Carlos Roggio owned 900,236 shares of Roggio Class A Common Stock, or 17.69% of the outstanding Roggio Class A Stock; (v) Vito Remo Roggio owned 96,567 shares of Roggio Class A Stock, or 1.9% of the outstanding Roggio Class A Stock; and (vi) Doya S.A. owned 1,410,562 shares of Roggio Class A Stock, or 27.71% of the outstanding Roggio Class A Stock. Doya S.A., at this time, is held by Aldo Benito Roggio, Vito Remo Roggio, Sergio Oscar Roggio and Alejandro Carlos Roggio, each with 18.15% of its capital stock and voting rights, and by Fundación Benito Roggio, with 27.40% of Doya's Capital stock and voting rights.

CERTAIN TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of its business, the Company engages in a variety of transactions with affiliates of the Company and Roggio. Financial information concerning certain material transactions is set forth in Note 16 to the Consolidated Combined Financial Statements for the nine‑month period ended March 31, 1997 and Note 16 to the Combined Financial Statements for the fiscal years ended June 30, 1996, 1995 and 1994. The principal transactions with such related parties from July 1, 1994 to December 31, 1996, are as follows:

Purchases and Sales of Services

The Company, through BRH, provides construction services to many of the corporations holding toll road concessions in which the Company holds a minority interest. Sales to these corporations (GCO, Aufe, Concanor, Covinorte, Covisur, Coviares and Covimet (collectively, the "Minority Toll Road Concessionaires")) totaled P$14.8 million, P$13.1 million and P$16.4 million, respectively, during the six‑month period ended December 31, 1996 and the fiscal years ended June 30, 1996 and 1995. Additionally, BRH provides construction services to affiliates of Roggio, including construction services to Empalme S.A., an affiliate of Roggio, in connection with the development of a shopping mall in Córdoba. Finally, BRH has in the past provided consulting and other services to Servicios del Centro, an electricity distribution company affiliated with Roggio.

In recent years, Taym S.A., a corporation in which BRH and Ormas each hold 50% of the common stock, has provided cleaning and other similar services to Metrovías, totaling P$4.0 million and P$4.1 million, respectively, during the fiscal years ended June 30, 1996 and 1995 and P$2.7 million during the six‑month period ended December 31, 1996.

Pursuant to a contract executed in 1995, BRH has provided computer and information services to Catrel S.A. ("Catrelsa"), an affiliate of Roggio providing cartographical services to the City of Buenos Aires. Sales to Catrelsa totaled P$0.8 million, P$5.4 million and P$1.0 million, respectively, during the six‑month period ended December 31, 1996 and the fiscal years ended June 30, 1996 and 1995.

BRH, Metrovías and other of the Company's business units purchase financial advisory services from SICSA S.A. ("SICSA"), an affiliate of Roggio. In addition, from time to time, BRH has provided computer, other information management and engineering advisory services to SICSA which together resulted in net payments to SICSA of immaterial amounts during the six‑month period ended December 31, 1996 and P$2.7 million and P$0.4 million, respectively, during the fiscal years ended June 30, 1996 and 1995. In addition, pursuant to a contract dated December 1993, Banco del Suquía, a subsidiary of SICSA, provides fare collection and reconciliation services to Metrovías. Pursuant to this agreement, Metrovías has paid Banco del Suquía P$3.6 million and P$3.5 million, respectively, during the fiscal years ended June 30, 1996 and 1995 and P$1.9 million during the six‑month period ended December 31, 1996. This agreement expired December 31, 1996; however, Banco del Suquía continues providing services on the same terms as those provided in the earlier contract.

Intercompany Balances

The Company, as do other shareholders in the Minority Toll Road Concessionaires, maintains intercompany lines of credit with each of the Minority Toll Road Concessionaires in order to facilitate temporary cash infusions and other flows of funds to meet working capital requirements, the distribution of cash to shareholders pending the declaration of dividends at the end of each fiscal year and payment of amounts due for construction and other services rendered to these concessionaires. These lines of credit with the Company accrue interest at a rate per annum equal to the average rate paid by BRH on other indebtedness.

The Company, through BRH, has established similar lines of credit with Taym and Catrel. As of December 31, 1996, the Company owed, on a net basis, P$1.6 million to Catrel. This amount accrues interest at 9.0% per annum.

BRH and Metrovías also maintain similar lines with Roggio. As of December 31, 1996, BRH and Metrovías were owed P$31.2 million and P$4.7 million, respectively, by Roggio. These amounts owed by Roggio are offset in part by (i) a P$18.4 million debt owed by CLISA to Roggio in payment for the shares of BRH and Caminos transferred to CLISA in connection with the Restructuring and (ii) P$3.9 million owed by Caminos to Roggio under an intercompany line of credit. In October 1996, SICSA assigned to BRH its right to receive a management fee from Metrovías; in exchange for such assignment, since October 1, 1996, amounts owed to BRH by Roggio have not accrued interest. Amounts outstanding under the Metrovías‑Roggio intercompany line accrue interest at 12.0% per annum; however, amounts owed by Caminos to Roggio accrue interest at a rate per annum equal to the average rate paid by BRH on other indebtedness plus 1%. Following the completion of the Offering, there will be no intercompany balances between CLISA and Roggio.

Other

Prior to the Restructuring, Intercel S.A. ("Intercel") was a subsidiary of BRH, which acquired a minority interest in CTI Compañía de Teléfonos del Interior S.A. ("CTI"). BRH's holdings in Intercel were later transferred to SICSA. In March 1995, Intercel sold its holdings in CTI and at that time reimbursed BRH for P$6.4 million in various costs associated with the purchase of the CTI stock and the financing of this acquisition which BRH had advanced on behalf of Intercel.

DESCRIPTION OF INDEBTEDNESS OF THE COMPANY AND ITS JOINT VENTURES

Revolving Credit Facility

CLISA and BRH have obtained a commitment (the "Bank Commitment Letter") as co‑issuers for a two‑year U.S.$25.0 million senior secured revolving credit facility from a group of banks led by Citibank, N.A., Buenos Aires Branch (the "Citibank Revolver"). Amounts outstanding under the Citibank Revolver are expected to be secured by an assignment of contract rights and receivables from certain approved counterparties ("Eligible Receivables"). It is expected that the Citibank Revolver will provide that the aggregate amount of Eligible Receivables and contract rights assigned to such fiduciary must at all times equal not less than three times the amount available under the Citibank Revolver. It is also expected that the Citibank Revolver will provide for an advance rate of 83.0% against Eligible Receivables assigned to the fiduciary. Amounts drawn under the Citibank Revolver are expected to accrue interest at a rate per annum equal to Argentine two‑month LIBOR times 1.1 plus 4.00% and are expected to be repaid upon the maturity of the Citibank Revolver. The Citibank Revolver will be provided pursuant to definitive documentation which has not yet been completed and, accordingly, there can be no assurance that the Citibank Revolver will be obtained on the terms set forth in the Bank Commitment Letter or on terms favorable to the Company, if at all. If for any reason the Company were unable to execute definitive documentation for the Citibank Revolver, the Company would seek to obtain alternative financing, although no assurance can be given as to the availability of any such alternative financing or its terms.

Self‑Liquidating Financings ("Autoliquidables")

BRH has obtained various loans from Banco de la Provincia de Buenos Aires ("Banco Provincia") totaling P$21.0 million to finance the construction of various public works to be built in the Province of Buenos Aires. Amounts under these loan agreements accrue interest at a rate of 10.25% per annum and are repayable in installments through May 1999. Amounts under these loan agreements are secured by an assignment of notes issued by the Province of Buenos Aires which were received by the Company in payment of such public works. These notes have the same interest and principal payment dates as the loans advanced to BRH by Banco Provincia and accrue interest at the same interest rate as the Company pays under the Banco Provincia loan. To date, Banco Provincia has on each principal and interest payment date repaid itself from the amounts paid by the province under the pledged notes. As of March 31, 1997, P$11 million remained unpaid under these loan facilities with Banco Provincia.

In connection with the recent purchase of 113 used Japanese coaches, Metrovías obtained a letter of credit from Banco de la Nación Argentina ("BNA") for US$17.0 million representing 85% of the purchase price. Amounts drawn under this letter of credit are repayable over a period of four and a half years ending 2002 and accrue interest at a rate of 4.2% per annum. Metrovías is also required to pay a letter of credit fee of 0.5% per annum on the unpaid principal amount under this BNA facility. MEYOSP has agreed to reimburse Metrovías for the purchase price of such coaches over a five‑and‑a‑half year period which coincides with the schedule of payments to be made by Metrovías to BNA and to pay interest on the unpaid principal portion at a rate of 4.2% per annum. In order to provide for prompt payment of this debt to BNA, Metrovías has assigned to BNA its rights under the Metrovías concession contract to receive reimbursement from MEYOSP for such coaches. To date, BNA has been paid on each principal and interest payment date from the amounts paid by MEYOSP. As of March 31, 1997, Metrovías owed P$8.1 million to BNA pursuant to this reimbursement obligation.

AIG Facility

Roggio and American International Companies ("AIG") have executed an Agreement of Indemnity dated August 22, 1995 providing for the issuance of surety bonds, undertakings or instruments of guarantee on behalf of Roggio and/or any present or future subsidiary of Roggio for up to US$300.0 million. Pursuant to the terms of this facility, subsidiaries of Roggio such as the Issuer and the Guarantors are responsible for indemnifying AIG only for those bonds for which they have elected to be liable. Generally, in those circumstances, both Roggio and such subsidiary would be jointly and severally liable to AIG. As of March 31, 1997, approximately US$50.1 million in surety and other bonds had been issued on behalf of the Company and remained outstanding under such facility. The Company is liable for the entire amount of such bonds.

Western Access Road Financing

GCO has obtained a US$180.0 million loan facility from a syndicate of financial institutions (the "Banco Río Syndicate") arranged by Banco Río de la Plata S.A. ("Banco Río") to finance a portion of the costs of building the Western Access Road (the "Banco Río Loan"). The current principal amount outstanding under the Banco Río Loan is US$90.5 million and interest on such loan, which accrued at 12.5% per annum, is capitalized monthly through December 1999, when the Company will begin repayment of both principal and interest.

Pursuant to the Banco Río Loan, GCO pledged all of its rights to revenues from the sub‑concession with Shell C.A.P.S.A. and 100% of the toll revenues from the Western Access Road for the benefit of the Banco Río Syndicate. Under this agreement, GCO has agreed to, among other things, maintain a capitalization of at least US$70 million following such completion. GCO has assigned to the Banco Río Syndicate its rights to indemnification by the Argentine government in the event of any rescission of GCO's concession contract. In addition, GCO has assigned to the Banco Río Syndicate all its assignable rights from its insurance policies.

The Banco Río Loan contains covenants: (i) restricting GCO's ability to merge with another entity and to sell all or any part of its assets; (ii) requiring GCO to maintain a debt‑to‑equity ratio of no more than 2.30; (iii) prohibiting GCO from acquiring any financial debt other than that provided in the Banco Río Loan; (iv) prohibiting GCO from modifying or renegotiating the terms of the GCO concession contract or any related agreement without the prior consent of the syndicate of banks participating in the Banco Río Loan; (v) restricting the ability of GCO to pay dividends; and (vi) requiring the shareholders of GCO (the "GCO Shareholders") not to diminish their stock or voting participation in GCO to less than 51% or pledge their GCO shares.

Coviares Financing

Coviares has obtained a P$82.0 million loan facility from a syndicate of Argentine financial institutions for which Banco de Galicia y Buenos Aires S.A. served as agent (the "Banco Galicia Loan"). Amounts outstanding under the Banco Galicia Loan accrue interest at a rate of three‑month LIBOR plus 8.75% and are repayable in 20 quarterly installments commencing on March 31, 1997. The amount of each installment increases over time as follows: P$1.0 million for each of the four installments due in 1997; P$3.0 million for each of the four installments due in 1998; and P$5.5 million for each installment payable thereafter. Amounts outstanding thereunder may be repaid prior to maturity by payment of a fee equal to 1.5% of the principal amount prepaid.

Amounts outstanding under the Banco Galicia Loan are secured by (i) an assignment of a portion of the toll fees collected by Coviares and (ii) a pledge of all of the common stock of Coviares. In addition, the shareholders of Coviares have each jointly and severally guaranteed the indebtedness outstanding thereunder up to an amount equal to a percentage of the total debt due under the Banco Galicia Loan. In the case of BRH and Polledo, their guarantees are limited to 10.4% and 10.0%, respectively, of the total amount outstanding under such loan agreement.

The Banco Galicia Loan contains covenants: (i) restricting Coviares' ability to merge with another entity and to sell or encumber all or any substantial part of its assets; (ii) prohibiting Coviares from incurring any debt other than in the ordinary course of business; (iii) restricting Coviares' ability to create liens or security interests in the assigned toll collections; (iv) restricting the ability of Coviares to pay dividends upon the occurrence of an event of default; and (v) restricting the ability of the shareholders to pledge their Coviares shares.

Other Contingent Liabilities

In addition to the indebtedness and guarantees described above, the Company also has a number of contingent liabilities arising from indebtedness incurred by its affiliates or affiliates of Roggio. Financial information concerning these contingent liabilities is set forth in Note 18 to the combined financial statements for the nine months ended March 31, 1997. The principal contingent liabilities updated to December 31, 1996, are as follows:

Coviares Obligations. In addition to the guarantees of the Coviares indebtedness under the Banco Galicia Loan described above, the Company has other contingent liabilities arising from the following Coviares transactions:

(i) BRH, as original shareholder of Coviares, is jointly responsible with the other shareholders for the performance by Coviares of its obligations under the concession contract up to P$12.5 million;

(ii) Caminos has guaranteed repayment of 16.22% of a P$5.0 million (P$0.8 million) equipment financing credit extended to Coviares by Banco Quilmes S.A. Amounts due under this facility have a term of 30 days, extendable at the end of each month for an additional month. Interest accrues on amounts outstanding thereunder at a rate of 16% per annum; and

(iii) BRH has jointly and severally guaranteed a portion of Coviares' obligations under an equipment purchase financing extended by Nissho Iwai. Principal amount of the zero‑coupon notes issued to Nissho Iwai total P$9.0 million; however, BRH's guarantee is limited to a maximum amount of P$2.3 million. Principal amounts thereunder are repayable in seven, semi‑annual installments commencing in May 1997.

Covisur Obligations. Covisur has obtained four loans from Banco Provincia (and Banco de Inversión y Comercio Exterior S.A. through an on‑lending arrangement with Banco Provincia) totaling P$28.3 million. Interest accrues on these facilities at rates ranging from 12.6% to 16.0% per annum. Principal amounts outstanding under these facilities are repayable as follows: (i) P$1.3 million is repayable in 31 monthly installments commencing in January 1997; (ii) P$9.0 million is repayable in 6 semi‑annual installments commencing in March 1997; and (iii) P$18.0 million is repayable in 12 semi‑annual installments commencing in March 1998. Amounts due thereunder are secured by a fiduciary assignment of the toll fees collected by Covisur. BRH has guaranteed 25% of the amounts due under these four loans.

Grancor Obligations. Grancor S.A. ("Grancor") is an Argentine corporation which is currently an affiliate of Roggio. Prior to the Restructuring, Grancor was a subsidiary of BRH and during that time, BRH guaranteed a P$5.0 million loan made to Grancor by Banco Nacional de Desarrollo, the Argentine development bank, for the purchase of mining and other equipment to be used in operating a newly‑acquired granite mine. Amounts borrowed under this facility accrue interest at 3.0% per annum and are payable in 26 semi‑annual installments commencing December 1995 and ending in December 2009. As of December 31, 1996, P$4.4 million remains outstanding under the loan. Grancor has since ceased operations, and pursuant to an agreement reached between Roggio and BRH, amounts payable under this facility are being paid by Roggio.

Covinorte and Concanor Obligations. Covinorte and Concanor have obtained financings of P$2.9 million and P$1.2 million, respectively, from Citibank, N.A., Argentina to finance certain capital improvements for the toll roads. Amounts borrowed under these loans mature in August 1998 and accrue interest at a rate of 13.5% per annum. Caminos has agreed to guarantee 38.47% of the amounts outstanding under each of the loan facilities.

Relevamiento Catastral Obligations. Relevamiento Catastral S.A. ("Relevamiento Catastral") is an Argentine Corporation which is a subsidiary of SICSA. In 1995, Relevamiento Catastral acquired the shares of Catrisa S.A. ("Catrisa"), an Argentine corporation which through a Joint Venture with Catrelsa (an affiliate of SICSA) provided cartographical services to the City of Buenos Aires. In connection with this purchase, Relevamiento Catastral agreed to pay US$3.7 million in 27 equal monthly installments commencing in August 1995 and ending in October 1997. BRH and SICSA have jointly and severally guaranteed payment of this debt to the selling shareholders of Catrisa. As of December 31, 1996, 11 installments, totalling US$1.6 million, remain to be paid.

Emprigas Obligations. Emprigas S.A. ("Emprigas") is an Argentine corporation which is currently an affiliate of Roggio. Prior to the initial spin‑off of BRH, Emprigas was a subsidiary of BRH and during that time, Emprigas obtained various loans from the International Finance Corporation, which BRH guaranteed. Amounts borrowed under these loans accrue interest at a rate of 7.81% per annum. Two installments totaling P$0.4 million due in June and September 1997 remain to be paid under these facilities.

GCO Obligations. In addition to the project finance guarantee granted in connection with the Banco Río Loan, BRH has also guaranteed the performance by GCO under an agreement between GCO and Shell C.A.P.S.A. ("Shell"), dated August, 25, 1995 pursuant to which Shell agreed (i) to pay P$27.1 million in rental fees over the 21 years of the concession for two service areas along the Western Access Road and (ii) to advance up to P$16.6 million against the fees a percentage of the rental fees payable during the first ten years and the entire fees payable during the last eleven years of the concession. Pursuant to this Agreement, GCO delivered one service area in April 1997 and agreed to deliver the other in September 1997. BRH guarantees the delivery of these areas and the continued operation of the Western Access Roads through the period for which Shell has advanced rental fees. As of December 31, 1996, this contingency was valued at P$5.2 million.

Polledo Indebtedness

As of March 31, 1997, Polledo had approximately P$20.5 million in indebtedness outstanding, comprised of P$4.7 million in short‑term debt and P$15.8 million in long‑term debt. Polledo has assigned assets with a book value of P$15.5 million to a fiduciary to secure the repayment of a certain portion of this indebtedness, including P$4.4 million maturing in 1997. Upon the consummation of the spin‑off/merger described above under the heading "Business‑Toll Road Management‑Recent Developments; Polledo Acquisition," such indebtedness would be included in the Company's consolidated financial statements. Under the Indenture, Polledo will be an Unrestricted Subsidiary of the Company, and for purposes of the covenants thereunder, Polledo's results will not be consolidated with those of the Company, and Polledo will be treated as a minority investee.

The Polledo debt accrues interest at rates which range from LIBOR plus 5.6% per annum to 13.5% per annum. This indebtedness is due and payable as follows over the next seven years: in 1997, P$2.7 million; in 1998, P$0.9 million; in 1999, P$1.8 million; in 2000, P$2.7 million; in 2001, P$3.6 million; in 2002, P$4.4 million; and in 2003, P$4.4 million.

DESCRIPTION OF THE SENIOR NOTES

The issue of the Senior Notes has been authorized by the Unanimous Resolution of an Extraordinary General Meeting of the Shareholders of the Company dated January 17, 1997, while the terms and conditions of the Senior Notes have been established by Resolutions of the Board of Directors of the Company dated January 17, 1997 and May 21, 1997. The Senior Notes will be issued under an indenture to be dated as of the Issue Date (the "Indenture") among the Issuer, as issuer, and BRH and Caminos as guarantors, The Bank of New York, as Trustee (the "Trustee"), Co‑Registrar and Principal Paying Agent and The Bank of New York S.A., as Registrar, Transfer Agent, Paying Agent and Representative of the Trustee in Argentina. Each of BRH, Caminos and each other Person who becomes a guarantor of the Senior Notes under the terms of the Indenture is referred to as a "Guarantor" and, together, the "Guarantors." The terms of the Senior Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in effect on the date of the Indenture. The Senior Notes are subject to all such terms and Holders of the Senior Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. Copies of the Indenture will be available for inspection at the offices of the Issuer, at the specified offices of the Trustee, at the offices of The Bank of New York S.A., the Trustee's representative in Buenos Aires, and at the offices of the Paying Agent.

General

The Senior Notes will be senior unsecured obligations of the Issuer limited to US$100 million in aggregate principal amount and will mature on June 1, 2004. The Senior Notes will be guaranteed, on a senior basis, by the Guarantors. The Senior Notes will bear interest at the rate per annum shown on the cover page of this Offering Memorandum, payable semi‑annually on June 1 and December 1 in each year to Holders of record of the Senior Notes at the close of business on the May 15 or November 15 next preceding the interest payment date. Interest will initially accrue from the date of original issuance and the first interest payment date will be December 1, 1997. Interest will be computed on the basis of a 360‑day year of twelve 30‑day months. Additional interest will also be due on the Senior Notes if the Issuer fails to satisfy certain terms of the Registration Rights Agreement. See "--Certain Registration and Exchange Rights." The Senior Notes will be issued only in registered form, without coupons, in denominations of US$1,000 and integral multiples thereof.

Principal of, premium, if any, and interest on the Senior Notes will be payable in United States Dollars, and the Senior Notes will be transferable, at the corporate trust office or agency of the Trustee in New York City. In addition, at the option of the Issuer, interest may be paid by wire transfer or check mailed to the Person entitled thereto as shown on the register for the Senior Notes. No service charge will be made for any registration of transfer or exchange of the Senior Notes. Initially, the Trustee will act as Principal Paying Agent, Transfer Agent and Co‑Registrar and The Bank of New York S.A., will act as Registrar, Transfer Agent, Paying Agent and Representative of the Trustee in Argentina. The Issuer may change Principal Paying Agent, any Paying Agent, Transfer Agent, Registrar or Co‑Registrar; provided prior notice is given to the Holders. None of the Issuer, any of its Subsidiaries nor any of its Affiliates may act as Principal Paying Agent or Paying Agent. The Senior Notes will be Negotiable Obligations under, and will be issued pursuant to and in compliance with all the requirements of, the Negotiable Obligations Law and other applicable Argentine regulations. The public offering of the Senior Notes in Argentina has been authorized by the CNV by Resolution No. 11,735 dated May 15, 1997. So long as the Senior Notes are authorized for their public offering in Argentina and the rules of the CNV or other applicable Argentine law so requires, the Issuer shall maintain a Paying Agent, a Transfer Agent and a Registrar in Argentina.

Taxation; Redemption for Taxation Reasons

All payments by the Issuer or any Guarantor in respect of the Senior Notes or any Guarantee shall be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or other governmental charges of whatsoever nature, including penalties, interest and any other liabilities related thereto ("Taxes"), imposed or levied by or on behalf of Argentina or any political subdivision or authority thereof or therein having power to tax, unless the Issuer or such Guarantor is compelled by law to deduct or withhold such taxes, duties, assessments or other governmental charges. In such event, the Issuer or such Guarantor shall pay such additional amounts ("Additional Amounts") as may be necessary to ensure that the net amounts received by Holders after such withholding or deduction shall equal the respective amounts of principal and interest that would have been receivable in respect of the Senior Notes in the absence of such withholding or deduction, except that no such Additional Amounts shall be payable in respect of any Senior Note (i) presented for payment of principal more than 30 days after the later of (x) the date on which such payment first became due and (y) if the full amount payable has not been received in New York City by the Trustee on or prior to such date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Holders by the Trustee, except to the extent that the Holder would have been entitled to such Additional Amounts on presenting such Senior Note for payment on the last day of the applicable 30‑day period, (ii) if any tax, assessment or other governmental charge is imposed or withheld by reason of the failure to comply by the Holder with a timely request of the Issuer or such Guarantor addressed to such Holder to provide information, documents or other evidence concerning the nationality, residence, identity or connection with Argentina of such Holder or beneficial owner which is required by a statute, treaty, regulation or administrative practice of Argentina as a precondition to exemption from all or part of such tax, assessment or governmental charge, (iii) held by or on behalf of a Holder who is liable for taxes in respect of such Senior Note by reason of having some connection with Argentina (or any political subdivision or authority thereof) other than the mere purchase, holding or disposition of any Senior Note, or the receipt of principal or interest in respect thereof, or (iv) any combination of (i), (ii) or (iii), nor shall Additional Amounts be paid with respect to any payment of the principal of, or any interest on, any Senior Note to any Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor or beneficial owner would not have been entitled to any Additional Amounts had such beneficiary or settlor or beneficial owner been the Holder. The Issuer will also (i) make such withholding or deduction compelled by applicable law and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. The Issuer will furnish copies of receipts evidencing the payment of any Taxes so deducted or withheld to the Trustee within 60 days after the date of such withholding or deduction. The Trustee will make such evidence available to Holders upon request.

All references herein and in the Indenture or the Senior Notes to the principal of or interest on a Senior Note shall be deemed to include any Additional Amounts payable in connection therewith.

The Issuer and the Guarantors have agreed to pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery or registration of the Senior Notes or any other document or instrument referred to in the Indenture or Senior Notes, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside of Argentina.

Senior Notes may be redeemed, at the option of the Issuer, as a whole, but not in part, at any time, upon giving notice to Holders not less than 30 days nor more than 60 days prior to the date fixed for redemption (which notice shall be irrevocable and shall be given in the manner described in the next succeeding paragraph), at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption and any Additional Amounts payable with respect thereto, if the Issuer determines and certifies to the Trustee immediately prior to the giving of such notice that (i) it has or will become obligated to pay Additional Amounts in respect of such Senior Notes as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Argentina or any political subdivision or taxing authority thereof or therein affecting taxation or any change in the official position regarding the application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction) which change, amendment, application or interpretation becomes effective on or after the date of issuance of such Senior Notes and (ii) such obligation cannot be avoided by the Issuer's taking reasonable measures available to it; provided that no such notice of redemption shall be given earlier than 60 days prior to the earliest date on which the Issuer would be obligated to pay such Additional Amounts if a payment in respect of such Senior Notes were then due. Prior to the giving of any notice of redemption described in this paragraph, the Issuer shall deliver to the Trustee an Officers' Certificate (together with a copy of an independent Opinion of Counsel to the effect that the Issuer will become obligated to pay Additional Amounts as a result of a change, amendment, official interpretation or application described above), stating that the Issuer is entitled to effect such redemption in accordance with the terms set forth in the Indenture and setting forth in reasonable detail a statement of the facts relating thereto.

Waiver of Right to Reimbursement for Personal Assets Taxes

In the event that the Issuer or any Guarantor pays any Personal Assets Tax in respect of outstanding Senior Notes, the Issuer and each Guarantor has agreed to waive any right it may have to seek reimbursement (whether by way of foreclosing on such Senior Notes, by deduction from payments of principal or interest on such Senior Notes or otherwise) from Holders or direct owners of the Senior Notes of any such amounts paid. See "Taxation--Argentine Tax Considerations."

Optional Redemption of Senior Notes upon Initial Public Offering

Other than in the following limited circumstances and as set forth under "--Taxation; Redemption for Taxation Reasons," the Senior Notes will not be redeemable, in whole or in part, at the option of the Issuer, at any time. Prior to June 1, 2000, the Issuer may use the net proceeds of an Initial Public Offering to redeem (on a pro rata basis) up to 25% of the originally issued principal amount of Senior Notes at a redemption price of 111% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date; provided that (i) any such redemption must be effected within 90 days of the Initial Public Offering upon not more than 30 nor more than 60 days' notice and (ii) an aggregate of not less than 75% of the originally issued principal amount of Senior Notes would remain outstanding after giving effect to any such redemption.

Selection of Senior Notes for redemption following any Initial Public Offering will be made by the Trustee in compliance with the requirements of the principal securities exchange, if any, on which the Senior Notes are then listed or, if the Senior Notes are not listed on a securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate, provided, however, that no Senior Notes of US$1,000 or less will be redeemed in part. Notice of redemption shall be mailed by first‑class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at its registered address. If any Senior Note is to be redeemed in part only, the notice of redemption that relates to such Senior Note shall state the portion of the principal amount thereof to be redeemed. A new Senior Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Senior Note. On and after the redemption date, interest will cease to accrue on Senior Notes or portions thereof called for redemption.

Change of Control

In the event of a Change of Control of the Issuer or the Parent (the date of such occurrence being the "Change of Control Date"), the Issuer will notify the Holders in writing of such occurrence and will make an offer to purchase (the "Change of Control Offer"), on a business day not later than 60 calendar days following the Change of Control Date (the "Change of Control Payment Date"), all Senior Notes then outstanding at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the Change of Control Payment Date. Notice of a Change of Control Offer shall be mailed by the Issuer to the Holders not less than 30 calendar days nor more than 45 calendar days before the Change of Control Payment Date. The Change of Control Offer will remain open for at least 20 Business Days and until the close of business on the Change of Control Payment Date.

The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and all other applicable United States and Argentine securities laws or regulations and the applicable rules of the principal securities exchange, if any, on which the Senior Notes are listed in connection with the repurchase of any Senior Notes pursuant to a Change of Control Offer.

Ranking and Guarantees

The Indebtedness of the Issuer evidenced by the Senior Notes will rank pari passu in right of payment with all existing or future Indebtedness of the Issuer. With respect to any secured obligations of the Issuer, such secured obligations will be senior in right of payment to the Senior Notes with respect to the assets securing such secured obligations. The Issuer's obligations under the Senior Notes will be jointly and severally guaranteed (the "Guarantees") by each of the Guarantors. The Guarantees will rank pari passu in right of payment to all existing or future senior Indebtedness of each of the Guarantors. With respect to any secured obligations of a Guarantor, such secured obligations will be senior in right of payment to such Guarantor's obligations under its Guarantee with respect to the assets securing such secured obligations.

Each Guarantor will fully and unconditionally guarantee, jointly and severally, on a senior basis to each holder of Senior Notes the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts owing in respect of such Senior Notes (including any Additional Amounts payable in respect thereof) and under the Indenture.

Pursuant to each Guarantee, if the Issuer defaults in payment of any amount owing in respect of any Senior Notes, the Guarantor will be obligated to duly and punctually pay the same. Pursuant to the terms of the Indenture, each of the Guarantors has agreed that its obligations under its Guarantee will be unconditional, irrespective of the validity, regularity or enforceability of the Senior Notes or the Indenture, the absence of any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge of a guarantor.

Certain Covenants

Set forth below are descriptions of certain covenants which are contained in the Indenture.

Reports. Pursuant to the Indenture, whether or not required by the rules and regulations of the Commission, so long as any Senior Notes are outstanding, the Issuer will distribute or cause to be distributed to Holders and the Initial Purchaser copies of the financial and other information that would have been contained in such annual, quarterly and other reports that the Issuer and the Guarantors would have been required to file with the Commission pursuant to the Exchange Act if the Issuer and the Guarantors were subject to the reporting requirements of the Exchange Act and, to the extent permissible, will file such reports with the Commission. Such financial and other information shall include (i) within 150 days following the end of each fiscal year, annual reports containing consolidated financial statements and notes thereto in Argentine GAAP, together with an opinion thereon expressed by an internationally recognized independent public accounting firm, management's discussion and analysis of financial condition and results of operations, and shall also contain a statement of the Consolidated EBITDA, Consolidated EBITDA Coverage Ratio, Consolidated Net Income of the Issuer and the Restricted Subsidiaries, as each such term is defined in the Indenture and the consolidated interest expense and consolidated debt of the Issuer and the Restricted Subsidiaries at the end of such period, and additional information substantially equivalent to the information required to be included in Form 20‑F (or any successor form) under the Exchange Act, (ii) within 60 days following the end of each of the first three quarters of each fiscal year (75 days following the end of the fiscal quarter ending September 30, 1997), quarterly reports containing unaudited interim consolidated financial statements in Argentine GAAP, together with a review report thereon setting forth the results of a review of such unaudited interim consolidated financial statements conducted in accordance with the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in SAS 71, Interim Financial Information, by an internationally recognized independent accounting firm, management's discussion and analysis of financial condition and results of operations, and shall also contain a statement of the Consolidated EBITDA, Consolidated EBITDA Coverage Ratio and Consolidated Net Income of the Issuer and the Restricted Subsidiaries as each such term is defined in the Indenture and the consolidated interest expense and consolidated debt of the Issuer and the Restricted Subsidiaries at the end of such period, and additional information substantially equivalent to the information required to be included by domestic issuers on Form 10‑Q (or any successor form) and (iii) promptly from time to time after the occurrence of an event which would be required to be reported on Form 6‑K (or any successor form) information of the type required to be reported on such form. The Issuer will also make such reports available to prospective purchasers of the Senior Notes, securities analysts and broker‑dealers upon their request. In addition, the Issuer has agreed to furnish to Holders and prospective purchasers of the Senior Notes designated by the Initial Purchaser, upon its request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Act until such time as the Issuer either consummates an Exchange Offer or has registered the Senior Notes for resale under the Act and at certain other times thereafter. See "--Certain Registration and Exchange Rights."

Notices of Default. The Issuer will promptly notify the Trustee by facsimile (receipt confirmed telephonically and promptly thereafter confirmed by mail in writing) and the CNV of the occurrence of any Event of Default, or any condition or event which with the giving of notice, lapse of time or satisfaction of any other condition or any combination of the foregoing would, unless cured or waived, become an Event of Default. Each notice given pursuant to this paragraph shall be accompanied by a certificate of the chief financial officer of the Issuer setting forth the details of the occurrence referred to therein and stating what action the Issuer proposes to take with respect thereto.

Limitation on Additional Indebtedness. The Indenture will provide that the Issuer shall not, and shall not permit any Restricted Subsidiary to, create, incur, assume or issue, directly or indirectly, guarantee or in any manner become, directly or indirectly, liable for or with respect to the payment of ("incur"), or suffer to exist, any Indebtedness (including any Acquired Indebtedness) except for Permitted Indebtedness; provided that the Issuer or any Restricted Subsidiary will be permitted to incur any Indebtedness (including Acquired Indebtedness), if, after giving pro forma effect to such incurrence and any concurrent financing (including the application of the net proceeds therefrom), the Consolidated EBITDA Coverage Ratio of the Issuer determined on a pro forma basis as if any such Indebtedness had been incurred and the proceeds thereof had been applied at the beginning of the period comprising the most recent fiscal quarter for which consolidated financial statements are available, would be equal to or greater than (i) in the case of Pro Rata Credit Support Indebtedness incurred by the Issuer or any Guarantor with respect to Indebtedness of any Minority Investee, 3.0 to 1.0 and (ii) in the case of all other Indebtedness, 2.75 to 1.0.

Notwithstanding the foregoing limitation, the Indebtedness set forth in the following clauses (each of which shall be given independent effect) shall be permitted ("Permitted Indebtedness"):

(a) Indebtedness of the Issuer and the Guarantors under the Senior Notes, the Exchange Senior Notes and the Guarantees;

(b) Indebtedness of the Issuer and the Restricted Subsidiaries outstanding on the Issue Date, other than any Indebtedness thereunder to be repaid or retired with the net proceeds from the sale of the Senior Notes;

(c) Indebtedness of the Issuer and the Restricted Subsidiaries under the Revolving Credit Agreement in an aggregate principal amount at any one time outstanding or available not to exceed (x) US$25.0 million minus(y) any amount of the Revolving Credit Agreement permanently repaid as provided in the penultimate sentence of the second paragraph of the covenant described under "--Limitation on Asset Sales;"

(d) Replacements, renewals, refinancings and extensions of outstanding Indebtedness incurred under clauses (i) and (ii) of the proviso to the first paragraph of this description of this covenant and clauses (a) and (b) of this definition of Permitted Indebtedness; provided that (i) any such replacement, renewal, refinancing or extension (including related expenses) shall not (A) exceed the principal amount (plus accrued interest and any applicable premium) of the Indebtedness being replaced, renewed, refinanced or extended or (B) provide for any mandatory redemption, amortization or sinking fund requirement in an amount greater than or at a time prior to the amounts and times specified in the Indebtedness being replaced, renewed, refinanced or extended, and (ii) Indebtedness of the Issuer or a Guarantor may not be replaced, renewed, refinanced or extended under this paragraph (d) with Indebtedness of a Subsidiary (other than a Guarantor);

(e) Indebtedness of the Issuer or a Restricted Subsidiary incurred in connection with Hedging Obligations of the Issuer or such Restricted Subsidiary pursuant to (i) Interest Rate Agreements in respect of Indebtedness permitted to be incurred by the Issuer or such Restricted Subsidiary pursuant to the Indenture to the extent the notional principal amount of such Indebtedness does not exceed the principal amount of Indebtedness to which such Interest Rate Agreements relate, and (ii) Currency Agreements in respect of foreign exchange exposures incurred by the Issuer or such Restricted Subsidiary in the ordinary course of business;

(f) Capitalized Lease Obligations of the Issuer and the Restricted Subsidiaries in an aggregate amount not to exceed US$5.0 million at any one time outstanding;

(g) Indebtedness in respect of (x) surety bonds, undertakings or instruments issued under Permitted Bonding Facilities which insure the performance by the Issuer or a Restricted Subsidiary of its obligations under contracts or bids in the ordinary course of business and (y) trade letters of credit incurred in the ordinary course of business, in each case, which would not otherwise constitute Indebtedness; provided that any Indebtedness of the Issuer or a Restricted Subsidiary arising from a payment made by the issuer of such a surety bond, undertaking, instrument, or letter of credit, or incurred to fund any reimbursement obligation under such a surety bond, undertaking, instrument, or letter of credit, shall be deemed to have been incurred on the date which is 30 days after any such payment by the issuer thereof.

(h) Indebtedness under Government‑Backed Investment Program Commitments in an aggregate principal amount not to exceed US$20.0 million at any one time outstanding;

(i) Indebtedness of the Issuer or any Restricted Subsidiary owed to and held by the Issuer, a Wholly‑Owned Restricted Subsidiary or a Guarantor; provided that a new incurrence of Indebtedness shall be deemed to have occurred upon (i) any subsequent issuance or transfer of any Capital Stock which results in any such Subsidiary which is not a Guarantor ceasing to be a Wholly‑Owned Restricted Subsidiary, (ii) any transfer of such Indebtedness to a Person other than a Wholly‑Owned Restricted Subsidiary of the Issuer or a Guarantor or (iii) the Designation of a Restricted Subsidiary which holds Indebtedness of the Issuer or Indebtedness of another Restricted Subsidiary as an Unrestricted Subsidiary;

(j) Indebtedness of the Issuer or any Guarantor owed to and held by Metrovías and which is subordinated in right of payment to the Senior Notes and the Guarantees, in an aggregate amount not to exceed US$10.0 million at any one time outstanding;

(k) Indebtedness of any Restricted Subsidiary of the Issuer owed to the Issuer or any Guarantor that is senior in right of payment to all Indebtedness of such Restricted Subsidiary which is subordinated in right of payment to any other Indebtedness of such Subsidiary;

(l) Indebtedness of Covicentro which is Specified Non‑Recourse Debt of Covicentro, in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) US$25.0 million, or, (ii) 45% of the amounts committed by either the Argentine federal or the applicable provincial government for the Covicentro Expansion Project; provided, however, that in no event shall such Indebtedness exceed, in the aggregate US$75.0 million at any one time outstanding;

(m) Indebtedness of the Issuer and the Restricted Subsidiaries in an aggregate principal amount which, together with all other Indebtedness of the Issuer and the Restricted Subsidiaries then outstanding (other than Indebtedness permitted by paragraphs (a) through (l) of this covenant), does not exceed US$10.0 million at any one time outstanding.

Limitation on Restricted Payments. The Indenture will provide that the Issuer will not make, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:

(a) no Default or Event of Default shall have occurred and be continuing under the Indenture at the time of and after giving effect to such Restricted Payment; and

(b) the Issuer could incur US$1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under "Limitation on Additional Indebtedness;" and

(c) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made after the Issue Date does not exceed the sum of (i) 50% of the Issuer's aggregate cumulative Consolidated Net Income accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Issue Date and ending on the last day of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which financial statements are available (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) plus (ii) the aggregate Net Proceeds, including the Fair Market Value of property other than cash, received by the Issuer either (x) as capital contributions to the Issuer after the Issue Date or (y) from the issuance or sale of Capital Stock (excluding Disqualified Capital Stock, but including Capital Stock issued upon the conversion of convertible debt and from the exercise of options, warrants or rights to purchase Capital Stock (other than Disqualified Capital Stock)) of the Issuer to any Person (other than to a Subsidiary of the Issuer) after the Issue Date plus (iii) 100% of the net reduction in Investments (other than Permitted Investments) resulting (A) from payments of interest on Indebtedness, dividends, return of capital, repayments of loans or advances or other transfers of assets, in each case, to the Issuer or any Restricted Subsidiary of the Issuer, from the Person in whom such Investment was made (except to the extent that any such amount is included in the calculation of Consolidated Net Income) or (B) from the expiration or cancellation of Pro Rata Credit Support Indebtedness to the extent not funded by the Issuer or any Guarantor or (C) from the Revocation of a Designation of an Unrestricted Subsidiary, in each case, which have not been applied to reduce the outstanding amount of Investments made pursuant to clause (iii) of the following paragraph provided that the amount included in this clause (iii) shall not exceed the amount of Investments previously made by the Issuer and its Restricted Subsidiaries in such Person.

The Indenture will also provide that the provisions of this covenant shall not prohibit (i) the payment of any dividend within 60 calendar days after the date of declaration thereof, if at such date of declaration such payment would comply with the provisions of such Indenture, (ii) Restricted Payments made to other shareholders of a Restricted Subsidiary in connection with pro rata payments to the Issuer or any Wholly‑Owned Restricted Subsidiary, (iii) so long as no Default or Event of Default shall have occurred and be continuing, any Investment constituting a Restricted Payment by the Issuer or any Restricted Subsidiary in any Person (including any Unrestricted Subsidiary) made after the Issue Date in an aggregate amount not to exceed US$10.0 million to all such Persons at any one time outstanding, (iv) commitments existing on the Issue Date to contribute US$5.0 million to GCO, (v) the distribution of any asset or transfer of any Capital Stock in accordance with the Polledo Transaction, (vi) Restricted Payments arising from incurrence of Pro Rata Credit Support Indebtedness by the Issuer or any Guarantor, (vii) Restricted Payments made to, or on behalf of, a Minority Investee which are legally required to be made under Pro Rata Credit Support Indebtedness incurred in compliance with the Indenture; provided that such Minority Investee has executed, or simultaneously with such Restricted Payment will execute, an Additional Subsidiary Guarantee; (viii) Minority Investee Guarantee Payments; and (ix) Restricted Payments in respect of reductions in capital of the Issuer in an aggregate amount not to exceed the equivalent in U.S. dollars of P$70.0 million made pursuant to public notice of such capital reduction commenced on April 24, 1997; provided that all amounts payable in respect of Restricted Payments permitted pursuant to this clause (ix) are offset against Indebtedness owed to the Issuer by the equityholders of the Issuer.

The amounts previously expended pursuant to clauses (ii) and (vi) above shall be included as Restricted Payments in determining the amount of any particular Restricted Payment permissible pursuant to this covenant. For purposes of determining the amount expended for Restricted Payments, cash distributed or invested shall be valued at the face amount thereof and property other than cash shall be valued at its Fair Market Value.

Limitation on Liens. The Indenture will provide that the Issuer will not, and will not permit, cause or suffer any of its Restricted Subsidiaries to, directly or indirectly, incur or suffer to exist any Lien of any kind upon any of its property or assets owned or acquired by it on or after the Issue Date except for the following (each of which clauses shall be given independent effect):

(a) Liens existing as of the Issue Date;

(b) Permitted Liens;

(c) Liens on the assets or property of the Issuer or a Subsidiary of the Issuer that (i) existed prior to the time such assets or property were acquired by the Issuer or such Subsidiary, (ii) were not incurred as a result of (or in connection with or in anticipation of) such acquisition, and (iii) do not extend to or cover any property or assets of the Issuer or any of its Restricted Subsidiaries other than the property or assets so acquired;

(d) Liens pursuant to real property leases in the ordinary course securing the landlord's interest under such real property leases;

(e) Liens securing Indebtedness which is permitted to be incurred under clauses (a), (c), (e), (f), (h) and (l) of the covenant described under "--Limitation on Additional Indebtedness;" provided, however, that (i) in the case of Indebtedness permitted pursuant to paragraphs (f), and (h), such Liens do not extend to or cover any property or assets of the Issuer or any of the Restricted Subsidiaries other than the property or assets financed by such Indebtedness and (ii) in the case of Indebtedness permitted pursuant to paragraph (l), such Liens cover only the assets of Covicentro and do not extend to or cover any property or assets of the Issuer or any of its other Restricted Subsidiaries;

(f) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under this covenant and which is permitted to be refinanced under paragraph (d) of the covenant described under "--Limitation on Additional Indebtedness;" provided, however, that such Liens do not extend to or cover any property or assets of the Issuer or any of the Restricted Subsidiaries not securing the Indebtedness so refinanced prior to such refinancing;

(g) Liens in favor of the Issuer or any Guarantor; and

(h) Liens not otherwise specified in clauses (a) through (g) above securing the deferred purchase price of goods and services purchased in the ordinary course of business; provided, however, that the aggregate amount of Indebtedness secured by such Liens shall not exceed US$10.0 million in aggregate principal amount at any one time outstanding.

Additional Subsidiary Guarantees; Release of Guarantors. The Indenture will provide that if the Issuer or any of its Restricted Subsidiaries makes capital contributions, advances or loans to or guarantees any loan to any Restricted Subsidiary which is not a Guarantor in an aggregate amount for all such capital contributions, advances, loans or guarantees with respect to such Restricted Subsidiary (or to more than one Restricted Subsidiary in a series of related transactions) in excess of US$10.0 million (valuing any assets, businesses, divisions, real property or equipment so contributed at the greater of (x) the Fair Market Value of such assets, businesses, divisions, real property or equipment or (y) the book value of such assets, businesses, divisions, real property or equipment) (other than, subject to the covenant described under "--Limitations on Transactions with Affiliates," transfers of goods in the ordinary course of business), the Issuer shall (a) cause each such transferee Subsidiary to execute a Guarantee (an "Additional Subsidiary Guarantee"), and (b) deliver an Opinion of Counsel as to certain matters, including the enforceability of each such Additional Subsidiary Guarantee (which Opinion of Counsel may include only such customary limitations as are set forth in the Indenture), in accordance with the terms of the Indenture. Notwithstanding the foregoing, in determining the amount of capital contributions, advances or loans or guarantees of loans to any Restricted Subsidiary which is not a Guarantor, the Issuer may elect to exclude ("Excluded Subsidiary Funding") any such amount if (x) at the time the Issuer or such Restricted Subsidiary makes such capital contribution, advance or loan or guarantees any loan to such Restricted Subsidiary which is not a Guarantor, the Issuer would have been permitted to make a Restricted Payment in the amount of such capital contribution, advance or loan or guarantee of any loan and (y) the Issuer elects to treat such amount as a Restricted Payment for all purposes under the Indenture as evidenced by a Board Resolution to such effect delivered to the Trustee at the time of making such capital contribution, loan or guarantee. The Indenture also sets forth certain limitations on the consolidation or merger of any Guarantor.

If no Default exists or would exist under the Indenture, concurrently with any sale or disposition (by merger or otherwise) of any Guarantor (other than a transaction subject to the provisions described under "--Limitation on Consolidations, Mergers and Sales of Assets") by the Issuer or a Restricted Subsidiary to any person that is not an Affiliate of the Issuer or any of the Restricted Subsidiaries or Guarantors which is in compliance with the terms of the Indenture, such Guarantor will automatically and unconditionally be released from all obligations under its Guarantee.

Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Indenture will provide that the Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits owned by, or pay any Indebtedness owed to, the Issuer or a Restricted Subsidiary, (b) make any loans or advances to the Issuer or any Restricted Subsidiary or (c) transfer any of its properties or assets to the Issuer or to any Restricted Subsidiary, except, in each case, for such encumbrances or restrictions existing under or contemplated by or by reason of (i) applicable law, (ii) the Senior Notes and the Guarantees or any refinancings or replacements thereof, (iii) the Revolving Credit Agreement, (iv) any restrictions, with respect to a Restricted Subsidiary that is not a Restricted Subsidiary of the Issuer on the Issue Date, in existence at the time such Person becomes a Restricted Subsidiary (but not created in contemplation of such Person becoming a Restricted Subsidiary), (v) any lease to the extent such lease encumbers or restricts the transfer of the leasehold interest governed by such lease and (vi) any restrictions existing under any agreement that refinances or replaces an agreement containing a restriction permitted by clause (ii), (iii) or (iv) above;

provided, however, that the terms and conditions of any such restrictions permitted under this clause (vi) are not materially less favorable to Holders than those under or pursuant to the agreement being replaced or the agreement evidencing the Indebtedness refinanced.

Limitation on Preferred Stock Issuances by Subsidiaries. The Indenture will prohibit the Issuer or any Restricted Subsidiary from causing or permitting the issuance by any Restricted Subsidiary of any Capital Stock other than common stock or causing or permitting any Restricted Subsidiary to at any time have outstanding any shares of Capital Stock other than common stock, except issuances of Capital Stock to the Issuer or a Wholly‑Owned Restricted Subsidiary that is a Guarantor.

Limitation on Asset Sales. The Indenture will provide that, the Issuer will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Sale unless (i) at least 85% of the consideration therefor received by the Issuer or such Restricted Subsidiary is in the form of cash or Cash Equivalents and (ii) such Asset Sale is for Fair Market Value; provided, however, that the amount of (a) any trade liabilities (as shown on the Issuer's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Issuer or any such Restricted Subsidiary that are assumed without recourse to the Issuer or any Restricted Subsidiary by the transferee of any asset pursuant to such Asset Sale, (b) any cash or Cash Equivalents received by the Issuer or any Restricted Subsidiary from the sale by the Issuer or such Restricted Subsidiary of any asset received from the transferee pursuant to such Asset Sale that is converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents substantially concurrently with the receipt of such asset by the Issuer or such Restricted Subsidiary and (c) accounts receivable not more than ninety days old of another Person assigned to the Issuer or a Restricted Subsidiary (net of the amount of appropriate Argentine GAAP reserves relating to such accounts receivable) received by the Issuer or a Restricted Subsidiary from the transferee pursuant to such Asset Sale, shall be deemed to be cash for purposes of this provision. The Issuer or such Restricted Subsidiary may apply the Net Cash Proceeds of any Asset Sale, at its option, to investments in assets of a kind then used or usable in any Permitted Business ("Productive Assets"); provided, however, that the Net Cash Proceeds from any Asset Sale by the Issuer or a Guarantor which are invested in Productive Assets may only be invested in Productive Assets of the Issuer or a Guarantor.

Within 120 calendar days following the consummation of an Asset Sale, the Issuer or such Restricted Subsidiary will notify the Trustee in writing of such Asset Sale and whether it has elected to apply all or a portion of the Net Cash Proceeds of such Asset Sale to investments in Productive Assets. If the Issuer or such Subsidiary does not elect to apply all or any portion of the Net Cash Proceeds of such Asset Sale to investments in Productive Assets, or if having notified the Trustee of its election to do so, it fails to so apply such Net Cash Proceeds within 180 calendar days following the consummation of such Asset Sale (the Net Cash Proceeds not so applied are hereinafter referred to as "Excess Proceeds"), the Issuer shall, within 135 days following such Asset Sale, make an offer to purchase (an "Asset Sale Offer") from all Holders, an amount of Senior Notes equal to such Excess Proceeds at a purchase price equal to 100% of the principal amount thereof plus accrued interest thereon, if any, to the date of purchase (the "Asset Sale Purchase Date"), which shall be a date not later than the 180th day following such Asset Sale; provided, however, that the Issuer's obligation to make an Asset Sale Offer shall not commence until the aggregate Excess Proceeds received by the Issuer and its Restricted Subsidiaries subsequent to the Issue Date exceed US$10.0 million (at which time the entire unutilized Excess Proceeds (and not just the amount in excess of US$10.0 million) shall be applied as required pursuant to this paragraph within the specified time periods with respect to the most recent Asset Sale). Notwithstanding the foregoing, the amount of Excess Proceeds required to be used in an Asset Sale Offer shall be reduced by the amount of any Net Cash Proceeds used by the Issuer or such Restricted Subsidiary within 180 calendar days following the consummation of such Asset Sale, to repay, permanently reduce commitments under, and reduce the amounts available for any future borrowings of, Indebtedness incurred pursuant to clauses (c), (f) and (h) of the covenant described under "--Limitation on Additional Indebtedness." Notwithstanding the foregoing, pending the application of Net Cash Proceeds as provided in this covenant, the Issuer or such Restricted Subsidiary may invest such Net Cash Proceeds on a temporary basis in Permitted Investments of the types specified in clauses (i) through (vi) of the definition of Permitted Investments, or may temporarily repay amounts under the Revolving Credit Agreement.

The Indenture further provides that the Issuer shall not cause or permit any direct or indirect sale, transfer or redemption of Capital Stock of Metrovías S.A. which results in either (x) Metrovías S.A. no longer being effectively controlled by the Issuer or (y) Metrovías S.A. no longer being a consolidated subsidiary of the Issuer under Argentine GAAP; provided, however that the foregoing shall not prohibit the Issuer from effecting a sale of all (but not less than all) of the Capital Stock of Metrovías S.A. in compliance with all of the provisions of this covenant.

Notice of an Asset Sale Offer shall be mailed by the Issuer to the Holders not less than 25 calendar days nor more than 45 calendar days before an Asset Sale Purchase Date and the Asset Sale Offer will remain open for at least 20 business days. To the extent the Asset Sale Offer is not fully subscribed to by the Holders, the Issuer may retain such unutilized portion of the Excess Proceeds.

The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) under the Exchange Act and any other applicable United States and Argentine securities laws or regulations in connection with the repurchase of Senior Notes or Exchange Senior Notes pursuant to an Asset Sale Offer.

Limitation on Transactions with Affiliates. The Indenture will provide that the Issuer will not, and will not permit or cause any of its Subsidiaries to, enter into any transaction or series of transactions with or for the benefit of any of their respective Affiliates (each an "Affiliate Transaction"), except in good faith and on terms that are no less favorable to the Issuer or such Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arm's‑length basis from a Person that is not an Affiliate of the Issuer or such Subsidiary. Notwithstanding the preceding sentence, all Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments in excess of US$2.5 million shall be approved by the Board of Directors of the Issuer, such approval to be evidenced by a Board Resolution (and if required pursuant to the definition of Fair Market Value, an opinion of an Independent Financial Advisor) stating that such Board of Directors has determined that such transaction has been made at Fair Market Value. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) transactions with or among Restricted Subsidiaries of the Issuer; provided that, in any such case, no officer, director or beneficial holder of 10% or more of any class of Capital Stock of the Issuer shall beneficially own any Capital Stock of any such Restricted Subsidiary (otherwise than by such officer's, director's or beneficial holder's interest in the Issuer); (ii) customary directors' fees, including, without limitation any management or other fees payable to the Issuer by Metrovías or BRH, indemnification and similar arrangements, consulting fees, employee salaries or benefits, bonuses or legal fees; and (iii) Indebtedness permitted under clause (j) of the covenant described under "--Limitation on Additional Indebtedness."

Limitation on Certain Remuneration. The Indenture will provide that the Issuer shall not pay (or permit any of its Subsidiaries to pay) aggregate annual remuneration to the directors (including Managing Directors) and executive officers of the Issuer in any given fiscal year which is in excess of the greatest of (i) US$2.0 million (as adjusted for changes in the "Consumer Price Index--All Items" of the United States since the Issue Date), (ii) P$2.0 million (as adjusted for changes in the "Consumer Price Index" of Argentina since the Issue Date) and (iii) P$2.0 million plus 8.0% of the Issuer's Consolidated EBITDA in excess of P$50.0 million for such fiscal year; provided, however, that compensation attributable to the value of options to purchase common stock of the Company shall be excluded from the calculation of such aggregate remuneration.

Special Covenants of the Guarantors. The Indenture will provide that each Guarantor of the Senior Notes will comply with each covenant of the Issuer contained in such Indenture, to the extent applicable.

Limitation on Designations of Unrestricted Subsidiaries. The Indenture will provide that the Issuer may designate any Subsidiary of the Issuer (other than a Guarantor) as an "Unrestricted Subsidiary" under the Indenture (a "Designation") only if:

(a) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and

(b) the Issuer would be permitted under the Indenture to make an Investment under all applicable provisions of the covenant described under "--Limitation on Restricted Payments" at the time of Designation (assuming the effectiveness of such Designation) in an amount (the "Designation Amount") equal to the greater of (x) the book value of such Subsidiary on such date or (y) the Fair Market Value of such Subsidiary on such date.

In the event of any such Designation, the Issuer shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described under "--Limitation on Restricted Payments" for all purposes of the Indenture in the Designation Amount. The Indenture will further provide that the Issuer shall not and shall not permit any Restricted Subsidiary to, at any time (x) guarantee any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness); provided, however, that the Issuer or any Restricted Subsidiary may pledge Capital Stock or Indebtedness of any Unrestricted Subsidiary on a nonrecourse basis such that the pledgee has no claim whatsoever against the pledgor other than to obtain such pledged property or (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except in the case of clause (x) or (y) to the extent permitted under the covenant described under "--Limitation on Restricted Payments."

The Indenture will further provide that the Issuer may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:

(a) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and

(b) all Liens, Indebtedness and Preferred Stock of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred or issued, as the case may be, at such time, have been permitted to be incurred for all purposes of the Indenture.

All Designation and Revocations shall be evidenced by a duly adopted Board Resolution of the Issuer delivered to the Trustee certifying compliance with this covenant; provided, however, that upon consummation of the Polledo Transaction, Polledo S.A. shall be deemed to be an Unrestricted Subsidiary, without any requirement of a Board Resolution.

Limitation on Consolidations, Mergers and Sales of Assets. The Indenture will provide that the Issuer will not consolidate with or merge with or into any other person or sell, assign, convey, lease or transfer all or substantially all of its properties and assets in a single transaction or through a series of transactions, and the Issuer will not permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions, if such transaction or series of transactions would result in a sale, conveyance, lease, transfer or other disposition of all or substantially all of the properties and assets of the Issuer and its Restricted Subsidiaries taken as a whole, unless, (i) the resulting, surviving or transferee person (the "surviving entity") is (x) the Issuer, (y) a sociedad anónima organized under the laws of the Republic of Argentina or (z) a corporation organized and existing under the of laws the United States or any State thereof or the District of Columbia; (ii) the surviving entity shall have expressly assumed, by a supplemental indenture executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer under the Indenture and the Senior Notes; (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, giving effect to any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing under the Indenture; (iv) the surviving entity shall immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, giving effect to any Indebtedness incurred or anticipated to be incurred in connection with or in respect of the transaction or series of transactions) have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Issuer immediately prior to such transaction or series of transactions; (v) except in the case of a transaction or series of transactions involving only the Issuer and one or more of its Restricted Subsidiaries, immediately after giving effect to such transaction or series of transactions on a pro forma basis, the surviving entity would be able to incur at least US$1.00 of additional Indebtedness under the first paragraph of the covenant described under "Limitation on Additional Indebtedness;" (vi) the surviving entity shall have delivered to the Trustee under the Indenture an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture, complies with this covenant and that all conditions precedent in the Indenture relating to the transaction or series of transactions have been satisfied; and (vii) each Guarantor under the Indenture shall have confirmed, by supplemental indenture, that its Guarantee shall apply to the surviving entity's obligations under the Indenture, as modified by such supplemental indenture and the Senior Notes, and shall have confirmed the due and punctual performance of such Guarantee and every covenant in the Indenture on the part of such Guarantor to be performed or observed.

Events of Default

Each of the following is an Event of Default ("Event of Default") under the Indenture:

(i) default in the payment of any interest on the Senior Notes when it becomes due and payable, and continuance of any such default for a period of 30 calendar days;

(ii) default in the payment of the principal of, or premium, if any, on the Senior Notes, when due, at maturity, upon redemption, pursuant to an offer to purchase required under the Indenture (including the failure to make any required repurchase in the event of a Change of Control), by acceleration or otherwise;

(iii) default in the performance, or breach, of any covenant of the Issuer or any Guarantor contained in the Senior Notes, any Guarantee or the Indenture (other than defaults specified in clause (i) or (ii) above), and continuance of such default or breach for a period of 30 calendar days after written notice to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Senior Notes;

(iv) failure by the Issuer, any Restricted Subsidiary or any Guarantor (a) to make any payment when due (including, with respect to any interest payment only, the giving effect to any applicable grace period) with respect to any Indebtedness in an aggregate principal amount of US$10.0 million or more under one or more classes or issues of Indebtedness; or (b) to perform any term, covenant, condition, or provision of one or more classes or issues of other Indebtedness in an aggregate principal amount of US$10.0 million or more, which failure, in the case of this clause (b), results in an acceleration of the maturity thereof;

(v) one or more judgments, orders or decrees for the payment of money in excess of US$10.0 million (to the extent not covered by insurance), either individually or in an aggregate amount, shall be entered against the Issuer, any Restricted Subsidiary or any Guarantor or any of their respective properties and shall not be discharged or fully bonded and there shall have been a period of 60 calendar days during which a stay of enforcement of such judgment or order, by reason of pending appeal or otherwise, shall not be in effect;

(vi) the Issuer or any of its Material Restricted Subsidiaries or any Guarantor shall (a) apply for or consent to the appointment of a receiver, trustee, liquidator or the like for itself or of its property, (b) be unable or admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of its creditors, (d) be adjudicated bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or a judicial or extrajudicial "concurso preventivo de acreedores" or seeking to take advantage of any applicable insolvency law, (f) file any answer admitting the material allegation of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or (g) take any corporate action for the purpose of effecting any of the foregoing or the equivalent thereof under the laws of Argentina;

(vii) without its application, approval or consent, a proceeding shall be instituted in any court of competent jurisdiction seeking in respect of the Issuer or any of its Material Restricted Subsidiaries or any Guarantor: adjudication in bankruptcy, reorganization, dissolution, winding‑up, liquidation, a composition or arrangement with creditors, a re‑adjustment of debt, the appointment of a trustee, receiver, liquidator or the like of the Issuer or any of its Material Restricted Subsidiaries or any Guarantor or of all or any of the assets thereof or other like relief in respect of the Issuer or any of its Material Restricted Subsidiaries or any Guarantor under any applicable bankruptcy or insolvency law; and either (a) such proceeding shall not be actively contested by the Issuer or such Material Restricted Subsidiaries or any Guarantor in good faith, or (b) such proceeding shall continue undismissed for any period of 60 consecutive calendar days, or (c) any order, judgment or decree shall be entered by any court of competent jurisdiction to effect any of the foregoing;

(viii) the authorization of the CNV pursuant to Law No. 17,811, as amended, and the rules and regulations of the CNV thereunder shall cease to be in full force and effect;

(ix) any authorization, consent, approval, license, filing or registration now or hereafter necessary to enable the Issuer or any Guarantor to perform its obligations under the Indenture, or any law, rule or regulation necessary for a Holder to enforce the Issuer's or any Guarantor's obligations under the Indenture in accordance with the terms of the Indenture, shall be revoked, withdrawn, withheld or modified or shall cease to remain in full force and effect, or it shall become unlawful for the Issuer or any Guarantor to perform its obligations thereunder or any governmental agency shall contest the legality or validity of any of the Senior Notes in a formal administrative, legislative or judicial proceeding;

(x) any condemnation, seizure, compulsory purchase or expropriation by any governmental authority or agency of assets of the Issuer or any Restricted Subsidiary or Guarantor which, in the aggregate, would be reasonably likely to have a material adverse effect upon the business and results of operations of the Issuer or such Guarantor, as the case may be;

(xi) a general moratorium shall be agreed or declared in respect of the payment or performance of the obligations of the Issuer or any of its Restricted Subsidiaries; and

(xii) any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee.

If an Event of Default (other than an Event of Default specified in clauses (vi) or (vii) with respect to the Issuer or (viii) or (xi) above) occurs and is continuing, then the Holders of at least 25% in aggregate principal amount of the outstanding Senior Notes may, by written notice, and the Trustee upon the request of the Holders of not less than 25% in aggregate principal amount of the outstanding Senior Notes shall, declare the principal of, premium, if any, accrued interest and any other amounts (including Additional Amounts, if any), on all the Senior Notes to be immediately due and payable. Upon any such declaration such amounts shall become due and payable immediately. If an Event of Default specified in clauses (vi) or (vii) with respect to the Issuer or (viii) or (xi) above occurs and is continuing, then the principal of, premium, if any, accrued interest and any other amounts (including Additional Amounts, if any) on all the Senior Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

After a declaration of acceleration, the Holders of a majority in aggregate principal amount of outstanding Senior Notes may, by notice to the Trustee, rescind such declaration of acceleration if all existing Events of Default have been cured or waived, other than nonpayment of principal of, premium, if any, and accrued interest on such Senior Notes, that has become due solely as a result of the acceleration thereof, and if the rescission of acceleration would not conflict with any judgment or decree. Past defaults under the Indenture (except a default in the payment of the principal of, premium, if any, or interest on any Senior Note issued thereunder or in respect of a covenant or a provision which cannot be modified or amended without the consent of all Holders of such Senior Notes) may be waived by the Holders of a majority in aggregate principal amount of the outstanding Senior Notes.

No Holder of any Senior Note has any right to institute any proceeding with respect to the Indenture or any remedy thereunder, unless the Holders of at least 25% in aggregate principal amount of the outstanding Senior Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee, the Trustee has failed to institute such proceeding within 15 calendar days after receipt of such notice and the Trustee has not within such 15‑day period received directions inconsistent with such written request by Holders of a majority in aggregate principal amount of the outstanding Senior Notes. Such limitations do not apply, however, to a suit instituted by a Holder of a Senior Note for the enforcement of the payment of the principal of, premium, if any, accrued interest and any other amounts (including Additional Amounts, if any), on such Senior Note on or after the respective due dates expressed in such Senior Note or to institute suit (including any "acción ejecutiva individual" pursuant to Article 29 of the Negotiable Obligations Law of Argentina) for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the prior consent of such Holder.

During the existence of an Event of Default under the Indenture, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise thereof as a prudent Person would exercise under the circumstances in the conduct of such Person's own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing under the Indenture, the Trustee is not under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of the Senior Notes, unless such Holders shall have offered to the Trustee reasonable security or indemnity. Subject to certain provisions of the Indenture concerning the rights of the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Senior Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the Indenture, or exercising any trust, or power conferred on the Trustee.

Defeasance

The Issuer may at any time terminate all of its obligations with respect to the Senior Notes ("defeasance"), except for certain obligations, including those regarding any trust established for a defeasance and obligations to register the transfer or exchange of the Senior Notes, to replace mutilated, destroyed, lost or stolen Senior Notes, and to maintain agencies in respect of the Senior Notes. The Issuer may at any time terminate its obligations under certain covenants set forth in the Indenture, some of which are described under "--Certain Covenants" above, and, from and after such time, any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Senior Notes ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance, the Issuer must irrevocably deposit in trust, for the benefit of the Holders of the Senior Notes with the Trustee money or U.S. government obligations, or a combination thereof, in such amounts as will be sufficient to pay the principal of, premium, if any, and interest on the Senior Notes to redemption or maturity and comply with certain other conditions, including the delivery of an opinion as to certain tax matters.

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of Senior Notes) as to all outstanding Senior Notes issued thereunder, when either (a) all such Senior Notes theretofore authenticated and delivered (except lost, stolen or destroyed Senior Notes which have been replaced or paid) have been delivered to the Trustee for cancellation; or (b)(i) all such Senior Notes not theretofore delivered to such Trustee for cancellation have become due and payable and the Issuer has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust for the purpose an amount of money sufficient to pay and discharge the entire indebtedness on such Senior Notes not theretofore delivered to such Trustee for cancellation, for principal, premium, if any, and accrued interest to the date of maturity or redemption; and (ii) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of such Senior Notes at maturity or the redemption date, as the case may be. In addition, the Issuer must deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been complied with.

Consents and Waivers

From time to time, the Issuer and the Guarantors, when authorized by resolutions of their respective Boards of Directors, and the Trustee may, without the consent of the Holders of the Senior Notes, amend, waive or supplement the Indenture or the Senior Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act, or making any change that does not adversely affect the rights of any Holder of the Senior Notes issued thereunder; provided, however, that the Issuer and the Guarantors shall have delivered to the Trustee an Opinion of Counsel stating that such change does not adversely affect the rights of any such Holder. Other amendments and modifications of the Indenture or the Senior Notes may be made by the Issuer, the Guarantors and Trustee with the consent of the Holders of not less than a majority of the outstanding aggregate principal amount of the Senior Notes; provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding Senior Note affected thereby, (i) reduce the principal amount of, extend the fixed maturity of, or alter the redemption provisions of the Senior Notes, (ii) change the currency in which the Senior Notes or any premium or the interest thereon is payable, (iii) reduce the percentage in outstanding principal amount of the Senior Notes which must consent to an amendment, supplement or waiver or consent to take any action under the Senior Notes, the Guarantees or the Indenture, (iv) impair the right to institute suit for the enforcement of any payment on or with respect to the Senior Notes or the Guarantees, (v) alter the Issuer's obligation upon the occurrence of a Change of Control or an Asset Sale to purchase such Senior Notes in accordance with the Indenture or waive any default in the performance thereof, (vi) waive a default in payment with respect to the Senior Notes, (vii) reduce or change the rate or time for payment of interest, Additional Amounts or Additional Interest on the Senior Notes, (viii) affect the ranking of the Senior Notes or (ix) except in strict compliance with the terms of the Indenture, release any Guarantor from any of its obligations under its Guarantee of such Senior Notes or the Indenture.

Promptly after the execution by the Issuer and the Trustee of any supplemental indenture, the Issuer or the Trustee is required to give notice thereof as specified in the Indenture (as described below under "--Notices"), and shall additionally give notice thereof to the CNV, setting forth in general terms the substance of such amendment or modification. Any failure of the Issuer or the Trustee to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Meetings of Securityholders

The Indenture contains provisions permitting the Issuer or the Trustee at any time to call meetings of the Holders for the purpose of entering into a supplemental indenture as provided above or approving a modification or amendment to, or obtaining a waiver of, any provision of the Indenture or the Senior Notes (an "extraordinary meeting"). In addition, the Issuer or the Trustee shall upon the request of the Holders of at least 5% in aggregate principal amount of Senior Notes at the time outstanding call such a meeting and such meeting shall be convened within 40 days from the date such request is received by the Issuer or the Trustee.

The Holders, whether present or represented by proxy, entitled to vote 75% in aggregate principal amount of the Senior Notes at the time outstanding will be required for a quorum at an extraordinary meeting. In the absence of a quorum at any such meeting, the meeting may be adjourned for a period of not less than 10 days nor more than 30 days, as determined by the chairman of the meeting.

At an extraordinary meeting at which the proper quorum is present, (i) any resolution to modify or amend, or to waive compliance with, any of the provisions of the Senior Notes shall be effectively passed and decided (except for those matters set forth above requiring the consent of the Holder of each outstanding Senior Note affected thereby) if approved by the persons entitled to vote in excess of 66 2/3% in aggregate principal amount of Senior Notes outstanding and (ii) any resolution to modify or amend, or to waive compliance with, any of the provisions of the Senior Notes set forth above requiring the consent of the Holder of each outstanding Senior Note affected thereby shall be effectively passed and decided only if all Holders of Senior Notes are present or represented by proxy at such meeting and the unanimous vote of all Holders is obtained with respect to such matter.

The Indenture also sets forth certain additional requirements as to the credentials necessary for attendance at a meeting of Holders in person or by proxy and as to the procedures to be observed at any such meeting.

Notices

Notices shall be mailed to the Holders of the Senior Notes at their registered addresses. Notice sent by first‑class mail, postage prepaid at a U.S. post office, shall be deemed to have been given, made or served on the date of receipt of such notice by the Holder of the Senior Notes to whom such notice is addressed.

In addition, the Issuer shall cause all such other publications of such notices as may be required from time to time by applicable Argentine law, including, without limitation, those required under the regulations issued by the CNV, including the event of redemption of the Senior Notes as contemplated in those terms and conditions.

Regarding the Trustee

The Bank of New York with offices at 101 Barclay Street, Floor 21W, New York, New York 10286 will serve as Trustee under the Indenture. The Bank of New York S.A., with offices at 25 Mayo 195, Floor 9, 1002 Buenos Aires, Argentina, will serve as representative of the Trustee in Argentina.

The recitals contained in the Indenture and in the Senior Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same, it being understood, however, that pursuant to the obligations imposed on the Trustee by paragraph (c) of Section 13 of the Negotiable Obligations Law, the Trustee has confirmed through the Issuer, the Issuer's attorneys and accountants and its own attorneys, the accuracy of the information required to be confirmed as set forth in the Indenture. The Trustee makes no representation as to the validity or sufficiency of the Indenture or of the Senior Notes. The Trustee shall not be accountable for the use or application by the Issuer of any of the Senior Notes or of the proceeds thereof.

Governing Law; Service of Process

The Indenture, the Senior Notes and the Guarantees shall be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflict of laws; provided, however, that all matters relating to the due authorization, execution, issuance and delivery of the Senior Notes and the Guarantees, the capacity of the Issuer or any Guarantor and matters relating to the legal requirements necessary in order for the Senior Notes to qualify as Negotiable Obligations under Argentine law shall be governed by the Negotiable Obligations Law and other applicable Argentine laws and regulations.

Any suit, action or proceeding against the Issuer or any Guarantor or any of their respective properties, assets or revenues with respect to the Indenture, the Senior Notes or any Guarantee (a "Related Proceeding") may be brought in the Supreme Court of the State of New York, County of New York, in the United States District Court for the Southern District of New York, in the courts of Argentina that sit in Buenos Aires, or in the courts of any other jurisdiction as provided by the terms of the Senior Notes. The Issuer and each Guarantor has consented to the non‑exclusive jurisdiction of each such court for the purposes of any Related Proceeding, and has irrevocably waived, to the fullest extent it may effectively do so, any objection to the laying of venue of any Related Proceeding in any such court and the defense of an inconvenient forum to the maintenance of any Related Proceeding in any such court.

The Issuer and each Guarantor has agreed that service of all writs, process and summonses in any Related Proceeding brought against it in the State of New York may be made upon CT Corporation System in New York City, presently located at 1633 Broadway, New York, New York 10019 (the "Process Agent"), and the Issuer has irrevocably appointed the Process Agent as its agent and true and lawful attorney‑in‑fact in its name, place and stead to accept such service of any and all such writs, claims, process and summonses, and has agreed that the failure of the Process Agent to give any notice to it of any such service of process shall not impair or affect the validity of such service or of any judgment based thereon. The Issuer and each Guarantor has agreed to maintain at all times an agent reasonably acceptable to the Trustee with an office in New York City to act as Process Agent as aforesaid. Nothing in the Indenture shall in any way be deemed to limit the ability to serve any such writs, process and summonses in any other manner permitted by applicable law.

Waiver of Immunities

To the extent that the Issuer or any Guarantor or any of their respective revenues, assets or properties shall be entitled, with respect to any Related Proceeding at any time brought against the Issuer or any Guarantor or any of their respective revenues, assets or properties in the courts identified above, to any immunity from suit, from attachment prior to judgment, from attachment in aid of execution of judgment, or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the Issuer and each Guarantor has irrevocably agreed not to claim and has irrevocably waived such immunity to the extent permitted by law (including, without limitation, the Foreign Sovereign Immunities Act of 1976 of the United States) in respect of its obligations under the Indenture and any Senior Note. The Issuer and each Guarantor has agreed that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding on it and may be enforced in any court to the jurisdiction of which the Issuer or any Guarantor is subject by a suit upon such judgment, provided that service of process is effected upon the Issuer or such Guarantor in the manner specified above or as otherwise permitted by law.

Judgment Currency

If for the purpose of obtaining judgment in any court it is necessary to convert a sum due under the Indenture or under the Senior Notes or the Guarantees from one currency into another currency, the Issuer and each Guarantor have agreed and each Holder agrees, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures such Holder could purchase the first currency with such other currency in the city that is the principal financial center of the country of issue of the first currency on the day two Business Days preceding the day on which final judgment is given.

The obligation of the Issuer or any Guarantor in respect of any sum payable by it to the Holder of the Senior Notes or the Guarantees shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of the Indenture or such Senior Note or Guarantee (the "Security Currency"), be discharged only to the extent that on the Business Day following receipt by such Holder of such Senior Note or Guarantee of any sum adjudged to be so due in the Judgment Currency, such Holder may in accordance with normal banking procedures purchase the Security Currency with the Judgment Currency; if the amount of the Security Currency so purchased is less than the sum originally due to the Holder of such Senior Note or Guarantee in the Security Currency (determined in the manner set forth above), the Issuer and each Guarantor has agreed, as a separate obligation and notwithstanding any such judgment, to indemnify the Holder of such Senior Note or Guarantee against such loss, and if the amount of the Security Currency so purchased exceeds the sum originally due to such Holder, such Holder agrees to remit to the Issuer or the applicable Guarantor such excess, provided that such Holder shall have no obligation to remit any such excess as long as the Issuer or any Guarantor shall have failed to pay such Holder any obligation due and payable under the Indenture or any Senior Note or Guarantee, in which case any such excess may be applied to such obligations of the Issuer and the Guarantors under the Indenture, the Senior Notes or the Guarantees.

Foreign Exchange Restrictions

Under the terms and conditions of the Senior Notes and the Guarantees, in the event of any foreign exchange restriction or prohibition in Argentina, any and all payments in respect of the Senior Notes and the Guarantees will be made in U.S. Dollars through (i) the sale of Bonos Externos de la República Argentina ("BONEX") or of any other public or private bond issued in U.S. Dollars in Argentina or (ii) any other legal mechanism for the acquisition of U.S. Dollars in any exchange market. All costs, including any taxes, relative to such operations to obtain U.S. Dollars will be borne by the Issuer and the Guarantors.

Transfer and Exchange

A Holder may transfer or exchange the Senior Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any Senior Notes selected for redemption. Also, the Registrar is not required to transfer or exchange any Senior Notes selected for a period of 15 days before a selection of the Senior Notes to be redeemed.

Certain Definitions

Set forth below is a summary of certain defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

"Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Issuer or assumed in connection with an Asset Acquisition of such Person, including, without limitation, Indebtedness incurred in connection with, or in anticipation of, (i) such Person's becoming a Restricted Subsidiary of the Issuer or (ii) such Asset Acquisition.

"Act" means the Securities Act of 1933, as amended.

"Affiliate" means, with respect to any specified Person, any other Person which, directly or indirectly, controls, is controlled by or is under direct or indirect common control with, such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For avoidance of doubt, each Unrestricted Subsidiary shall be deemed to be an Affiliate of the Issuer and of each Restricted Subsidiary.

"Argentine GAAP" means generally accepted accounting principles in Argentina.

"Argentine Personal Assets Tax" means the personal assets tax ("impuesto a los bienes personales") set forth under Argentine Law 23,966, as amended from time to time.

"Asset Acquisition" means (i) any capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) by the Issuer or any of its Restricted Subsidiaries in any other Person, or purchase or acquisition of Capital Stock, by the Issuer or any of its Restricted Subsidiaries of any other Person, in either case pursuant to which such other Person shall become a Restricted Subsidiary of the Issuer or any of its Restricted Subsidiaries or shall be merged with or into the Issuer or any of its Restricted Subsidiaries or (ii) any acquisition by the Issuer or any of its Restricted Subsidiaries of assets of any Person which constitute substantially all of an operating unit or business of such Person.

"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease or other disposition by the Issuer or a Restricted Subsidiary to any Person (other than the Issuer or any Restricted Subsidiary) in one transaction or a series of related transactions (including by way of sale and leaseback), of (i) any Capital Stock of any Restricted Subsidiary or (ii) any other property or asset of the Issuer or any Restricted Subsidiary of the Issuer, in each case, other than isolated transactions which do not exceed US$1.0 million individually. For the purposes of this definition, the term "Asset Sale" shall not include (a) any disposition of properties and assets of the Issuer or any Restricted Subsidiary that is governed under and complies with the requirements set forth in the covenant described under "--Limitation on Consolidations, Mergers and Sales of Assets" above, (b) any sale by the Issuer of its Capital Stock (other than Disqualified Stock), (c) sales or other dispositions of equipment that has become obsolete or no longer useful in the business of the Issuer or its Restricted Subsidiaries, or inventory of the Issuer or any Restricted Subsidiaries sold or disposed of in the ordinary course of its business and not in the form of a bulk sale or liquidation of such inventory; (d) sales of property and equipment to SBASE, FEMESA or any other Argentine governmental entity or agency on the dates and in the manner set forth in the Metrovías Concession Contract, (e) any sale, discount, conveyance or other disposition of receivables pursuant to a Permitted Receivables Transaction, (f) the transfer of shares in Coviares S.A. and Covimet S.A. (and interests in the joint venture to build the Yacyreta hydro‑electric dam) in connection with the Polledo Transaction and (g) the assignment to Parent by the Issuer or any of its Subsidiaries of its right to receive payment from one or more Argentine federal, provincial or municipal government(s) or agencies thereof in connection with the concurrent assumption by Parent of the obligations of the Issuer or such Subsidiaries under Self‑Liquidating Financings in existence on the Issue Date.

"Authorized Officer," with respect to any Person, means the President of its Board of Directors, any other member of its Board of Directors, its Chief Financial Officer or any other officer appointed as an "Authorized Officer" by the Board of Directors of the Issuer, as certified to the Trustee in a Board Resolution.

"Board Resolution" means a copy of a resolution signed by the President or any Director who is a full time employee of the Issuer, any Wholly‑Owned Restricted Subsidiary or the Parent of the Board of Directors of the Issuer or a Guarantor, as appropriate, and certified as having been duly adopted by the Board of Directors of the Issuer or a Guarantor, as appropriate, and to be in full force and effect on the date of such certification, and delivered to the Trustee.

"Capital Stock" means, with respect to any Person, any and all shares, partnership interests, participations, rights in, or other equivalents (however designated and whether voting or non‑voting) of, any Person, whether outstanding on the Issue Date or issued after the Issue Date, and any and all rights, warrants or options exchangeable for or convertible into any of the foregoing.

"Capitalized Lease Obligation" means any obligation to pay rent or other amounts under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under Argentine GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with Argentine GAAP.

"Cash Equivalents" means, at any time (i) any evidence of Indebtedness with a maturity of 180 calendar days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or banker's acceptances with a maturity of 180 calendar days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than US$500.0 million; (iii) commercial paper with a maturity of 180 calendar days or less issued by a corporation (except an Affiliate of the Issuer) organized under the laws of any state of the United States or the District of Columbia and rated at least A‑1 by S&P or at least P‑1 by Moody's; (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of acquisition, provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency of the United States.

"Change of Control" of the Issuer or the Parent, as the case may be, means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Stockholders, is or becomes the "beneficial owner" (as defined in Rules 13d‑3 and 13d‑5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the outstanding Voting Stock of the Issuer or the Parent, as the case may be or (b) the Issuer or the Parent, as the case may be, consolidates with, or merges with or into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Issuer or the Parent, as the case may be, in any such case, pursuant to a transaction in which the outstanding Voting Stock of the Issuer or the Parent, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction (i) in which the outstanding Voting Stock of the Issuer or the Parent, as the case may be, is converted into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the surviving or transferee corporation and/or (2) cash, securities and other property in an amount which could be paid by the Issuer or the Parent, as the case may be, as a Restricted Payment under the Indenture and (ii) as a result of which no "person" or "group" (excluding Permitted Stockholders) owns more than 50% of the outstanding Voting Stock of the Issuer or the Parent, as the case may be; or (c) during any consecutive two‑year period, individuals who at the beginning of such period constituted the Board of Directors of the Issuer or the Parent, as the case may be, (together with any new directors whose election by the Board of Directors of the Issuer or the Parent, as the case may be, or whose nomination for election by the stockholders of the Issuer or the Parent, as the case may be, was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than by action of the Permitted Stockholders) to constitute a majority of the Board of Directors of the Issuer or the Parent, as the case may be, then in office.

"Commission" means the United States Securities and Exchange Commission.

"common stock" with respect to any person organized under the laws of Argentina means acciones ordinarias of such Person and with respect to any other Person, means such class of shares, quotas or other equity interests as constitute the common equity capital of such Person, regardless of how such claims may be denominated.

"Consolidated EBITDA" means, with respect to any period, the Consolidated Net Income of the Issuer and the Restricted Subsidiaries for such period, (A) increased (to the extent deducted in calculating Consolidated Net Income) by the sum of: (i) all income taxes of the Issuer and the Restricted Subsidiaries paid or accrued in accordance with Argentine GAAP for such period (other than income taxes attributable to extraordinary, unusual or non‑recurring gains or losses); (ii) all financial results generated by liabilities of the Issuer and the Restricted Subsidiaries paid or accrued for such period (including amortization of original issue discount and interest with respect to Capitalized Lease Obligations), other than any interest paid by the Issuer and the Restricted Subsidiaries to the Issuer or any of the Restricted Subsidiaries; (iii) all depreciation expense of the Issuer and the Restricted Subsidiaries; (iv) amortization expense of the Issuer and the Restricted Subsidiaries including, without limitation, amortization of capitalized debt issuance costs; (v) deferred toll revenue of the Issuer and the Restricted Subsidiaries; (vi) adjustments to Consolidated Net Income for interests of minority shareholders in Restricted Subsidiaries; and (vii) any other extraordinary non‑cash charges of the Issuer and the Restricted Subsidiaries, to the extent deducted in determining the Consolidated Net Income of the Issuer, and (B) reduced (without duplication) by the sum of (i) the aggregate amount of dividends or other distributions actually paid to minority shareholders of Restricted Subsidiaries, (ii) financial results generated by assets of the Issuer and the Restricted Subsidiaries, (iii) charges for the reversal of the revaluation reserve of the Issuer and the Restricted Subsidiaries, (iv) amortization of negative goodwill (v) and other income, net (if positive), all determined on a consolidated basis in accordance with Argentine GAAP.

"Consolidated EBITDA Coverage Ratio" means the ratio of (i) Consolidated EBITDA for the four full fiscal quarter period (the "Reference Period") for which financial statements are available that immediately precedes the date (the "Transaction Date") of the transaction or other circumstances giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio, to (ii) the sum of (a) all Interest Expense of the Issuer and the Restricted Subsidiaries paid or accrued (including amortization of original issue discount and interest with respect to Capitalized Lease Obligations), other than any Interest Expense paid or accrued by the Issuer and the Restricted Subsidiaries to the Issuer or any of the Restricted Subsidiaries, and (b) the aggregate amount of cash dividends and other cash distributions declared or paid on Capital Stock (other than common stock) of the Issuer and the Restricted Subsidiaries, other than any dividends paid by the Issuer and the Restricted Subsidiaries to the Issuer or any Wholly‑Owned Restricted Subsidiary, in each case, for such Reference Period. For purposes of this definition, if the Transaction Date occurs prior to the date on which the Issuer's consolidated financial statements for the four full fiscal quarters immediately subsequent to the Issue Date are first available, "Consolidated EBITDA" and the items referred to in the preceding clause (ii) shall be calculated after giving effect on a pro forma basis to the Senior Notes outstanding on the Transaction Date as if they were issued on the first day of such four full fiscal quarter period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and the items referred to in the preceding clause (ii) shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence of any Indebtedness of the Issuer or any of the Restricted Subsidiaries at any time during the Reference Period, including, without limitation, the incurrence of the Indebtedness, if any, giving rise to the need to make such calculation, as if such incurrence occurred on the first day of the Reference Period; and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any of the Restricted Subsidiaries (including any Person who becomes such Restricted Subsidiary as a result of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the Reference Period and any retirement of Indebtedness in connection with such Asset Sales, as if such Asset Sale or Asset Acquisition and/or retirement occurred on the first day of the Reference Period. Furthermore, in calculating the denominator (but not the numerator) of the "Consolidated EBITDA Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to accrue at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate based upon a factor of a prime or similar rate shall be deemed to have been in effect; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. If the Issuer or any of the Restricted Subsidiaries directly or indirectly guarantees Indebtedness of any other Person (other than the Issuer or any of the Restricted Subsidiaries), this definition shall give effect to the incurrence of such guaranteed Indebtedness as if the Issuer or the Restricted Subsidiary had directly incurred such guaranteed Indebtedness, to the extent of such guarantee (and, in the case of a guarantee on a joint and several basis, shall give effect to the incurrence as if the Issuer or such Restricted Subsidiary, were obligated for the entire amount of such Indebtedness).

"Consolidated Net Income" means, with respect to any period, the consolidated net income (or loss) of the Issuer and the Restricted Subsidiaries for such period as determined in accordance with Argentine GAAP, adjusted by excluding, without duplication (to the extent included in calculating such consolidated net income): (i) all extraordinary gains or losses, (ii) any Net Income or loss of any Person if such Person is not a Restricted Subsidiary, except that the Issuer's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Issuer or a Wholly‑Owned Restricted Subsidiary as a dividend or other distribution, (iii) net income of any Person combined with such Person or one of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss realized upon the termination of any employee pension benefit plan (on an after‑tax basis), (v) gains or losses in respect of any Asset Sales by the Issuer or any of the Restricted Subsidiaries, and (vi) the Net Income of any Restricted Subsidiary to the extent that the declaration of dividends or the making of distributions by such Restricted Subsidiary of such net income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or similar organizational document or any agreement, instrument, judgment, decree, order, statute, law, rule or governmental regulations applicable to such Restricted Subsidiary or its stockholders.

"Consolidated Net Worth" means, with respect to any Person at any date of determination, the consolidated equity represented by the shares of such Person's Capital Stock (other than Disqualified Stock) at such date, as determined on a consolidated basis in accordance with Argentine GAAP.

"Covicentro Expansion Project" means any project for the expansion of the existing highway system operated by Covicentro between Rosario and Córdoba.

"Currency Agreement" in respect of a Person means any foreign exchange contract, currency swap agreement, currency option or other similar financial agreement or arrangement to which such Person is a party or a beneficiary.

"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.

"Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date which is 180 days after the final Maturity Date of the Senior Notes and, if applicable, the Exchange Senior Notes.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Senior Note" means any debt securities of the Issuer registered under the Securities Act with terms substantially identical to those of the Senior Notes (except that the Exchange Senior Notes will not contain terms with respect to transfer restrictions under the Securities Act) issued in exchange for Senior Notes pursuant to the Registration Rights Agreement.

"Exchange Offer" means an offer to exchange the Senior Notes for Exchange Senior Notes made by the Issuer pursuant to the Registration Rights Agreement.

"Fair Market Value" means, with respect to any asset, property or services provided, the price which could be negotiated in an arm's‑length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined by a majority of the members of the Board of Directors acting in good faith and shall be evidenced by a Board Resolution delivered to the Trustee and, in the case of an asset or other property, may be greater than or less than the book value thereof; provided that in the case of any transaction or series of related transactions with respect to assets, property or services which involve aggregate consideration of US$5.0 million or more, Fair Market Value shall also be determined by an Independent Financial Advisor; provided, further, that in the case of any transaction or series of related transactions with respect to construction services to be rendered by the Issuer or a Restricted Subsidiary to an Affiliate of the Issuer or any Restricted Subsidiary, Fair Market Value shall be determined in the case of any such transaction or series of related transactions which involve aggregate consideration of (x) less than US$5.0 million, by the good faith judgment of an appropriate executive officer of the Issuer without any requirement of a Board Resolution, (y) more than US$5.0 million and less than US$10.0 million, by the Board of Directors acting in good faith and evidenced by a Board Resolution delivered to the Trustee and (z) in excess of US$10.0 million, by the Board of Directors acting in good faith and evidenced by a Board Resolution delivered to the Trustee and shall also be determined by an Independent Financial Advisor.

"Government‑Backed Investment Program Commitments" means any long‑term lease, installment sale or similar agreement between Metrovías S.A. and any vendor or supplier of equipment, or provider of services (or any financial institution providing financing to facilitate a sale by a vendor of equipment or provider of services) which provides for (i) the use of such equipment by, or provision of services to Metrovías S.A. during the term of the Metrovías Concession Contract, (ii) the payment of all amounts owing under such agreement (whether on account of interest, principal, required capital reduction or otherwise) to be made on or prior to any due date thereof, either (x) by the government of the Republic of Argentina or (y) by any municipality or other political subdivision of the Republic of Argentina which is, at the date of incurrence of such obligation, rated BB or higher by Standard & Poor's.

"Guarantee" means the guarantee of the Senior Notes and any Exchange Senior Notes made by each Guarantor.

"Guarantor" means (i) each of BRH and Caminos, (ii) each of the Issuer's Subsidiaries which becomes a guarantor of the Senior Notes and, if applicable, the Exchange Senior Notes pursuant to the covenant described under "--Additional Subsidiary Guarantees", and (iii) each of the Issuer's Subsidiaries that executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Guarantee.

"Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.

"Holder" means the Person in whose name a Senior Note or Exchange Note is registered on the Registrar's books.

"incur" means, with respect to any Indebtedness, to directly or indirectly create, incur, assume, guarantee or in any manner become liable (whether by contract, by operation of law or otherwise) for such Indebtedness, whether contingently or otherwise.

"Indebtedness" means, with respect to any Person, without duplication, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures or notes, (iii) all Capitalized Lease Obligations, (iv) all obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business and financing for the purchase by the Issuer or any of its Subsidiaries of property or equipment that is not accounted for as property, plant and equipment of the Issuer and its consolidated subsidiaries pursuant to Argentine GAAP), (v) all obligations issued or contracted for as payment in consideration of the purchase by such Person of the stock or substantially all the assets of another Person or a merger or consolidation, (vi) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transactions entered into in the ordinary course of business (other than any letter of credit, banker's acceptance or similar credit transaction entered into as credit support for the purchase by the Issuer or any of its Subsidiaries of property or equipment that is not accounted for as property, plant and equipment of the Issuer and its consolidated subsidiaries pursuant to Argentine GAAP), (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is directly or indirectly responsible or liable as obligor, guarantor or otherwise, but only to the extent that such Person is liable as obligor, guarantor or otherwise, and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons which are secured by any non‑recourse Lien on any property or asset of such Person, the amount of such obligation being deemed to be the lesser of the Fair Market Value of such property or asset or the amount of the obligation so secured.

"Independent Financial Advisor" means, as appropriate, (i) an investment or merchant banking firm or public accounting firm of international standing or (ii) an internationally recognized construction engineering consulting firm, in either case, (x) which does not, and whose directors and executive officers and Affiliates do not, have a material investment in the Issuer or any of its Affiliates and (y) which, in the judgment of the Board of Directors of the Issuer, is otherwise independent with respect to the Issuer and its Affiliates and qualified to perform the task for which it is to be engaged. A trustee or nominee for the true parties in interest shall not be excluded from the definition of "Independent Financial Advisor" solely as a result of such trustee or nominee status.

"Initial Public Offering" means the first underwritten registered public offering of common stock (acciones ordinárias) of the Issuer (whether or not represented by American Depositary Receipts) pursuant to either (i) a registration statement that has been declared effective by the Commission or (ii) a public offering in Argentina registered with the CNV, in either case, resulting in gross proceeds to the Issuer of not less than US$25.0 million.

"Interest Expense of the Issuer and its Restricted Subsidiaries" means financial results generated by liabilities of the Issuer and its Restricted Subsidiaries as determined in accordance with Argentine GAAP consistently applied by the Issuer in accordance with past practices; that in any fiscal period during which inflationary accounting shall be in effect in accordance with Argentine GAAP, the aggregate of effects of inflation included in financial results generated by liabilities shall be excluded.

"Interest Rate Agreement" means with respect to any Person any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other financial agreement or arrangement designed to protect such Person or its Subsidiaries (or in the case of the Issuer, the Issuer and its Restricted Subsidiaries) against fluctuations in interest rates with respect to Indebtedness of such Person.

"Investment" by any Person means any capital contributions, advances or loans to (including any guarantees of loans to), or investments or purchases of Capital Stock in, any other Person.

"Issue Date" means the date that the Senior Notes are originally issued.

"Latin American country" means any of the United Mexican States and any country located in South America, Central America or the Caribbean basin.

"Lien" means any mortgage, lien (statutory or other), pledge, security interest, encumbrance, claim, hypothecation, assignment for security, deposit arrangement or preference or other security agreement of any kind or nature whatsoever. For purposes of the Indenture, a Person shall be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to Indebtedness of such Person and shall not be deemed to own subject to a Lien any receivables sold, discounted, conveyed or otherwise disposed of for cash or Cash Equivalents pursuant to a Permitted Receivables Transaction.

"Material Restricted Subsidiary" means any Restricted Subsidiary of the Issuer which, at any time of determination, would have been a "Significant Subsidiary" under the definition of such term in Rule 1‑02 of Regulation S‑X issued under the Securities Act, as in effect on the Issue Date.

"Maturity Date," when used with respect to any Senior Note or Exchange Note, means the date specified in such Senior Note or Exchange Note as the fixed date on which the principal of such Senior Note or Exchange Note is due and payable.

"Metrovías Concession Contract" means the Contrato de Concesión dated November 25, 1993 between Metrovías S.A. and the Ministry of Economy and Public Works and Services of the Republic of Argentina, as amended by the Agreement among Metrovías S.A., The Municipality of the City of Buenos Aires and the Ministry of Economy and Public Works and Services of the Republic of Argentina dated August 18, 1994.

"Minority Investee" means any Person in which the Issuer or any Subsidiary holds an equity participation but not more than 50% of such Person's Capital Stock.

"Minority Investee Guarantee Payments" means Restricted Payments made to, or on behalf of, a Minority Investee in respect of obligations of the Issuer or a Guarantor under Pro Rata Credit Support Indebtedness; provided that simultaneously with such Restricted Payment, payments on the Underlying Indebtedness are made by or on behalf of other owners of the equity capital of such Minority Investee in an aggregate percentage of such Underlying Indebtedness equal to or greater than (x) 100% minus (y) the Issuer's Ownership Percentage in such Minority Investee.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents, net of (i) brokerage commissions and other reasonable fees and expenses (including reasonable fees and expenses of counsel and investment bankers) related to such Asset Sale; (ii) provisions for all taxes payable as a result of such Asset Sale; (iii) payments made to retire Indebtedness secured by the assets subject to such Asset Sale to the extent required pursuant to the terms of such Indebtedness; and (iv) appropriate amounts to be provided by the Issuer or any of its Subsidiaries, as the case may be, as a reserve, in accordance with Argentine GAAP, against any liabilities associated with such Asset Sale and retained by the Issuer or such Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post‑employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale.

"Net Income" means, with respect to any Person for any period, the net income (loss) of such Person for such period determined in accordance with Argentine GAAP.

"Net Proceeds" means (i) in the case of any sale of Capital Stock (other than Disqualified Stock) by the Issuer, the aggregate net proceeds received by the Issuer, after payment of expenses, commissions and the like incurred in connection therewith, whether such proceeds are in cash or in property (valued at the Fair Market Value thereof as of the time of receipt), and (ii) in the case of the issuance of Capital Stock upon the conversion of convertible debt or the exercise of options, warrants or rights, the net cash proceeds received by the Issuer upon the issuance of such convertible debt, options, warrants or rights plus any incremental amount of cash received by the Issuer upon the conversion or exercise thereof.

"Officers' Certificate" means, with respect to any Person, a certificate signed by an Authorized Officer of such Person.

"Opinion of Counsel" means a written opinion from legal counsel which and who are reasonably acceptable to the Trustee, complying with the requirements of the Indenture as they relate to the giving of an Opinion of Counsel. Unless otherwise required by the TIA, the legal counsel may be counsel to the Issuer or the Trustee. The cost of obtaining such Opinion of Counsel shall be borne by the Issuer and shall not be an expense of the Trustee.

"Parent" means Roggio S.A. or any successor thereof.

"Permitted Bonding Facility" means (i) the Agreement of Indemnity dated August 22, 1995 between Roggio S.A. and American International Companies providing for the issuance of surety bonds, undertakings or instruments of guarantee on behalf of Roggio S.A. and/or any present or future subsidiary for up to US$300 million, and (ii) any one or more additional agreements between the Issuer, or any Restricted Subsidiary and one or more insurance or surety companies rated at least A by S&P and at least A3 by Moody's, providing for surety bonds, undertakings or instruments of guarantee on behalf of the Issuer and the Restricted Subsidiaries.

"Permitted Business" means (i) the provision of waste management services in Argentina and other Latin American countries, (ii) the construction and engineering of hydroelectric projects, industrial plants, highways, bridges, roads, airports and residential and commercial buildings in Argentina and other Latin American countries, (iii) the management of highways, bridges, roads and airports in Argentina and other Latin American countries, (iv) the provision of mass transportation management services in Argentina and other Latin American countries, (v) the management, operation and maintenance of toll roads in Argentina and other Latin American countries, and (vi) the provision of services in Argentina and other Latin American countries previously or customarily provided as public services by the national, state, provincial or similar government or an agency or instrumentality thereof.

"Permitted Investments" means Investments (i) in Cash Equivalents; (ii) in obligations of the government of the Republic of Argentina due within one year; (iii) in money market or overnight management accounts and certificates of deposits or Eurodollar deposits due within one year with a branch in the United States of America or in the Republic of Argentina of Citibank, N.A., First National Bank of Boston, Chase Manhattan Bank, Morgan Guaranty Trust Company, Banco de Galicia y Buenos Aires S.A., Banco Francés del Río de la Plata, Banco Río de la Plata S.A., Banco Roberts S.A. or BanSud S.A.; (iv) in repurchase obligations with a term of not more than 30 calendar days for underlying securities of the type described in clause (ii) above entered into with a bank described in clause (iii) above; (v) in commercial paper with a maturity date of 180 days or less issued by a corporation (except an Affiliate of the Issuer) organized under the laws of any state of the United States or the District of Columbia and rated at least A‑1 by S&P or at least P‑1 by Moody's; (vi) in debt of any state or political subdivision of the United States of America that is rated A‑1 or better by S&P or P‑1 by Moody's; (vii) by the Issuer or any Restricted Subsidiary in another Person, if (x) at the time of such Investment no Default or Event of Default has occurred and is continuing, (y) as a result of such Investment (A) such other Person becomes a Restricted Subsidiary or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Issuer or a Restricted Subsidiary and (z) such other Person is substantially engaged in a Permitted Business; (viii) by the Issuer or any Restricted Subsidiary in the Issuer or any Restricted Subsidiary (other than Excluded Subsidiary Funding); (ix) represented by accounts receivable created or acquired in the ordinary course of business; and (x) in the form of advances in the ordinary course of business to employees who are not Affiliates of the Issuer in an aggregate amount not to exceed US$1.0 million at any one time outstanding.

"Permitted Liens" means, with respect to any Person, any Lien arising by reason of (i) judgments, which judgments do not constitute a Default or Event of Default with respect to the Senior Notes or any Exchange Senior Notes; (ii) taxes or assessments and similar charges either (a) not delinquent or (b) being contested in good faith by appropriate proceedings and as to which the Issuer or a Subsidiary of the Issuer shall have set aside on its books such reserves as may be required pursuant to Argentine GAAP; (iii) pledges and deposits in connection with workers' compensation, unemployment insurance and social security benefits, or securing performance, bids, tenders, leases, contracts (other than for the repayment of borrowed money), statutory obligations, progress payments, surety and appeal bonds and other obligations of a like nature, incurred in the ordinary course of business; (iv) applicable law, such as mechanics', carriers', warehousemen's, materialmen's and vendors' liens, incurred in good faith in the ordinary course of business; and (v) zoning restrictions, easements, licenses, covenants, reservations, restrictions on the use of real property or minor irregularities of title incident thereto which do not in the aggregate materially detract from the value of the property or assets of the Issuer and its Subsidiaries, taken as a whole, or materially impair the operation of the business of the Issuer and its Subsidiaries, taken as a whole; and (vi) law to secure payment of customs duties in connection with the importation of goods.

"Permitted Receivables Transaction" means any sale, discount, conveyance or other disposition for cash or Cash Equivalents of receivables that (i) is made without representation or warranty (except for representations and warranties normally and customarily given by sellers and servicers in connection with non‑recourse cash sales of receivables), (ii) is made pursuant to good faith bona fide transactions with third parties other than Affiliates of the Issuer or any Restricted Subsidiary, (iii) in respect of which the Issuer and the Restricted Subsidiaries neither incur nor accept any obligation other than (x) obligations in respect of representations and warranties as described in clause (i) above and (y) any agreement to service such receivables for and on behalf of the purchaser of such receivables, and (iv) the Issuer in good faith accounts for as, and intends that such transaction will be characterized under Argentine GAAP as, a "true sale" and not a liability or secured financing.

"Permitted Stockholders" means (x) with respect to the Issuer, each of Roggio S.A. and the Benito Roggio Foundation and (y) with respect to the Parent, Mr. Aldo Roggio (or his heirs) and one or more of Sergio Oscar Roggio, Alejandro Carlos Roggio or Graciela Amalia Roggio de Lejarza, or their respective heirs.

"Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

"Polledo Transaction" means the several transfers of Capital Stock and other assets set forth in that certain agreement dated January 7, 1997 among Polledo S.A., Caminos Australes S.A. and the Issuer, as in effect on the Issue Date; provided, however, that no material provision of such agreement shall be amended, modified or waived in a manner adverse to the Issuer or the Holders.

"Preferred Stock" means, with respect to any Person, (i) Disqualified Stock of such Person and (ii) any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred or preference stock or shares whether now outstanding, or issued after the Issue Date to the extent it carries any preference in respect of the distribution of assets in the event of a liquidation or insolvency of such Person as compared with any other Capital Stock of such Person.

"Pro Rata Credit Support Indebtedness" means Indebtedness of the Issuer or a Guarantor in the form of guarantees, letters of credit, banker's acceptances or similar credit transactions incurred by the Issuer or such Guarantor (i) with respect to Indebtedness ("Underlying Indebtedness") of a Minority Investee, (ii) in which the maximum liability of the Issuer or such Guarantor outstanding at any time is in an amount not in excess of a percentage of the Underlying Indebtedness equal to the percentage (the "Issuer's Ownership Percentage") of such Minority Investee's total equity capital directly or indirectly owned by the Issuer at such time and (iii) for which the Underlying Indebtedness is guaranteed by or on behalf of other owners of such Minority Investee to the extent of (x) 100% of such Underlying Indebtedness minus (y) the Issuer's Ownership Percentage of such Underlying Indebtedness; provided that Pro Rata Credit Support Indebtedness in an aggregate amount at any one time outstanding of US $5.0 million may be incurred without complying with the preceding clause (ii) or (iii).

"Restricted Payment" means any of the following: (i) the declaration or payment of any dividend or any other distribution or payment on or in respect of Capital Stock of the Issuer to the direct or indirect holders (in their capacity as such) of Capital Stock of the Issuer (other than dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase Capital Stock (other than Disqualified Stock), and dividends or distributions payable to a Wholly‑Owned Restricted Subsidiary of the Issuer), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Issuer or any Restricted Subsidiary (other than any such Capital Stock owned by the Issuer or a Restricted Subsidiary of the Issuer), (iii) the making of any Investment in any Person, other than a Permitted Investment or (iv) the repayment by the Issuer or any Guarantor of Pro Rata Credit Support Indebtedness.

"Restricted Subsidiary" means any direct or indirect Subsidiary of the Issuer, other than any Unrestricted Subsidiary.

"Revolving Credit Agreement" means (i) the Revolving Credit Facility Agreement to be entered into among the Issuer and certain of the Guarantors, as Borrowers and Citibank, N.A. and Banco de Galicia y Buenos Aires, as Lenders pursuant to that certain Commitment Letter dated May 2, 1997, (ii) any one or more additional credit agreements (which may include or consist of revolving credits) between the Issuer or any Restricted Subsidiary and one or more banks or other financial institutions providing financing for the business of the Issuer and the Restricted Subsidiaries and (iii) any replacements, renewals or refinancings of the foregoing.

"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill, Inc., and its successors.

"Self‑Liquidating Financings" means extensions of credit made to (i) BRH by Banco de la Provincia de Buenos Aires in an aggregate principal amount totaling P$10.6 million to finance the construction of various public works in such province and (ii) Metrovías S.A. by Banco de la Nación Argentina for US$8.1 million to finance, in part, the purchase of Japanese rail coaches, which, in each case, have been granted concurrently with the creation in favor of the Issuer or its Subsidiaries of a payment obligation by an Argentine federal, provincial or municipal government or agency thereof on terms which are substantially similar to the repayment terms contained in such extensions of credit.

"Specified Non‑Recourse Debt" means Indebtedness of Covicentro (i) as to which neither the Issuer nor any of its Restricted Subsidiaries (other than Covicentro and any Restricted Subsidiary of Covicentro) (a) provides direct credit support (including any undertaking, agreement or instrument that would constitute Indebtedness), or (b) is directly or indirectly liable (as a guarantor or otherwise), (ii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Issuer or any of the Restricted Subsidiaries (other than Covicentro) and (iii) is incurred for the purpose of financing the Covicentro Expansion Project.

"Subsidiary" means, with respect to any Person, (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of voting interest is at the time, directly or indirectly, owned by such Person; provided, however, that any Person used solely as a special purpose entity to conduct a Permitted Receivables Transaction shall not be, for purposes of the Indenture, a Subsidiary.

"U.S. Dollar" means such lawful coin or currency of the United States of America as shall at the time of payment be legal tender for the payment of public and private debts.

"Underlying Indebtedness" has the meaning specified within the definition of "Pro Rata Credit Support Indebtedness."

"Unrestricted Subsidiary" means any Subsidiary of the Issuer (other than a Guarantor) designated as such pursuant to and in compliance with the covenant described under "--Limitation on Designations of Unrestricted Subsidiaries." Any such designation may be revoked by a Board Resolution of the Issuer delivered to the Trustee, subject to the provisions of such covenant.

"U.S. Dollar Equivalent" means, with respect to any monetary amount in a currency other than US Dollars, at any time for the determination thereof, the amount of US Dollars obtained by converting such foreign currency involved in such computation into US Dollars at the spot rate for the purchase of US Dollars with the applicable foreign currency as quoted by Reuters at approximately 11:00 a.m. (New York time) on the date not more than two business days prior to such determination. For purposes of determining whether any Indebtedness can be incurred (including Permitted Indebtedness), any Investment can be made and any Affiliate Transaction can be undertaken (a "Tested Transaction"), the "US Dollar Equivalent" of such Indebtedness, Investment or Affiliate Transaction shall be determined on the date incurred, made or undertaken and no subsequent change in the US Dollar Equivalent shall cause such Tested Transaction to have been incurred, made or undertaken in violation of the Indenture.

"Voting Stock" is defined to mean, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of board of directors members, managing directors, managers or other voting members of the governing body of such Person.

"Wholly‑Owned Restricted Subsidiary" means any Restricted Subsidiary, at least 95% of the Capital Stock of which is owned by the Issuer, by a Wholly Owned Restricted Subsidiary or by the Issuer and a Wholly Owned Restricted Subsidiary.

Book‑Entry; Delivery and Form

Senior Notes offered and sold in reliance on Regulation S will initially be represented by a single, permanent Global Senior Note (as hereinafter defined) in definitive, fully registered book‑entry form (the "Regulation S Global Senior Note") which will be registered in the name of a nominee of DTC and deposited on behalf of the purchasers of the Senior Notes represented thereby with the Trustee as custodian for DTC for credit to the respective accounts of the purchasers (or to such other accounts as they may direct) at the Euroclear System ("Euroclear") or Cedel Bank société anonyme ("Cedel"). Prior to the 40th day after the later of the commencement of the Offering and the Issue Date, interests in the Regulation S Global Senior Note may only be held through Euroclear or Cedel, unless delivery is made through the Rule 144A Global Senior Note in accordance with the certification requirements described below.

Senior Notes offered and sold to "qualified institutional buyers" in reliance on Rule 144A under the Securities Act will be represented by a single, permanent Global Senior Note in definitive, fully registered book‑entry form (the "Rule 144A Global Senior Note", and together with the Regulation S Global Senior Note, the "Global Senior Notes") which will be registered in the name of a nominee of DTC and deposited on behalf of the purchasers of the Senior Notes represented thereby with the Trustee as custodian for DTC for credit to the respective accounts of the purchasers (or to such other accounts as they may direct) at DTC.

Senior Notes offered and sold to institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act will be delivered in certificated fully registered form only, in minimum denominations of US$250,000 (the "Restricted Certificated Senior Notes", and together with the Rule 144A Global Senior Note, the "Restricted Senior Notes").

Transfers of interests in the Restricted Senior Notes will be subject to certain restrictions set forth therein and described under "Notice to Investors." In certain circumstances, as described below, transfers may be made as a result of which the transfer restrictions no longer apply. In certain circumstances, owners of beneficial interests in Global Senior Notes will be entitled to receive physical delivery of Certificated Senior Notes in fully registered definitive form. The Senior Notes are not issuable in bearer form. See "--Certificated Senior Notes."

The Senior Notes will be issued only in fully registered form, in denominations of US$1,000 and integral multiples of US$1,000 in excess thereof. Such denominations are referred to herein as "Authorized Denominations." No service charge will be made for any registration of transfer or exchange of Senior Notes. The Senior Notes are registered instruments, title to which passes upon registration of the transfer on the books of the Registrar in accordance with the terms of the Indenture.

Global Senior Notes

Upon the issuance of the Global Senior Notes, DTC or its custodian will credit, on its internal system, the respective principal amount of the individual beneficial interests represented by such Global Senior Note to the accounts of persons who have accounts with such depositary. Such accounts initially will be designated by or on behalf of the Initial Purchaser. Ownership of beneficial interests in a Global Senior Note will be limited to persons who are members of, or participants in, DTC (the "Agent Members") or persons who hold interests through Agent Members. Ownership of beneficial interests in the Global Senior Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of Agent Members) and the records of Agent Members (with respect to interests of persons other than Agent Members). QIBs may hold their interests in the Global Senior Notes directly through DTC if they are Agent Members, or indirectly through organizations which are Agent Members.

So long as DTC, or its nominee, is a registered holder of a Global Senior Note, DTC or such nominee, as the case may be, will be considered the absolute owner or holder of the Senior Notes represented by such Global Senior Note for all purposes under the Indenture and the Senior Notes, and Agent Members, as well as any other persons on whose behalf Agent Members may act (including Euroclear and Cedel and account holders and participants therein), will have no rights under the Indenture or under a Global Senior Note. Owners of beneficial interests in a Global Senior Note will not be considered to be the owners or holders of any Senior Notes under the Indenture or the Senior Notes. In addition, no beneficial owner of an interest in a Global Senior Note will be able to exchange or transfer that interest, except in accordance with the applicable procedures of DTC, Euroclear and Cedel, in each case to the extent applicable (the "Applicable Procedures").

Investors may hold their interests in the Regulation S Global Senior Note directly through Cedel or Euroclear, if they are participants in such systems, or indirectly through organizations which are participants in such systems. Beginning 40 days after the later of the commencement of the Offering and the Issue Date (but no earlier), investors may also hold such interests through organizations other than Cedel or Euroclear that are participants in the DTC system. Cedel and Euroclear will hold such interests in the Regulation S Global Senior Note on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositaries, which in turn will hold such interests in the Regulation S Global Senior Note in customers' securities accounts in the depositaries' names on the books of DTC.

Payments in respect of each Global Senior Note registered in the name of DTC's nominee will be made to the order of DTC's nominee as the registered owner of such Global Senior Note. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in the Global Senior Notes or for maintaining, supervising or reviewing any records relating to such beneficial interests.

The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Senior Note, will immediately credit the accounts of Agent Members with payments in the amounts proportionate to their respective beneficial interest in the principal amount of such Global Senior Note as shown on the records of DTC or its nominee. The Company also expects that payments by Agent Members to owners of beneficial interest in such Global Senior Note held through such Agent Members will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such Agent Members.

Transfers between participants in DTC will be effected in the ordinary way in accordance with the Applicable Procedures and will be settled in same‑day funds. Transfers between participants in Euroclear and Cedel will be effected in the ordinary way in accordance with their respective rules and operating procedures.

DTC has advised the Company that it will take any action permitted to be taken by a holder of Senior Notes only at the direction of one or more Agent Members to whose account the DTC interests in the Global Senior Notes is credited and only in respect of such portion of the aggregate principal amount of Senior Notes as to which such Agent Member or Agent Members has or have given such direction, including the presentation of Senior Notes in connection with any Registered Exchange Offer. See "--Certain Registration and Exchange Rights."

The Company understands: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book‑entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants").

Although DTC, Euroclear and Cedel are expected to follow the foregoing procedures in order to facilitate transfers of interests in the Global Senior Notes among participants of DTC, Euroclear and Cedel, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC, Euroclear or Cedel or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Certificated Senior Notes

Senior Notes originally purchased by or transferred to institutional "accredited investors" which are not QIBs within the meaning of Rule 144A of the Securities Act will be issued as Certificated Senior Notes. Upon transfer of Certificated Senior Notes to a QIB or in an offshore transaction under Rule 903 or 904 under Regulation S, such Certificated Senior Notes may be transferred to the Rule 144A Global Senior Note or the Regulation S Global Senior Note, as the case may be, upon delivery of appropriate certifications to the Trustee.

In addition, interests in the Regulation S Global Senior Note and the Rule 144A Global Senior Note will be exchangeable or transferable for Certificated Senior Notes if (i) DTC notifies the Company that it is unwilling or unable to continue as depositary for such Global Senior Notes or DTC ceases to be a "Clearing Agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days, or (ii) an Event of Default has occurred and is continuing with respect to such Senior Notes and Senior Noteholders who hold more than 25% in aggregate principal amount of the Senior Notes at the time outstanding represented by the Global Senior Notes advise the Trustee through DTC in writing that the continuation of a book‑entry system through DTC (or a successor thereto) with respect to the Global Senior Notes is no longer required. Upon the occurrence of any of the events described in the preceding sentence, the Company will cause the appropriate Certificated Senior Notes to be delivered. In the case of Certificated Senior Notes issued in exchange for the Rule 144A Global Senior Notes, such Certificated Senior Notes shall bear the legend set forth under the heading "Notice to Investors." Upon the transfer, exchange or replacement of Senior Notes bearing such legend, or upon specific request for removal of such legend, the Company shall deliver only Senior Notes that bear such legend, or shall refuse to remove such legend, as the case may be, unless there is delivered to the Company and the Trustee a certificate in the form provided in the Indenture or such satisfactory evidence as may reasonably be required by the Company, which may include an opinion of United States counsel, that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. Certificated Senior Notes will be exchangeable or transferable for interests in other Certificated Senior Notes as described under "--Replacement, Exchange and Transfers" below.

Pursuant to Argentine Law No. 24,587, effective November 22, 1995, Argentine private corporations may only issue registered securities and may not issue bearer‑form securities.

Replacement, Exchange and Transfers

If any Senior Note at any time is mutilated, defaced, destroyed, stolen or lost, such Senior Note may be replaced at the office of the Trustee, upon provision of evidence satisfactory to the Trustee and the Company that such Senior Note was destroyed, stolen or lost, together with such indemnity as the Trustee and the Company may require. Mutilated or defaced Senior Notes must be surrendered before replacements will be issued.

Before the 40th day after the later of the commencement of the Offering and the Issue Date, transfers by an owner of a beneficial interest in the Regulation S Global Senior Note to a transferee who takes delivery of such interests through the Rule 144A Global Senior Note will be made only in accordance with the Applicable Procedures and upon receipt by the Trustee of a written certification from the transferor of the beneficial interest in the form provided in the Indenture to the effect that such transfer is being made to a person whom the transferor reasonably believes is a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and in accordance with the applicable securities laws of any state of the United States or any other jurisdiction. After such 40th day, such certification requirement will no longer apply to such transfers.

Transfers by an owner of a beneficial interest in the Rule 144A Global Senior Note to a transferee who takes delivery of such interest through the Regulation S Global Senior Note whether before, on or after the 40th day after the later of the commencement of the Offering and the Issue Date, will be made only upon receipt by the Trustee of a certification in the form set forth in the Indenture to the effect that such transfer is being made in accordance with Regulation S. Transfers of Certificated Senior Notes held by institutional "accredited investors" to persons who will hold through the Rule 144A Global Senior Note or the Regulation S Global Senior Note will be subject to certifications provided by the Trustee.

Any beneficial interest in one of the Global Senior Notes that is transferred to a person who takes delivery in the form of an interest in the other Global Senior Note will, upon transfer, cease to be an interest in such Global Senior Note and become an interest in the other Global Senior Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Senior Note for as long as it remains such an interest. Except in the limited circumstances described above under "--Certificated Senior Notes," owners of beneficial interests in Global Senior Notes will not be entitled to receive physical delivery of Certificated Senior Notes.

Certificated Senior Notes may be exchanged or transferred in whole or in part in the principal amount of Authorized Denominations by surrendering such Certificated Senior Notes at the office of the Trustee or any Transfer Agent with a written instrument of transfer as provided in the Indenture. In addition, if the Certificated Senior Notes being exchanged or transferred contain a legend, additional certifications to the effect that such exchange or transfer is in compliance with the restrictions contained in such legend may be required.

Certain Registration and Exchange Rights

The Issuer and the Guarantors (the "Registrants") have entered into a registration rights agreement (the "Registration Rights Agreement") pursuant to which the Registrants have agreed, for the benefit of the Holders of the Senior Notes, that they will, at their cost, file a registration statement (the "Exchange Offer Registration Statement") with respect to an offer to exchange the Senior Notes for debt securities of the Issuer (the "Exchange Senior Notes") registered under the Securities Act with terms substantially identical to those of the Senior Notes, including the Guarantees of each Guarantor, (except that the Exchange Senior Notes will not contain terms with respect to transfer restrictions under the Securities Act) (the "Exchange Offer") upon the occurrence of any Exchange Offer Triggering Event (as defined below).

If (i) the Registrants fail to file within 30 days after any Exchange Offer Triggering Event, or cause to become effective under the Securities Act within 150 days after any Exchange Offer Triggering Event, the Exchange Offer Registration Statement, or (ii) the Registrants fail to consummate the Exchange Offer within 30 days of the date on which the Exchange Offer Registration Statement was declared effective by the SEC or (iii) the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of the Senior Notes (each such event referred to in clauses (i) through (iii) above, a "Registration Default"), then the Issuer will be required to pay to each holder of Transfer Restricted Senior Notes (as defined), with respect to the first 90‑day period following such Registration Default, additional interest as liquidated damages in cash on each Interest Payment Date in an amount equal to one‑half of one percent (.5%) per annum of the principal amount of Transfer Restricted Senior Notes held by such Holder. The amount of such additional interest as liquidated damages will increase by an additional one‑half of one percent to a maximum of two percent (2.0%) per annum of the principal amount of Transfer Restricted Senior Notes held by such holder for each subsequent 90‑day period until such Registration Default has been cured. Upon the consummation of the Exchange Offer, additional interest as liquidated damages would no longer be payable.

Upon the Exchange Offer Registration Statement being declared effective, the Registrants will offer the Exchange Senior Notes in exchange for surrender of the Senior Notes. The Registrants will keep the Exchange Offer open for not less than 30 calendar days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders of the Senior Notes. For each Senior Note surrendered to the Issuer pursuant to the Exchange Offer, the Holder of such Senior Note will receive an Exchange Senior Note having a principal amount equal to that of the surrendered Senior Note. Under existing SEC interpretations, the Exchange Senior Notes would in general be freely transferable after the Exchange Offer without further registration under the Securities Act; provided that broker‑dealers ("Participating Broker‑Dealers") receiving Exchange Senior Notes in the Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Senior Notes. The SEC has taken the position that Participating Broker‑Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Senior Notes (other than a resale of an unsold allotment from the original sale of the Senior Notes) with the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, the Registrants are required to allow Participating Broker‑Dealers and other Persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Senior Notes for a period of 180 calendar days commencing on the consummation of the Exchange Offer.

Each Holder of Senior Notes that wishes to exchange such Senior Notes for Exchange Senior Notes in the Exchange Offer will be required to represent that any Exchange Senior Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Exchange Offer it has no arrangement with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Senior Notes.

In the event that (i) applicable interpretations of the staff of the SEC do not permit the Registrants to effect such an Exchange Offer, (ii) the Exchange Offer is not consummated within 180 calendar days after an Exchange Offer Triggering Event, (iii) under certain circumstances, if the Initial Purchaser shall so request, (iv) Holders of 25% of the principal amount of Senior Notes are not eligible to participate in the Exchange Offer other than because of any change after the date of this Offering Memorandum in law or in prevailing interpretations of the staff of the SEC or there occurs any such change and because of such change any holder is not eligible to participate in the Exchange Offer, or (v) any holder does not receive freely tradable Exchange Senior Notes in the Exchange Offer, the Registrants will, at its cost, (a) as promptly as practicable, file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Senior Notes, (b) cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) keep continuously effective the Shelf Registration Statement until three years after its effective date. The Registrants will, in the event the Shelf Registration Statements is filed, provide to each Holder of the Senior Notes copies of the prospectus, which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement for the Senior Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Senior Notes. A Holder of Senior Notes that sells such Senior Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a Holder (including certain indemnification obligations).

For purposes of the foregoing, "Exchange Offer Triggering Event" means the consummation by the Issuer or the Parent of an underwritten public offering of common stock (acciones ordinarias) or any other debt or equity securities of the Issuer or the Parent which is conducted pursuant to an effective registration statement under the Act or the availability of Financial Statements with respect to the Issuer which comply as to form with the applicable requirements of the Exchange Act.

The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which will be available upon request to the Issuer.

TAXATION

Argentine Tax Considerations

The following summary is based upon tax laws of Argentina as in effect on the date of this Offering Memorandum and is subject to any change in Argentine law that may come into effect after such date. Prospective purchasers of the Senior Notes are advised to consult their own tax advisers as to the consequences under the tax laws of the country of which they are residents of an investment in the Senior Notes, including, without limitation, the receipt of interest and the sale, redemption or any disposition of the Senior Notes.

Income and Withholding Taxes

Except as described below, interest payments on the Senior Notes (including original issue discount, if any) will be exempt from Argentine income tax, provided the Senior Notes are issued in accordance with Argentine Law No. 23,576, as amended (the "Negotiable Obligations Law"), and qualify for tax exempt treatment under Article 36 of such law. Under this Article, interest on Senior Notes will be exempt if the following conditions (the "Article 36 Conditions") are satisfied:

(a) the Senior Notes must be placed through a public offering authorized by the CNV;

(b) the proceeds of the placement must be used by the Issuer for (i) working capital in Argentina, (ii) investments in tangible assets located in Argentina, (iii) refinancing of debts and (iv) contributions to the capital of a controlled or related corporation, provided the latter uses the proceeds of such contribution for the purposes specified in this section (b); and

(c) the Issuer must provide evidence to the CNV in the time and manner prescribed by regulations that the proceeds of the placement have been used for the purposes described in section (b) above.

If the Issuer does not comply with the Article 36 Conditions, Article 38 of the Negotiable Obligations Law provides that the Issuer shall be responsible for the payment of any withholding taxes on interest received by the Holders of the Senior Notes. In such event, such Holders shall receive the amount of interest provided in the relevant Note as though no withholding tax had been required.

Presidential Decree No. 1,076 of June 30, 1992, ratified by Argentine Law No. 24,307 of December 30, 1993 ("Decree No. 1,076"), eliminated the exemption described above with respect to certain Argentine entities. As a result of Decree No. 1,076, interest paid to Holders that are subject to the tax adjustment for inflation rules is subject to withholding as prescribed by Argentine tax regulations.

Pursuant to the terms of the Senior Notes, if any withholding on account of Argentine taxes becomes applicable on interest on the Senior Notes on or after the relevant closing date, the Issuer shall be responsible for payment of such withholding taxes so that the Holders receive the amount of interest provided in the Senior Notes free from any such withholdings. This provision does not apply with respect to Holders that are domiciled, have residence or have a permanent establishment in Argentina, who shall be subject to any withholding taxes that are currently in force or that may become applicable.

Capital Gains Taxes

Resident and nonresident individuals and foreign entities not having a permanent establishment in Argentina are not subject to taxation on capital gains derived from the sale or other disposition of Senior Notes if the Article 36 Conditions have been satisfied. As a result of Decree No. 1,076, those taxpayers subject to the tax adjustment for inflation rules of the Argentine income tax law are subject to taxes on capital gains on the sale or other disposition of Senior Notes as prescribed by Argentine tax regulations.

Value Added Taxes

Interest payments made in respect of the Notes will also be exempt from any value added tax because the Notes will be issued pursuant to a public offering authorized by the CNV. Further, so long as the Notes satisfy the Article 36 conditions, any benefits related to the offering, subscription, underwriting, transfer, authorization and cancellation will be exempt from any value added tax in Argentina.

Stamp Taxes and Transfer Taxes

No Argentine stamp tax shall be payable by Holders of Senior Notes under Article 35 of the Negotiable Obligations Law. No Argentine transfer taxes are applicable on the sale or transfer thereof. Article 38 of the Negotiable Obligations Law provides that if the Issuer does not comply with the Article 36 Conditions, the Issuer shall be responsible for the payment of any resulting taxes which would otherwise be payable by the Holders of Senior Notes.

Personal Assets Tax

Individuals and Undivided Estates. Pursuant to the Argentine Personal Assets Tax Law and the implementation of Decree No. 127/96, as amended by Decree No. 812/96 ("Decree No. 127/96"), individuals and undivided estates holding Senior Notes are subject to the Personal Assets Tax. The tax is imposed in respect of Senior Notes held on December 31 of each year at the rate of 0.5% of the market value (or acquisition cost plus accrued and unpaid interest, in the case of unlisted Senior Notes) of the Senior Notes as of such date. Decree No. 127/96 makes clear that although Senior Notes held by individuals or undivided estates domiciled outside Argentina technically would be subject to Personal Assets Tax, such tax will not be collected with respect to Senior Notes that are held by such individuals or undivided estates.

Legal Entities. Legal entities domiciled in Argentina are not subject to the Personal Assets Tax. Pursuant to Decree No. 127/96, legal entities domiciled outside Argentina ("foreign legal entities") which are deemed to be direct owners of Senior Notes which are not tradeable in local or foreign exchanges or markets ("Taxable Notes") will be subject to Personal Assets Tax if they are presumed to be holding Taxable Notes on behalf of an Argentine individual or estate. Such presumption, which does not allow any proof to the contrary, applies to any foreign legal entity which (a) is located in a country in which a regime of registration for private securities is not applied and (b) (i) pursuant to its bylaws or to the applicable regulatory framework has its principal investing activity outside the jurisdiction of its incorporation or (ii) cannot perform in the jurisdiction of its incorporation certain transactions expressly indicated in its bylaws or in the applicable regulatory framework (an "Offshore Taxable Entity"). In any case, such presumption would not apply to any foreign legal entity which is (a) an insurance company, (b) an open‑end mutual fund, (c) a pension fund or (d) a bank or financial entity whose headquarters are incorporated or domiciled in a country that has adopted the banking supervisory standards established by the Basle Convention (an "Exempt Offshore Entity").

Notwithstanding the requirement indicated in (a) above, pursuant to Resolution No. 4172/96 (the "Resolution") adopted on June 6, 1996 by the Dirección General Impositiva (the Argentine federal tax agency), a foreign legal entity constitutes an Offshore Taxable Entity if its capital stock is not evidenced by securities that qualify as "registered securities" under the laws of the jurisdiction, even if equity securities in such company's jurisdiction are generally held in registered form, such as in the United States. On the other hand if the capital stock of a foreign legal entity is evidenced by equity securities that qualify as registered notes under the laws of its jurisdiction of incorporation, such company would not be presumed to be holding securities on behalf of an Argentine individual or estate even if it would otherwise qualify as an Offshore Taxable Entity.

If under this presumption a foreign legal entity which directly owns Taxable Notes is deemed to be holding such Taxable Notes on behalf of an Argentine individual or estate and, therefore, is subject to the Personal Assets Tax, its eligible Taxable Notes will be taxed at the rate of 1% of the acquisition cost plus accrued interest in such Taxable Notes and such tax will be levied on any individual or legal entity that is domiciled in Argentina and has joint ownership, possession, use, authority over disposition, custody, management or guardianship of the securities as a substitute taxpayer for such foreign legal entity.

Pursuant to Decree No. 127/96, the Company shall be required to obtain from each foreign legal entity holding Taxable Notes a certification as to whether such entity is subject to the presumption described above. If the Company fails to obtain the required certification, the Company would be held liable for the Personal Assets Tax that would be imposed on that legal entity if it were subject to the presumption described above. In such a case, according to the terms and conditions of the Senior Notes, the Company has waived any right it may have under Argentine law to seek reimbursement from the direct owner of the Senior Notes of any such amounts paid by the Company (whether by deduction from payment of principal or interest on the Senior Notes or otherwise).

Foreign legal entities which are not Offshore Taxable Entities and which hold Taxable Notes must submit to the Company a copy of their bylaws or similar document. In addition, Exempted Offshore Entities which constitute financial institutions must provide the Company a certification from the relevant central bank or similar agency or, if not available, from a firm or individual duly authorized to issue such certification, of the fact that such financial institutions are subject to the Basle Convention supervisory standards. In the case of foreign legal entities that qualify as Offshore Taxable Entities, such entities are required, in order to prove that they are not holding Taxable Notes on behalf of an Argentine individual or estate, and therefore are not subject to the Personal Assets Tax, to submit to the Company a certification issued by any relevant authority of the jurisdiction of such foreign legal entities, incorporation of the fact that the capital stock of such foreign legal entities is evidenced by equity securities that qualify as "registered securities" under the laws of such jurisdiction.

The Company expects that the Senior Notes will be listed on the Buenos Aires Stock Exchange by December 31, 1997 and that, accordingly, the Senior Notes will not constitute Taxable Notes.

Court Tax

In the event that it becomes necessary to institute enforcement proceedings in relation to the Senior Notes in Argentina, a court tax (currently at a rate of 3%) will be imposed on the amount of any claim brought before the Argentine courts sitting in Buenos Aires.

U.S. Tax Considerations

The following is a general description of certain United States federal income tax consequences of the ownership and disposition of the Senior Notes applicable to U.S. Holders that are original purchasers of Senior Notes and will hold Senior Notes as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, life insurance companies, persons holding Senior Notes as part of a hedging or conversion transaction or a straddle or holder of Senior Notes whose "functional currency" is not the U.S. dollar. A "U.S. Holder" means a beneficial owner of Senior Notes that is (i) an individual who is a citizen or resident of the United States, (ii) a corporation or partnership created or organized in the United States or under the laws of the United States or of any state thereof or (iii) an estate or trust the income of which is includible in gross income for United States federal income tax purposes regardless of its source or (iv) any other person or entity that would be subject to U.S. federal income taxation on a net income basis in respect of the Senior Notes. This discussion is for general information only and does not deal with all aspects of United States federal income and estate taxation that may be relevant to U.S. Holders in view of their particular circumstances, nor does it address the effect of any applicable state or local tax law. Furthermore, this discussion is based on current provisions of the Internal Revenue Code of 1986 (the "Code") and administrative and judicial interpretations thereof as of the date hereof, all of which are subject to change. Prospective U.S. Holders of Senior Notes should consult their own tax advisors as to the United States federal, state and local and the foreign tax consequences of the ownership and disposition of Senior Notes.

Taxation of Interest

The gross amount of interest and Additional Amounts, if any, payable with respect to the Senior Notes to a U.S. Holder will be treated as interest income from sources outside the United States which is subject to federal income taxation as ordinary income. Argentine Taxes withheld therefrom that are properly treated as an income tax would be eligible for credit against the U.S. holder's federal income tax liability, subject to generally applicable limitations on the foreign tax credit, or at the election of the holder could be deducted in computing the holder's federal income tax liability. For foreign tax credit purposes, interest income with respect to the Senior Notes generally will be treated as passive income or, in the case of certain holders which are financial institutions, as financial services income.

If an Exchange Offer Triggering Event occurs, failure of the Company to file or cause to be declared effective an Exchange Offer Registration Statement or Shelf Registration Statement or consummate the Exchange Offer as described under "Description of the Senior Notes--Certain Registration and Exchange Rights" will cause additional interest to accrue on the Senior Notes in the manner described therein. According to Regulations, the possibility of a change in the interest rate will not affect the amount of interest income recognized by a U.S. Holder (or the timing of such recognition) if the likelihood of the change, as of the date the Senior Notes are issued, is remote. The Company believes that the likelihood of a change in the interest rate on the Senior Notes is remote and does not intend to treat the possibility of a change in the interest rate as affecting the yield to maturity of any Senior Note. If, as anticipated, the issue price of the Senior Notes will equal their stated principal amount, and because the likelihood of a change in the interest rate is remote, the Senior Notes will not have original issue discount. Solely for purposes of determining the amount of original issue discount, the Senior Notes would be treated as retired and reissued on any date the amount of interest were changed for an amount equal to its adjusted issue price.

Market Discount

If a U.S. Holder purchases a Senior Note for an amount that is less than its stated principal amount, the amount of the difference will be treated as "market discount" for federal income tax purposes, unless such difference is less than a specified de minimis amount (generally 0.25% of its remaining redemption amount multiplied by the number of whole years to maturity). Under the market discount rules, a U.S. Holder will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, a Senior Note as ordinary income to the extent of the market discount which has not previously been included in income and is treated as having accrued on such Senior Note at the time of such payment or disposition. In addition, the U.S. Holder may be required to defer, until the maturity of the Senior Note or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such Senior Note.

Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the Senior Note, unless the U.S. Holder elects to accrue on a constant interest method. A U.S Holder of a Senior Note may elect to include market discount in income currently as it accrues (on either a ratable or constant interest method), in which case the rule described above regarding deferral of interest deductions will not apply. This election to include market discount income currently, once made, applies to all market discount obligations acquired on or after the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service (the "IRS").

Amortizable Bond Premium

A U.S. Holder that purchases a Senior Note for an amount in excess of the sum of all amounts payable on the Senior Note after the purchase date other than stated interest will be considered to have purchased the Senior Note at a "premium." A U.S. Holder generally may elect to amortize the premium over the remaining term of the Senior Note on a constant yield method. The amount amortized in any year will be treated as a reduction of the U.S. Holder's interest income from the Senior Note. Bond premium on a Senior Note held by a U.S. Holder that does not make such an election will decrease the gain or increase the loss otherwise recognized on disposition of the Senior Note. The election to amortize premium on a constant yield method once made applied to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applied and may not be revoked without the consent of the IRS.

Taxation of Dispositions

Gain or loss realized by a U.S. Holder on the sale or other disposition of Senior Notes (including any gain or loss realized upon a redemption) generally will be treated as capital gain or loss and will be subject to federal income taxation. Such gain or loss would be treated as long‑term gain or loss if at the time of disposition the Senior Notes have been held for more than one year. In general, any gain would be treated as U.S. source income. For these purposes, a U.S. Holder's tax basis in a Senior Note generally will equal the cost of such Senior Note to such Holder, increased by any amounts includible in income by the holder as market discount and reduced by any amortized premium.

In the event that an Exchange Offer is consummated, an exchange of Senior Notes for Exchange Senior Notes will not be a taxable event for U.S. federal income tax purposes and a U.S. Holder will have the same tax basis and holding period in the Exchange Senior Notes as the Senior Notes.

Information Reporting and Backup Withholding

Payment of the proceeds from a sale of Senior Notes to or through a U.S. office of a broker will be subject to information reporting and backup withholding at a rate of 31% unless the owner establishes an exemption. Any amount withheld under the backup withholding rules would be credited against the holder's federal income tax liability or refunded, provided that the required information is furnished to the Internal Revenue Service.

PLAN OF DISTRIBUTION

Citicorp Securities, Inc., Citibank Canada Securities Limited, Citibank International plc and Citicorp Capital Markets S.A. (collectively, the "Initial Purchaser"), have severally agreed to purchase, and the Company has agreed to sell to the Initial Purchaser, the Senior Notes subject to the terms and conditions set forth in the Purchase Agreement ("Purchase Agreement") between the Company, the Guarantors and the Initial Purchaser relating to the Senior Notes.

The Purchase Agreement provides that the obligation of the Initial Purchaser to pay for and accept delivery of the Senior Notes is subject to certain conditions. The Initial Purchaser will be obligated to purchase all of the Senior Notes offered hereby if any are purchased.

The Initial Purchaser proposes to resell the Senior Notes initially at 100% of the principal amount thereof. The Purchase Agreement provides that the Company will sell the Senior Notes to the Initial Purchaser at a customary discount to the principal amount thereof and will reimburse the Initial Purchaser for its reasonable out‑of‑pocket expenses (including legal fees and disbursements of counsel to the Initial Purchaser) incurred in connection with the Offering. The Purchase Agreement also provides that all Senior Notes offered hereby may be resold by the Initial Purchaser solely to investors as described under "Notice to Investors."

Pursuant to the Purchase Agreement, and subject to the conditions thereof, the Initial Purchaser has agreed to resell the Senior Notes in transactions not requiring registration under the Securities Act or applicable state securities laws, initially at the price indicated on the cover page hereof. The Senior Notes will be offered and resold only to (i) persons whom the Initial Purchaser reasonably believes to be "qualified institutional buyers" as defined in Rule 144A that purchases for its own account or the account of a "qualified institutional buyer" and to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and, in each case, in transactions under Rule 144A, (ii) a limited number of institutional "accredited investors" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that represent in writing that they are purchasing the Senior Notes for their own account or for the account of an institutional accredited investor in minimum denominations of US$250,000, for investment purposes and not with a view to distribution in violation of the Securities Act, or (iii) persons to whom, and under circumstances which, the Initial Purchaser reasonably believes offers and sales of Senior Notes may be made without registration of the Senior Notes under the Securities Act in reliance on Regulation S thereunder. Each U.S. purchaser of the Senior Notes offered hereby (other than a person the Initial Purchaser reasonably believe to be a "qualified institutional buyer" as defined in Rule 144A under the Securities Act) in making its purchase will be required to complete and deliver to the Initial Purchaser an investor letter in the form included herein as Annex A for institutional investors prior to acceptance of any order and will be deemed to have made certain acknowledgments, representations and agreements as set forth under "Notice to Investors."

The Company and Guarantors have agreed to indemnify the Initial Purchaser against certain liabilities, including liabilities under the Securities Act, or to contribute to losses arising out of such liabilities.

The Initial Purchaser has represented and agreed that it (or any affiliate) (i) has not offered or sold and will not offer or sell any Senior Notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offering of Securities Regulations 1995 (the "Regulations"), (ii) has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Regulations with respect to anything done by it in relation to the Senior Notes in, from or otherwise involving the United Kingdom, and (iii) has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Senior Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on.

The Senior Notes have not been and will not be qualified for sale under the securities laws of Canada or any province or territory of Canada. The Senior Notes may not be offered or sold and the Initial Purchaser has agreed not to offer or sell the Senior Notes, directly or indirectly in Canada or to any resident thereof, in contravention of the securities laws of Canada or any province or territory of Canada.

The Senior Notes are expected to be eligible for trading on PORTAL. There has not been any market for the Senior Notes. The Senior Notes will not be listed on a national securities exchange and will not be authorized for trading on NASDAQ. The Company has been advised by the Initial Purchaser that it presently intends to make a market in the Senior Notes; however, it is not obligated to do so and any market making may be discontinued at any time. Therefore, there can be no assurance that an active market for the Senior Notes will develop or as to the liquidity of any such market. See "Risk Factors--Certain Factors Relating to the Senior Notes--Absence of Public Market for the Senior Notes."

If a public trading market develops for the Senior Notes, future trading prices of such Senior Notes will depend on many factors, including among other things, prevailing interest rates, the Company's results of operations and financial conditions, the market for similar securities, the state of the Argentine economy, the country's political stability and exchange rate fluctuations and exchange rate controls between the Peso and the dollar. Depending on the factors listed above, the Senior Notes may trade at a price less than the "Price to Investors" appearing on the cover page of this Offering Memorandum.

The Initial Purchaser and certain of its respective affiliates participate on a regular basis in various general financing and banking transactions for the Company and its affiliates and certain of the proceeds from the Offering are expected to be used to repay loans by such affiliates. Galicia Capital Markets S.A. ("Galicia") has provided banking services in connection with the Offering and may continue to perform similar services in the future. Galicia will be compensated for past services, reducing the Initial Purchaser's discount, and certain of the proceeds of the Offering are expected to be used to repay loans by affiliates of Galicia.

In connection with the Offering, certain persons participating in the Offering may engage in transactions that stabilize, maintain or otherwise affect the price of the Senior Notes during and after the Offering. Specifically, the Initial Purchaser may bid for and purchase the Senior Notes in the open market to stabilize the price of the Senior Notes. The Initial Purchaser may overallot the Offering, creating a syndicate short position, and may bid for and purchase Senior Notes in the open market to cover the syndicate short position. In addition, the Initial Purchaser may bid for and purchase the Senior Notes in market making transactions and impose penalty bids. These activities may stabilize or maintain the market price of the Senior Notes above market levels that may otherwise prevail. The Initial Purchaser is not required to engage in these activities and may end these activities at any time.

The Purchase Agreement provides that the Issuer and the Guarantors shall not, for a period of 180 days from the date hereof, without the prior written consent of Citicorp Securities, Inc., directly or indirectly, offer, sell, grant any option to purchase or otherwise dispose of any debt securities of the Issuer or any Guarantor.

NOTICE TO INVESTORS

Each purchaser of the Senior Notes offered hereby who is a U.S. person (other than certain U.S. persons buying for the account of non‑U.S. persons) will be deemed to have represented and agreed as follows (terms used herein that are defined in Rule 144A, Regulation D under the Securities Act ("Regulation D") or Regulation S under the Securities Act are used herein as defined therein).

It understands and acknowledges that the Senior Notes have not been registered under the Securities Act or any other applicable securities law, are being offered for resale in transactions not requiring registration under the Securities Act or any other securities laws, including sales pursuant to Rule 144A under the Securities Act, or outside the United States in accordance with Regulation S under the Securities Act and, unless so registered, the Senior Notes may not be offered, sold, or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities law, pursuant to an exemption therefrom or in a transaction not subject thereto and, in each case, in compliance with the conditions from transfer set forth in paragraph 4 below.

It is either:

a "qualified institutional buyer" as defined in Rule 144A promulgated under the Securities Act (a "QIB") and is aware that any sale of the Senior Notes to it will be made in reliance on Rule 144A; such acquisition will be for its own account or for the account of another QIB; or an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is purchasing at least US$250,000 of Senior Notes, and if the Senior Notes are to be purchased for one or more accounts ("investor accounts") for which it is acting fiduciary or agent, each such account is an institutional accredited investor that is purchasing at least US$250,000 of the Senior Notes. In the normal course of its business, it invests in or purchases securities similar to the Senior Notes and it has such knowledge and experience in financial business matters that it is capable of evaluating the merits and risks of purchasing the Senior Notes. It is aware that it (or any investor account) may be required to bear the economic risk of an investment in the Senior Notes for an indefinite period of time and it (or such account) is able to bear such risk for an indefinite period; or a non‑U.S. person as defined in Regulation S under the Securities Act.

It acknowledges that none of the Company, the Guarantors or the Initial Purchaser or any person representing the Company, the Guarantors or the Initial Purchaser has made any representation to it with respect to the Company or the offering or sale of any Senior Notes, other than the information contained in the Offering Memorandum, which has been delivered to it and upon which it is relying in making its investment decisions with respect to the Senior Notes. It has had access to such financial and other information concerning the Company and the Senior Notes as it has deemed necessary in connection with its decision to purchase the Senior Notes, including an opportunity to ask questions and request information from the Company, the Guarantors and the Initial Purchaser.

It is purchasing the Senior Notes for its own account, or for one or more investor accounts for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirement of law that the disposition of this property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Senior Notes pursuant to Rule 144A, Regulation S or any exemption from registration available under the Securities Act. It agrees on its own behalf and on behalf of any investor account for which it is purchasing the Senior Notes, and each subsequent holder of the Senior Notes by its acceptance thereof will be deemed to agree to offer, sell, or otherwise transfer such Senior Notes prior to (i) the date which is two years after the later of the date of original issue and the last date on which the Issuer or any affiliate of the Issuer was the Owner of such Senior Notes (or any predecessor thereto) and (ii) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date") only (a) to the Issuer, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Senior Notes are eligible for resale pursuant to Rule 144A, to a person it reasonably believes is a QIB that purchases for its own account or for the account of a QIB, to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S, (e) to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3), or (7) of Rule 501 under the Securities Act that is purchasing at least US$250,000 of Senior Notes for its own account or for the account of an institutional accredited investor, after delivery of an investor letter duly executed by such transferee in the form attached hereto as Annex A, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to any offer, sale, or other transfer prior to the Resale Restriction Termination Date of the Senior Notes pursuant to clauses (d), (e) or (f) above to require the delivery of any opinion of counsel, certification and/or other information

satisfactory to the Issuer and the Trustee. Each purchaser acknowledges that each Senior Note will contain a legend substantially to the following effect.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO (X) THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY A SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SENIOR NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS PURCHASING AT LEAST US$250,000 OF SENIOR NOTES AND THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT AND AFTER DELIVERING AN INVESTOR LETTER DULY EXECUTED BY SUCH TRANSFEREE, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY BE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

It acknowledges that the Issuer, the Guarantors, the Initial Purchaser and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that, if any of the acknowledgments, representation or warranties deemed to have been made by it by its purchase of Senior Notes are no longer accurate, it shall promptly notify the Initial Purchaser, the Guarantors and the Issuer. If it is acquiring any Senior Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of such account.

LEGAL MATTERS

The validity of the Senior Notes and the Guarantees will be passed upon for the Company by Carri Pérez, Ferla, Muzi & Asociados and Shearman & Sterling, Argentine counsel and New York counsel for the Company, respectively, and certain legal matters concerning the Senior Notes will be passed on for the Initial Purchaser by Bruchou, Fernández Madero & Lombardi and Cahill Gordon & Reindel (a partnership including a professional corporation), Argentine and New York counsel for the Initial Purchaser, respectively. With respect to certain matters governed by Argentine law, Shearman & Sterling will rely on the opinion of Carri Pérez, Ferla, Muzi & Asociados. Cahill Gordon & Reindel will rely on the opinions of Carri Pérez, Ferla, Muzi & Asociados and Bruchou, Fernández Madero & Lombardi.

INDEPENDENT PUBLIC ACCOUNTANTS

The combined balance sheets of the Company and its subsidiaries as of June 30, 1995 and 1996 and the combined statements of income and cash flows for the years ended June 30, 1994, 1995 and 1996 included in this Offering Memorandum have been audited by Harteneck, Lopez y Cia/Coopers & Lybrand, independent public accountants, as indicated in their report. With respect to the Unaudited Consolidated Combined Financial Statements for the nine‑month periods ended March 31, 1997 and 1996, also included in this Offering Memorandum, Harteneck, Lopez y Cia/Coopers & Lybrand, independent public accountants, reported that they have applied limited review procedures in accordance with Argentine professional standards, which are in substantial agreement with the standards as set forth in SAS 71, Interim Financial Information, for a review of such information. Such report states that they did not audit and they do not express an opinion on such interim financial statements. Accordingly, the degree of reliance on their report on such interim financial statements should be restricted in light of the limited nature of the review procedures applied.

PUBLIC OFFICIAL DOCUMENTS

The information herein presented as having been extracted from government publications has been presented on the authority of such public official documents.

AVAILABLE INFORMATION

Each purchaser of the Senior Notes from the Initial Purchaser will be furnished with a copy of this Offering Memorandum and any related amendments or supplements to this Offering Memorandum. Each person receiving this Offering Memorandum acknowledges that (i) such person has been afforded an opportunity to request from the Company, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein, (ii) such person has not relied on the Initial Purchaser or any person affiliated with the Initial Purchaser in connection with its investigation of the accuracy of such information or its investment decision and (iii) except as provided pursuant to clause (i) above, no person has been authorized to give any information or to make any representation concerning the Senior Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by the Company or the Initial Purchaser.

While any Senior Notes remain outstanding, the Company will make available, upon request, to any holder and any prospective purchaser of Senior Notes the information required pursuant to Rule 144A(d)(4) under the Securities Act during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act. Any such request should be directed to the Chief Financial Officer, CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A., Leandro N. Alem 1050, 9th Floor, Buenos Aires, Argentina, telephone number (54‑1) 317‑7302.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Index to the Unaudited Consolidated Combined Financial Statements

Page

Report of Independent Accountants F‑2

Unaudited Consolidated Combined Balance Sheets as at March 31, 1997 and 1996 F‑3

Unaudited Consolidated Combined Statements of Income for the nine‑month periods ended

March 31, 1997 and 1996 F‑4

Unaudited Consolidated Combined Statements of Cash Flows for the nine‑month periods ended

March 31, 1997 and 1996 F‑5

Notes to the Unaudited Consolidated Combined Financial Statements for the nine‑month periods

ended March 31, 1997 and 1996 F‑6

Report of Independent Accountants F‑27

Combined Balance Sheets as at June 30, 1996 and 1995 F‑28

Combined Statements of Income for the years ended June 30, 1996, 1995 and 1994 F‑29

Combined Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 F‑30

Notes to the Combined Financial Statements for the years ended June 30, 1996, 1995 and 1994 F‑31

REPORT OF INDEPENDENT ACCOUNTANTS

To the shareholders of

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

We have made a limited review of the consolidated combined balance sheets of CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. and its subsidiaries ("the Company") as of March 31, 1997 and 1996, and the related consolidated combined statements of income and cash flows for the nine‑month periods then ended. These financial statements are the responsibility of the Company's management. We did not review the financial statements supporting the Company's investment in Coviares S.A. and Covimet S.A., which are accounted for as equity method investees, representing P$48,752,187 and P$44,672,465, respectively of combined total assets as of March 31, 1997 and 1996, respectively, and its share of the equity in earnings of such investees of P$(886,414), P$1,458,249 for the nine‑month periods then ended. These statements were reviewed by Price Waterhouse whose report has been furnished to us, and our report, insofar as it relates to the amounts included for those entities, is based solely on the report of the other auditors.

Our limited review was made in accordance with Argentine professional standards, which are in substantial agreement with the standards established by the American Institute of Certified Public Accountants as set forth in SAS 71, Interim Financial Information. A limited review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially more limited in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Effective September 1, 1995, in accordance with a decree of the Argentine government and in accordance with generally accepted accounting principles in Argentina, general price‑level accounting which reflects changes in the purchasing power of the Peso in the historical financial statements was discontinued (see Note 1(c)). Accordingly, the Company's August 31, 1995 account balances adjusted to the general purchasing power of the Peso at August 31, 1995 became the historical cost basis for subsequent accounting and reporting and no gain or loss from exposure to inflation has been reflected subsequent to August 31, 1995. No financial statements for any period subsequent to August 31, 1995 have been restated.

The accompanying consolidated combined financial statements were prepared to present the financial position, results of operations and cash flows of the construction, toll road management, mass transportation and waste management businesses of the Company on the basis described in Note 1(a). Accordingly these financial statements are not intended to be a complete presentation of the historical consolidated financial position, results of operations and cash flows of the above mentioned businesses of the Company.

Based on our limited review and the reports of other auditors, we are not aware of any material modifications that should be made to the accompanying financial statements as of March 31, 1997 and 1996 and for the nine‑month periods then ended, for them to be in conformity with generally accepted accounting principles in Argentina.

Córdoba, Argentina COOPERS & LYBRAND

May 8, 1997 HARTENECK, LOPEZ Y CIA.

Eduardo H. Gañan

Partner

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Unaudited Consolidated Combined Balance Sheets as at March 31, 1997 and 1996

(In Argentine Pesos adjusted for price level changes

and expressed in constant Pesos for periods prior to September 1, 1995)

1997 1996

(Unaudited) (Unaudited)

ASSETS

Current Assets

Cash (Note 3) 9,705,148 6,647,314

Cash equivalents (Note 9) 4,373,482 4,347,907

Cash in escrow (Note 3) 1,254,189 1,287,002

Investments (Note 9) 3,301,977 5,866,769

Receivables, net (Note 4) 105,503,222 108,020,682

Other assets, net (Note 5) 25,946,611 43,689,861

Inventory (Note 6) 43,390,469 33,017,865

Total Current Assets 193,475,098 202,877,400

Non‑Current Assets

Receivables (Note 4) 5,337,636 9,837,619

Other assets (Note 5) 3,303,110 3,917,663

Inventory (Note 6) 6,108,025 4,793,962

Investments (Note 9) 103,004,465 80,910,291

Fixed assets, net (Note 7) 116,611,401 106,366,304

Intangible assets, net 18,530,369 20,660,195

Total Non‑Current Assets 252,895,006 226,486,034

TOTAL ASSETS 446,370,104 429,363,434

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Accounts payable (Note 10) 83,809,968 49,144,246

Loans (Note 11) 75,068,641 71,051,970

Other debt (Note 11) 15,194,919 1,711,878

Income and other taxes 11,956,408 9,766,037

Salaries and social security payable 8,911,090 7,345,045

Provisions and allowances -- 175,227

Other liabilities (Note 12) 30,821,606 45,420,773

Total Current Liabilities 225,762,632 184,615,176

Non‑Current Liabilities

Accounts payable (Note 10) 16,277,978 10,253,250

Loans (Note 11) 24,256,487 30,364,209

Income and other taxes 1,174,169 1,908,565

Provisions and allowances 17,447,339 9,872,470

Other liabilities (Note 12) 50,999,008 47,232,090

Total Non‑Current Liabilities 110,154,981 99,630,584

TOTAL LIABILITIES 335,917,613 284,245,760

Minority interest 26,722,706 22,577,299

SHAREHOLDERS' EQUITY (Note 13) 83,729,785 122,540,375

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 446,370,104 429,363,434

The accompanying notes are an integral part of these unaudited consolidated combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Unaudited Consolidated Combined Statements of Income

for the nine‑month periods ended March 31, 1997 and 1996

(In Argentine Pesos adjusted for price level changes

and expressed in constant pesos for periods prior to September 1, 1995)

1997 1996

(Unaudited) (Unaudited)

Sales 324,195,742 242,943,025

Cost of sales (241,965,044) (177,906,993)

Gross profit 82,230,698 65,036,032

Administrative expenses (Note 22) (41,007,515) (37,435,669)

Other operating expenses (Note 22) (20,407,323) (17,762,105)

Operating income 20,815,860 9,838,258

Other income, net 3,404,638 3,532,796

Income from permanent investments 2,671,414 2,409,701

Financing income (expense):

generated by assets (Note 15) 9,605,503 9,870,692

generated by liabilities (Note 15) (14,740,007) (20,187,105)

Income before taxes and minority interest 21,757,408 5,464,342

Income tax (3,091,194) (286,000)

Minority interest (4,018,396) (2,193,694)

Net income for the period 14,647,818 2,984,648

The accompanying notes are an integral part of these unaudited consolidated combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Unaudited Combined Statements of Cash Flows

for the nine‑month periods ended March 31, 1997 and 1996

(In Argentine Pesos adjusted for price level changes

and expressed in constant pesos for periods prior to September 1, 1995)

1997 1996

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income for the period 14,647,818 2,984,648

Adjustments to reconcile net income to net cash

from operating activities:

Depreciation and amortization 23,416,418 21,540,194

Amortization of deferred highway toll revenues 6,206,282 8,194,602

Minority interest 4,018,396 2,193,694

(Gain)/loss from sale of fixed assets (406,091) 34,245

(Gain)/loss from sale of equity investments (1,201,124) 533,644

Reversal of revaluation reserve (2,448,187) (4,410,919)

Income from permanent investments (2,671,414) (2,409,701)

Changes in operating assets and liabilities:

Inventories (13,916,735) 5,285,105

Provisions and allowances 1,755,702 1,465,898

Receivables (9,159,140) 7,238,380

Accounts payable 20,533,221 (19,850,970)

Net cash provided by operating activities 40,775,146 22,798,820

Cash flows from investing activities:

Purchase of fixed assets (26,360,016) (14,153,033)

Increase in intangible assets (935,905) (1,269,888)

Decrease/(increase) in other investments 2,347,623 (11,621,654)

Proceeds from the sale of fixed assets 1,435,910 3,247,508

Other 591,116 ---

Net cash used in investing activities (22,921,272) (23,797,067)

Cash flows from financing activities:

Increase in other assets (10,292,669) (2,208,249)

Increase in other liabilities 6,895,189 10,513,186

Shareholder contributions 151,818 741,718

Assumed contributions from shareholders 610,842 177,594

Payments of cash dividends (937,500) (706,350)

Decrease in borrowings (10,850,968) (7,844,127)

Net cash provided by (used in) financing activities (14,423,288) 673,772

Net increase (decrease) in cash and cash equivalents 3,430,586 (324,475)

Cash and cash equivalents at the beginning of the year 10,648,044 11,319,696

Cash and cash equivalents at the end of the period 14,078,630 10,995,221

The accompanying notes are an integral part of these unaudited consolidated combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Unaudited Consolidated Combined Financial Statements

For the nine‑month periods ended March 31, 1997 and 1996

Preparation of financial statements

1.(a) Basis of presentation

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. ("CLISA" or the "Company"), which is 97.6%‑owned by Roggio S.A., was organized as a "sociedad anonima" under the laws of Argentina in October 1996. CLISA and its subsidiaries are referred to collectively hereinafter as the "Group" or "CLISA Group". The businesses combined for the purposes of this presentation were not legal subsidiaries of CLISA as of March 31, 1996. As of March 31, 1997, all businesses combined have become legal subsidiaries of CLISA based on the ownership percentages indicated herein.

The Company, based in Argentina, conducts its business through two direct subsidiaries: Benito Roggio E Hijos S.A. ("BRH") and Caminos Australes S.A. ("Caminos"). These subsidiaries of CLISA through their respective operations and investments are primarily engaged in four major operating activities: mass transportation management, waste management, toll road management, and construction. The Company conducts the majority of its operations in Argentina, with some operations in Uruguay, Mexico, Chile, and Paraguay.

The interim unaudited consolidated combined financial statements included herein have been prepared by CLISA in accordance with accounting principles generally accepted in Argentina. In the opinion of the management of the Company, all adjustments, which are both of a normal recurring nature and necessary for a fair presentation of the interim consolidated condensed combined financial statements, have been included herein. The results of these interim periods are not necessarily indicative of results for the entire related years.

For the purposes of these interim consolidated combined financial statements certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in Argentina have been omitted. These unaudited statements should be read in conjunction with the audited combined financial statements and notes thereto as of June 30, 1996 and 1995.

These interim financial statements present the combined assets and liabilities and results of operations of the CLISA Group at their historical amounts and include adjustments based on certain assumptions as described below. These assumptions and related adjustments, are in the view of management, necessary to present the financial position, results of operations and cash flows as if the Group had operated on a stand alone basis for the periods presented. The combined financial statements however, are not necessarily indicative of the financial position, results of operations and cash flows in the future or what would have been attained had the Group operated independently.

All significant intercompany transactions between the combined companies of the Group have been eliminated in the combination.

Corporate expenses incurred by parent

During the nine‑month periods ended March 31, 1997 and 1996, Roggio S.A. did not allocate certain corporate expenses to the Group, primarily salary related costs, incurred on the Group's behalf. As part of the carve out adjustments, these costs have been allocated to CLISA and included in the nine‑month period consolidated combined unaudited financial statements.

Permanent investments

Four equity method investees of the Group, Covisur S.A., Grupo Concesionario del Oeste S.A. (GCO), Covimet S.A. and Coviares S.A. have been accounted for utilizing financial statement information for the period ended December 31, 1996 and 1995. In the opinion of management, there are no significant variations for the period January 1 through March 31, 1997 and 1996 which would require adjustment to or additional disclosure in these combined financial statements.

The income from permanent investments and investment in all other associated companies accounted for under the equity method have been recorded based on the equity method investees' financial statements using nine‑month information as at and for the periods ending March 31, 1996 and 1995.

During 1996, BRH's investments in certain associated companies which had been accounted for under the equity method were sold to Roggio S.A. Accordingly, these investments have been excluded from the interim consolidated combined financial statements for all periods presented.

Amounts to be paid to shareholders as a result of formation of CLISA

Upon formation of CLISA, Roggio S.A. and a minority shareholder of BRH and Caminos contributed their entire interests in these companies in exchange for a similar proportionate interest in CLISA which results in a liability of P$ 18.4 million as at December 31, 1996.

Other carve out adjustments

The tax effect of the above adjustments has been calculated at the effective tax rate for each period. Further, minority interest has been adjusted for the proportionate share of the adjustments.

Shareholders' equity

The shareholders' equity included in the interim consolidated combined financial statements represents the historical shareholders' equity of BRH and Caminos, and has been adjusted to give effect to the carve out adjustments previously described and the formation of CLISA as a legal entity.

Pro‑rata consolidation of UTEs

The Group proportionately consolidates its investments in Union Transitoria de Empresas (UTE). An UTE is similar to a business partnership in that it represents a contractual arrangement between or among separate entities formed in accordance with the Argentine law for the purpose of performing a specific work or project. An UTE is not a separate legal entity.

(b) Principles of combination

The following subsidiaries of BRH and Caminos are combined in these financial statements:

Percentage held

as at March 31,

(%)

Name of entity 1997 1996 Primary activity

Benito Roggio E Hijos S.A. (BRH) 94.16 92.16 Construction and waste management

Subsidiaries:

Cliba Ingenieria Ambiental S.A.* 55.00 55.00 Waste management

Sehos S.A.* 70.00 70.00 Hospital maintenance

Rail S.A. de Inversión* 99.00 99.00 Mass transportation

Metrovías S.A.*(1) 55.30 55.30 Mass transportation

Caminos Australes S.A. (Caminos) 99.37 99.37 Holding company

Subsidiaries:

Covicentro S.A.* 53.77 53.77 Toll road management

Red Vial Centro S.A.* 57.00 57.00 Toll road management

* Represents the direct interest of BRH and Caminos in the relevant subsidiary.

(1) Through Rail S.A. de Inversión and BRH ownership percentages of 27.08 and 28.22, respectively.

The consolidated combined financial statements have been prepared in accordance with generally accepted accounting principles used in Argentina ("Argentine GAAP") , which differ in certain significant respects from generally accepted accounting principles in the United States of America ("US GAAP"). Such differences involve methods of measuring the amounts shown in the financial statements, as well as additional disclosures required by US GAAP.

(c) Restatement of financial statements in constant Argentine pesos

Effective September 1, 1995 in accordance with general resolution No. 272/95 of the National Securities Commission in Argentina (the governmental regulator agency for public companies) and in accordance with Argentine GAAP, the Group began accounting for its financial transactions on a historical cost basis, without considering the effects of inflation. Prior to September 1, 1995 the financial statements had been prepared on the basis of general price level accounting which reflects changes in purchasing power of the Peso in the historical financial statements. At the end of each reporting period and as of August 31, 1995 for the current year, the financial statements were stated in the general purchasing power of the Peso, using changes in the Argentine Wholesale Price Index ("WPI") as follows:

• Non‑monetary items and income statement amounts were adjusted to reflect the then current general purchasing power.
• Monetary items were not adjusted as such items are, by their nature, stated in terms of current general purchasing power in the financial statements.
• Monetary gains or losses were recognized in the income statement, reflecting the effect of holding monetary items and were included within financing results.

In addition, the financial statement information of periods prior to August 31, 1995 have been updated to Pesos of general purchasing power at the end of August 31, 1995 ("constant Pesos"). The August 31, 1995 balances, adjusted to the general purchasing power of the Peso at that date, became the historical cost basis for subsequent accounting and reporting.

The amounts shown in the general price level statements do not purport to represent the appraised value, replacement cost, or any other measure of the current value of the assets or the prices at which transactions would take place currently.

The following are the changes in the inflation rate based on the WPI for the following periods:

Two months ended August 31, 1995 0.390%

(d) Use of estimates

The preparation of the interim consolidated combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. Significant Accounting Policies

(a) Revenue recognition

Construction

Revenues from construction contracts are recognized upon approval by the customer of the work performed, and are determined based on a percentage of completion method calculated as the ratio of earned revenues to total contract price, after considering accumulated costs and estimated costs to complete. If the estimates of costs to complete long‑term contracts indicate a loss on a combined contracts basis, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Concessions

A concession is a right of specified duration, granted by the federal government or a provincial government, to exploit, build, establish, operate and maintain a public form of transportation or other public service. Upon termination of a concession, the concessioned operations revert to the government. Certain concessions are renewable upon renegotiation by the concessionaire and governmental agency. A summary of the significant concessions and significant accounting policies thereto is as follows:

(i) Highway concessions in Argentina:

Toll revenues: In return for operating, maintaining and occasionally improving the facility in accordance with the agreement, the concessionaire has the right to the toll fees derived from operation of the concessioned highway for the term of the concession. Toll fees are recognized into earnings based on the expected margin on the project. Toll fees collected in excess of those that are earned are classified as deferred revenue. The operating and maintenance costs are recognized as expenses in the period incurred.

Revenue subsidies: Certain toll road concession contracts were amended in 1991 to modify the toll fee structure. Under the terms of the amendments, highway concessionaires agreed to receive pre‑determined subsidies on a monthly basis for the duration of the concession in exchange for agreeing not to increase toll fees as originally contemplated in the agreements. The Group recognizes the subsidy as revenue as amounts become contractually due each month. Total revenues from subsidies were P$ 6,963,047 and P$ 6,515,304 for the periods ended March 31, 1997 and 1996, respectively.

(ii) Subway concessions--Metrovías

In November 1993, Metrovías S.A., a subsidiary of the Group, was awarded a 20 year concession to operate the Buenos Aires Subway (BAS), which had previously been operated by the government. The concession contract, is extendable for two successive ten year periods upon mutual agreement by the parties. Under the terms of the concession, Metrovías was granted the right to use the existing subway assets with such assets remaining the property of the government throughout the term of the concession. Accordingly, these subway assets are not reflected in these combined financial statements.

Fare and leasing revenue: The concession agreement entitles Metrovías to collect toll fares from subway passengers, rents from the leasing of commercial kiosks and shops in stations, fees from advertising on coaches and in stations, and other services. Revenue relating to such items is recognized as income when earned. Metrovías is also responsible for the operating costs of the BAS which are recognized as expenses in the period incurred.

Capital investment program: The concession contract requires Metrovías to make certain capital investments to the subway for which Metrovías receives payment from the government. The capital investment amounts, which are pre‑determined in the concession contract, are recognized as revenues upon approval by the government agency responsible for payment. The costs associated with the acquisition and construction of fixed assets under the capital investment program are classified as inventory and expensed in the period in which the revenue is recognized. All assets constructed and or purchased under the capital investment program are the property of the government throughout the term of the concession.

Subsidies: Under the terms of the concession contract, Metrovías is to receive a subsidy from the government agency responsible for the subway from 1994 to 1999 and is to pay a fee to this same agency during the remaining years of the concession. The subsidy or fee is equal to the amount by which the fare revenue projected at the time the concession was granted is exceeded by or exceeds the projected cost of operating the BAS for each year, which includes the concessionaire's return. The amount of the subsidy and fee is adjustable to the extent that the actual cost of operating the subway is greater than or less than the projected cost. This is measured through a pre‑established price index agreed upon at the outset of the concession. The subsidies are recorded as revenues when received from the government. The scheduled fees currently estimated at P$344 million over 15 years will be recognized in the years they are paid. Total subsidies received relating to the subway concession contract for the periods ended March 31, 1997 and 1996 amounted to P$15,517,522 and P$12,043,766 respectively.

(iii) Waste management concessions

These concessions allow the concessionaire to perform services such as collecting and transporting refuse, sweeping streets, maintaining parks, and clearing utility lines. The Group receives payments from various municipalities in return for these waste management services provided. Revenue for these services is recognized in income as earned.

(b) Cash and cash equivalents

The Company considers all highly liquid temporary investments with maturities of three months or less to be cash equivalents.

(c) Investments

Current investments

Current investments include fixed term instruments and government debt securities. These investments have fixed maturities and are valued at their cost plus accrued interest at period end.

Long‑term investments

Long‑term investments consist primarily of permanent investments and real estate. Permanent investments in companies that are less than 50% owned and over which the Group has significant influence are accounted for under the equity method. All other permanent investments in companies are recorded as an investment at cost. Dividends from cost investees are recognized as income as received.

(d) Inventories

Materials and spare parts

Materials and spare parts used in the construction and subway businesses are valued at replacement cost which does not significantly differ from cost at the time of purchase. The estimated total value of this inventory does not exceed its net realizable value.

Construction for third parties

Construction costs on contracts in progress and costs on completed contracts pending approval are included in inventory. These costs include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, and depreciation.

(e) Fixed assets

Machinery and equipment, vehicles, buildings and land acquired prior to July 1, 1992, are recorded at their appraised value as of such date. All other fixed assets are recorded at historical cost. All fixed assets are restated in Argentine Pesos as explained in 1(c) and depreciation is provided using the straight‑line method at the following yearly rates:

Asset Rate(%)

Machinery and equipment 10.00

Vehicles 20.00

Furniture and fixtures 10.00

Buildings 2.00

Subway building improvements 8.33

Other 8.33

The appraisal as of July 1, 1992 increased the carrying value of the fixed assets by P$44,469,325, which was credited to the appraisal revaluation reserve account within shareholders' equity. The depreciation on the appraised value of the fixed assets is charged to the income statement. While, the appraisal revaluation reserve account in shareholders' equity is amortized into income using the same depreciation rate as is applied to the related fixed asset. Further, any remaining revaluation reserve relating to assets disposed of is considered in the gain or loss calculated upon disposal. For the periods ended March 31, 1997 and 1996, the asset revaluation reserve amount amortized into income amounted to P$2,401,708 and P$4,153,321 respectively. At March 31, 1997, the remaining balance in the assets revaluation reserve included within shareholders' equity amounted to P$1,669,014.

Subway improvements in addition to those within the capital investment program are owned by the Company and are capitalized.

Costs (direct materials, direct labor, allocated overheads and subcontractor costs) associated with the construction and/or improvement of highways awarded under concessions are classified as fixed assets. These costs are amortized on a straight line basis over terms not exceeding the remaining concession period.

The carrying value of fixed assets does not exceed their recoverable values, which are based on estimates made by the Group's management.

(f) Goodwill

Goodwill is recorded as the excess of cost over the proportionate share of the shareholders' equity acquired of interests held by others. Goodwill is amortized on a straight line basis over the life of the respective concession contract to which it relates, which does not exceed 20 years.

Upon acquisition of a non‑controlling interest in a minority investee, the excess of the proportionate net book value acquired over the purchase price (negative goodwill) is amortized into income immediately.

(g) Other intangible assets

Other intangible assets include development fees and pre‑operating costs which are valued at historical cost, net of accumulated amortization. These assets are amortized on a straight‑line basis over periods ranging from four to ten years, which do not exceed the term of the concession.

(h) Severance payments

Severance payments made to employees are expensed as incurred. The Group does not contribute to any employee pension plans.

(i) Provisions for litigation, contingencies and allowances

An allowance is recorded for bad debts relating to receivables based on the risk of uncollectability. The allowance is shown as a contra account to the related receivable balance.

The Group is involved in various legal actions which have arisen in the ordinary course of its business. Provisions have been established to cover losses on litigation matters and other contingencies which are both probable of occurring and for which amounts can be reasonably determined.

(j) Maintenance and repair expenses

Maintenance and repair expenses which totaled P$13,168,440 and P$4,650,709 for the periods ended March 31, 1997 and 1996, respectively are expensed as incurred.

(k) Income tax provisions

Income tax provision as of March 31, 1997 and 1996 have been calculated at the statutory 33% and 30% tax rates respectively, and is based upon the current taxable income of each period, as defined by Argentine tax law. The Group does not recognize deferred taxes.

(l) Foreign currency translation

For foreign subsidiaries who prepare their financial statements in the currencies other than the reporting currency, the translation to Argentine Pesos is performed by applying the following procedure:

 The foreign currency financial statements (both balance sheet and income statement) of the controlled or related companies are translated from their local currency to U.S. dollars by applying the official exchange rate as at the end of the periods.

 The dollars are then translated to Pesos by applying the exchange rate set by the Banco de la Nacion Argentina in force at the end of the periods.

 The difference arising on translation of the financial statements is reflected in financing income.

Assets and liabilities denominated in foreign currency are translated at the prevailing exchange rate at period end. Foreign currency transaction gains and losses are recorded within financing results.

3. Cash

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Cash 1,922,026 1,954,043

Cash in Bank 4,543,294 2,639,242

Cash and cash in bank in UTE partnerships 3,239,828 2,054,029

Total 9,705,148 6,647,314

Cash in escrow 1,254,189 1,287,002

4. Receivables

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Currents

Billed and certified contract receivable 35,641,322 17,116,267

Toll road subsidies 14,870,599 4,699,015

Accounts receivable 2,556,991 16,751,884

Notes receivable 10,290,959 20,235,272

Related parties 18,267,153 18,778,749

Trade accounts receivable in UTE partnerships 26,792,568 32,806,686

Total 108,419,592 110,387,873

Allowance for doubtful accounts (2,916,370) (2,367,191)

Total 105,503,222 108,020,682

Non‑current

Accounts receivable 650,735 1,301,470

Notes receivable 2,995,854 8,303,268

Related parties 1,691,047 ---

Trade accounts receivable in UTE partnerships --- 232,881

Total 5,337,636 9,837,619

Included in notes receivable at March 31, 1997 and 1996 are amounts totaling P$10,056,303 and P$26,025,961, respectively, due from two construction contracts. These notes bear interest at 10.25% and 15.18% respectively and are due in monthly installments through July, 1999.

5. Other assets, net

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Current

Value added tax 1,983,906 3,788,267

Related Companies 1,795,060 7,448,081

Due from others 4,172,901 4,812,162

Other 8,384,212 14,744,338

Other assets in UTE partnerships 11,716,129 13,384,013

Total 28,052,208 44,176,861

Allowance for doubtful accounts (2,105,597) (487,000)

Total 25,946,611 43,689,861

Non‑Current

Other assets in UTE partnerships 14,605 3,812,943

Other 3,288,505 104,720

Total 3,303,110 3,917,663

6. Inventory

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Current

Materials and spare parts 10,551,470 8,577,145

Contracts in progress 25,794,416 15,447,202

Advances to suppliers 3,392,137 1,813,094

Inventories in UTE partnerships 4,169,129 7,437,816

Total 43,907,152 33,275,257

Provision for inventory losses (516,683) (257,392)

Total 43,390,469 33,017,865

Non‑Current

Contracts in progress 6,108,025 4,793,962

7. Fixed Assets

The Group's fixed assets consist of the following:

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Non‑Current

Machinery and equipment 65,254,668 67,662,359

Highway concession 75,012,282 60,305,008

Vehicles 18,815,190 18,400,473

Furniture and fixtures 10,792,935 10,138,939

Buildings 8,792,654 7,266,394

Buildings improvements 5,003,352 4,710,873

Rail cars improvements 4,917,327 3,934,894

Other 842,184 400,222

Balance at beginning of the period 189,430,592 172,819,162

Increases 31,982,101 16,459,676

Decreases (4,171,895) (16,106,753)

Subtotal 217,240,798 173,172,085

Accumulated depreciation at beginning of the year (100,649,413) (79,131,310)

Depreciation for the period (19,047,029) (16,976,983)

Subtotal 97,544,356 77,063,792

Land 2,450,090 2,522,472

Rail cars (Note 17(b)) 16,616,955 26,780,040

Total 116,611,401 106,366,304

8. Restricted Assets

The following table summarizes the net book value of fixed assets, investments, and other assets included in the Group's balance sheet which have been pledged as collateral or guarantees and the corresponding debt arrangements.

Debt Amount at Type of

Description Book Value Debt Collateralized March 31, 1997 Guarantee

(Pesos) (Pesos)

Fixed assets

Machinery and equipment 6,494,136 Not payable to vendor 6,649,161 Pledge

Vehicles 2,031,376 Not payable to vendor 1,732,190 Pledge

Total 8,525,512 8,381,351

Investments

Shares in Metrovías 1,140,634 Bank loan 1,602,016 Pledge

Shares in Coviares S.A. 30,995,855 Loan granted to Coviares S.A.(3) 81,334,100 Pledge

Shares in Covicentro S.A. 4,213,444 Loan granted to BRH 10,039,178 Pledge

Shares in Red Vial Centro S.A. 5,544,357 Loan granted to BRH(1) 4,251,178 Pledge

Shares in Covisur S.A. 8,908,732 Loan granted to BRH 4,968,596 Lien

Total 50,803,022 102,195,068

Other assets

Notes receivable and investments 13,692,895 Loan granted to BRH(2) 12,245,408 Pledge

Accounts receivable and cash escrow 12,106,178 Negotiable bonds 19,088,999 Pledge

Total 25,799,073 31,334,407

(1) Comprised of BRH loans from Banco de Galicia and Citibank, both repayable in June and August 1997.

(2) Comprised of BRH loan from Banco Provincia de Buenos Aires, repayable in installments through July 1999, as well as various other loans.

(3) Represents a pledge of 100% of Caminos Australes shares to secure repayment of BRH's proportionate share of the loan.

Restrictions in equity method investees:

Included within the financial statements of Coviares S.A. and Covimet S.A., equity method highway management investees, are the following disclosures:

Coviares S.A. has conveyed the rights to 30% of the toll and other revenues related to the concessioned Buenos Aires--La Plata highway, as a guarantee for a syndicated bank loan totaling US$81,334,100. Further, Coviares, S.A. is restricted from paying dividends or any other distributions throughout the loan period.

Covimet S.A. has pledged its shares in Coviares S.A. and its right to a return of irrevocable capital contributions with respect to not yet authorized capital increases as collateral for the US$81,334,100 syndicated bank loan described above. In addition, Covimet S.A. guarantees the payment of the obligation.

9. Investments

The Group's investments consist of the following:

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Current

Fixed rate investments 2,108,717 6,232,196

Loans to related parties -- 410,096

Government bonds 1,293,109 2,000,000

Investments held by UTE partnerships 4,273,633 1,572,384

Total 7,675,459 10,214,676

Classified as

Cash equivalents 4,373,482 4,347,907

Investments 3,301,977 5,866,769

Total 7,675,459 10,214,676

Non‑Current investments

Real Estate

Building at Las Heras 294--Córdoba 7,187 8,555

Land at Las Heras 294--Córdoba 6,835 6,835

Vélez Sarfield 372 / 378--Córdoba 86,744 88,197

Negotiable Bonds -- 1,195,138

Investments held by UTE partnerships 4,839,275 1,609,217

Investment in associated companies 98,064,424 78,002,349

Total 103,004,465 80,910,291

As of March 31, the Group's investments in associated companies are as follows:

Ownership Investment

Percentage(1) Balance

Investments in associated Companies 1997 1996 1997 1996

(Pesos)

Taym S.A. 50.00 50.00 703,444 572,671

Grupo Concesionario del Oeste S.A. 25.50 34.00 20,241,270 20,663,404

Concanor S.A. 38.46 38.46 886,510 940,358

Covinorte S.A. 38.47 38.47 1,787,733 2,017,781

Covisur S.A. 25.00 25.00 8,908,732 6,193,245

Coviares S.A. 8.78 8.78 30,995,855 25,710,087

Covimet S.A. 16.23 16.23 17,822,646 18,962,378

Aufe S.A. 24.00 24.00 2,465,389 2,663,061

Servicios Urbanos de Puebla 50.00 50.00 273,720 273,720

Lismore International Limited (2) 31.80 13,890,936 --

Others 88,189 5,644

Total 98,064,424 78,002,349

(1) Represents the direct interest of the subholding company in the relevant subsidiary.

(2) In March 1997, the Group acquired 31.6% of the shares of Lismore International Limited. 15.48% of that acquisition is subject to the performance of the preliminary agreement with Polledo S.A. See Note 19(a).

10. Accounts Payable

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Current

Suppliers 48,494,945 25,052,320

Notes payable to vendors 9,013,849 7,552,023

Related parties 1,558,502 1,856,846

Guarantee deposits from subcontractors 1,163,337 708,823

Other 6,076,461 1,610,668

Trade payables in UTE partnerships 17,502,874 12,363,566

Total 83,809,968 49,144,246

Non‑Current

Customer advances (see Note 17(b)) 9,636,778 5,006,606

Note payable to vendors 4,496,587 3,022,595

Other 1,046,485 1,381,016

Trade payables in UTE partnerships 1,098,128 843,033

Total 16,277,978 10,253,250

The notes payable to vendors refers to amounts due to vendors for the purchase of equipment. The notes have variable interest rates and due dates ranging from April 1997 to December 2000.

11. Loans and other debt

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Loans:

Current

Bank overdrafts 694,707 4,819,509

Bank loans 72,666,877 60,545,873

Bank debts UTE partnerships 1,707,057 5,686,588

Total 75,068,641 71,051,970

Non‑current

Bank loans 23,034,265 29,591,569

Bank debts UTE partnerships 1,222,222 772,640

Total 24,256,487 30,364,209

Other debt:

Current

Commercial paper 15,194,919 --

Other -- 1,711,878

Total 15,194,919 1,711,878

12. Other liabilities

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Current

Related Parties 5,785,239 27,793,401

Prepaid subway tolls 2,300,795 1,898,734

Other 16,637,035 11,420,260

Payables in UTE partnerships 6,098,537 4,308,378

Total 30,821,606 45,420,773

Non‑current

Deferred highway toll revenue 47,011,268 43,487,839

Related Parties -- 1,520,925

Other 3,531,671 1,730,059

Payables in UTE partnerships 456,069 493,267

Total 50,999,008 47,232,090

Included within Other is the amount due on installment notes for the 16.7% purchase of Metrovías in 1995. The total amounts outstanding at March 31, 1997 and 1996 were P$1,614,125 and P$4,437,377 respectively.

13. Shareholders' equity

Changes in shareholders' equity for each of the periods ended March 31 were as follows:

1997 1996

(Pesos) (Pesos)

Balance at beginning of the period 140,872,833 123,531,454

Assumed contributions from shareholders(1) 610,842 177,594

Reversal of revaluation reserve (2,401,708) (4,153,321)

Net income for the period 14,647,818 2,984,648

Reduction of capital contribution(2) (70,000,000) --

Balance at end of the period 83,729,785 122,540,375

(1) Include adjustments as described in Note 1(a) and should not be interpreted to be an indication of future dividend levels.

(2) At the Clisa shareholders' meeting on March 10, 1997, the shareholders authorized a capital reduction in the amount of P$70,000,000, of which P$68,320,000 is payable to Roggio S.A. and P$1,680,000 is payable to Inversar S.A. In addition, it was agreed that such capital reduction be applied exclusively to the shares subscribed by Roggio S.A. and Inversar S.A. from the capitalization of their credits arising from the share transfer to the Company authorized by the Extraordinary General Meeting of Shareholders held on December 13, 1996, in accordance with the portion of the total shares subscribed to by each of them.

On April 24, 1997, the Company began to publish edicts, and the opposition period finished on May 13, 1997.

As of March 31, 1997, capital stock totals P$70,080,000 and consists of the following:

Number of Shares Share Value Voting

Class A 4,800 P$1.00 5 votes per share

Class B 70,075,200 P$1.00 1 vote per share

Total 70,080,000

14. Limitation on profit distributions

Argentine law No. 19,550 requires individual companies to appropriate 5% of each year's net income to a legal reserve until the total amount of the reserve equals 20% of its authorized and outstanding capital stock.

As established by the respective concession contracts, highway concessionaires, Covisur S.A., Concanor S.A., Covicentro S.A., Covinorte S.A., and Red Vial Centro S.A. are required to maintain a minimum capital stock amount equal to the net accumulated highway investment to date plus the amount of net highway investment costs expected to be incurred for the following year.

15. Financing income (expense)

March 31, March 31,

1997 1996

(Pesos) (Pesos)

Generated by assets

Interest 9,601,912 10,913,829

Effects of inflation -- (1,029,531)

Exchange difference 3,591 (13,606)

Total 9,605,503 9,870,692

Generated by liabilities

Interest (14,252,929) (21,564,106)

Effects of inflation -- 1,350,347

Exchange difference (487,078) 26,654

Total (14,740,007) (20,187,105)

Financing expense, net (5,134,504) (10,316,413)

16. Transactions with controlled and related companies

Amount included in

Income Statement for the Balance due (to)

nine-month period ended from Group

March 31, at March 31, (1)

Related parties Description of transaction 1997 1996 1997 1996

(Pesos) (Pesos) (Pesos) (Pesos)

Roggio S.A. Purchase net -- -- -- --

Loans from (to) Group 1,425,310 5,336,844 (4,573,492) (11,544.169)

Grupo Concesionario Sales 34,287,467 914,412 (1,387,372) 40,123

del Oeste S.A. Loan Facility -- -- (3,454,431) (179,165)

Pending capital contributions -- -- -- (6,534,563)

Taym S.A. Sales 206,263 453,759 163,664 567,735

Purchase (4,269,324) (3,547,920) (980,138) (421,113)

Loans from (to) Group -- -- 145,000 (305,283)

Concanor S.A. Sales 349,318 238,728 63,448 58,785

Loans from (to) Group -- -- (667,046) (467,911)

Covinorte S.A. Sales 918,734 1,189,892 5,134 80,279

Loans from (to) Group -- -- 439 --

Covisur S.A. Sales 9,372,313 7,296,028 1,234,147 4,056,005

Loans from (to) Group -- -- 82,500 165,000

Coviares S.A. Sales 1,233,556 1,079,943 295,370 2,822,228

Loans from (to) Group -- -- 1,944,455 1,611,355

Covimet S.A. Loans from (to) Group -- -- (333,108) (2,421,978)

Servicios del Centro

S.A. Loans from (to) Group -- -- -- --

Catrel S.A. Sales 750,000 3,000,000 929,888 3,630,000

Loans from (to) Group -- -- -- --

Sicsa S.A. Purchase net (1,106,892) (1,926,507) -- 90,568

Empalme S.A. Sales 1,772,349 384,482 742,662 1,122,043

Intelcel S.A. Sales -- -- -- 2,007

Aufe S.A. Sales 3,589 263,634 448 67,411

Loans from (to) Group -- -- 211,447 (342,709)

Banco del Suquía S.A. Sales (2,318,690) (2,754,386) (503,779) (543,439)

Directors and Advances -- -- 122,032 (864,881)

Shareholders

Other related parties Sales (221,768) 344,690 453,359 (174,784)

Loans from (to) Group -- -- 749,568 4,352,046

1. Loans from (to) Group represent net amounts owed between the Group and such related parties.

In 1995, Metrovías entered into two contracts, one with a minority shareholder for services related to the development of Metrovías' commercial plan and another with SICSA to provide services related to the administration of the capital investment program. The total combined fees paid to the minority shareholder and SICSA for the nine‑month periods ended March 31, 1997 and 1996 amounted to P$2,328,013 and P$3,917,029, respectively. SICSA transferred its rights on these contracts to BRH during October, 1996.

17. Metrovías concession

(a) Spare parts

In accordance with the concession contract, Metrovías has been granted the right to use the existing subway fixed assets and any other improvements made as a result of the capital investment program, all of which are owned by the government. Included in the assets were spare parts necessary for the repair, upkeep and improvement of the subway, with an approximate value of P$14,500,000. At the end of the concession period, all original spare parts received and any replacement spare parts will be returned to the government in a condition and at a level to be sufficient to operate the subway under normal conditions for six months. The Group reflects spare parts on the balance sheet only to the extent that the total spare parts inventory is in excess of the estimated spare parts to be returned to the government.

(b) Purchase of railcars

In April 1994, Metrovías purchased 113 used electric railcars for installation and use in Line B of the Buenos Aires subway system. The railcars were purchased on behalf of MEYOSP, the Argentine Ministry of Economy and Public Works, under the terms of the capital investment program, and also on behalf of the Municipality of the City of Buenos Aires. Metrovías obtained possession and title of the railcars and upon payment of the debt obligations incurred, will transfer title of such assets to MEYOSP and the Municipality of the City of Buenos Aires. Metrovías retains the right to use the railcars throughout the term of the concession.

The total purchase price, including the cost of the railcars and related expenses, amounted to P$33,600,000. The amount purchased under the capital investment program, representing approximately 55% of the total purchase price, was financed through a loan from Eximbank to Metrovías, denominated in Japanese yen. Under the terms of the arrangement, the government reimburses Metrovías for interest and principal payments. The remainder of the purchase price was paid by Metrovías which was reimbursed in installments by the Municipality of the City of Buenos Aires. In May 1996, Metrovías agreed to purchase 18 additional electric railcars owned by the Marubeni Corporation at a total cost of approximately US$5,770,000.

The railcars and the related costs have been classified as fixed assets. These assets are not being depreciated as they will be transferred to the government agencies upon full payment of the obligations. The reimbursements Metrovías receives from the Argentine government or Municipality of the City of Buenos Aires are classified as customer advances within accounts payable. As of March 31, 1997, the Municipality of the City of Buenos Aires has reimbursed Metrovías for their portion of the capital improvements, and therefore these advances and related fixed assets have been removed from the balance sheet. As of March 31, 1997, the fixed assets reflected represent the railcars purchased under the capital investment program for MEYOSP. In addition as of March 31, 1997, the balance due to Eximbank amounted to P$8,096,323 (reflected within loans) and the reimbursements received to date from MEYOSP for payments due on the Eximbank loan (reflected as customer advances) totaled P$9,636,778.

18. Contingencies and commitments

(a) Contingent debt

Amount of

debt under Guarantor

guarantee Company

(Pesos)

Proportional guarantee of syndicate loan in favor of

Coviares S.A. with an outstanding balance totaling

US$82.3 million (see note 13) 8,462,000 BRH

Joint guarantee of Coviares shareholders' for the

performance of the contract 1,560,615 BRH

Guarantee for loan issued by Citibank to Concanor S.A. 423,950 Caminos

Joint and several financing for Coviares S.A.'s

equipment purchases 2,290,933 BRH

Joint and several guarantee for loans issued by Banco

Quilmes to Coviares S.A. 811,350 Caminos

Guarantee for loan issued by Citibank to Covinorte S.A. 989,477 Caminos

Banade for loans to Grancor S.A., an affiliate 3,833,294 BRH

Guarantees to banks for Emprigas S.A., an affiliate 511,053 BRH

Guarantees to Banco Provincial de Buenos Aires for

loans to Covisur S.A. 6,699,138 BRH

Guarantee to Shell Argentina for advance to Grupo

Concesionario del Oeste S.A. 7,012,890 BRH

Guarantee for loan issued by Sociedad Militar to

Catrel S.A. 5,251,389 BRH

Guarantee for loan issued by Banco General de Negocios

S.A. to Coviares S.A. 811,350 BRH

Guarantee for ex‑Municipality of Buenos Aires 500,000 BRH

Joint and several guarantee to selling shareholders of

Catrel S.A. in connection with the sale of their

interests to Relevamiento Catastral S.A., an affiliate 1,200,000 BRH

Total 40,357,439

(b) Legal Matters

Arbitration of contract Collector Viña del Mar--Valparaíso Collector Sewage System

On January 4, 1995, Constructora Consorcio Oceánico Ltda. (Consorcio Oceanico), in which BRH participates jointly with Companía Brasileira de Projetos e Obras, reported the cancellation of the contract for the construction of Collector Viña del Mar ‑ Valparaíso sewage system, which was being constructed for Esval S.A (Esval), a Chilean government agency. The cause for such cancellation, as expressed by Consorcio Oceánico, was the failure on the part of Esval to fulfill the contract terms.

As required by the contract, the resolution of the matter is to be decided through arbitration. Consorcio Oceánico demanded the legal termination of the contract as a result of Esval's default, along with damage compensation of P$16,275,760. Esval requested restitution for construction advances and damage compensation totaling P$26,229,687. The opinions of the legal advisors is in favor of the actions taken by Consorcio Oceánico as they believe that the company complied with the requirements of the contract and law. As of this date, both parties have responded to the demands and the matter is in a period of review with a decision expected by March 1997. The Group has not recognized any provision in the combined financial statements for this matter. The loss on the contract, which has been reflected in the results of operations for the years ended June 30, 1995 and 1994, totaled P$4,651,825 and P$544,183, respectively.

Burlington Northern Arbitration

BRH is currently involved in arbitration proceedings with Burlington Northern as a result of an agreement entered into on September 16, 1993 (the "Burlington Northern Agreement") pursuant to which Burlington Northern agreed to transfer all of its rights and obligations as a shareholder of Metrovías to BRH in the event that Metrovías was awarded the concession to operate the Buenos Aires Subway and the Urquiza Line. This transfer was in exchange for payment of the amount of Burlington Northern's stock subscription in Metrovías, reimbursement of US$1,275,000 of expenses and indemnification of Burlington Northern against any claims made by third parties. In December 1995 the transfer was initiated by Burlington Northern, however BRH informed Burlington Northern that the Guarantees requested were not required as no situation giving rise to the obligation to deliver the guarantees had occurred.

In January 1996, Burlington Northern declared the Burlington Northern Agreement had terminated because BRH had not complied with its obligation thereunder. Burlington Northern submitted to arbitration a claim against BRH for damages derived from such termination. BRH answered Burlington Northern's claim and counterclaimed. Burlington Northern has been notified of BRH's counterclaim and its response is currently pending.

The share rights and obligations subject to this arbitration are not considered by CLISA group as part of its share ownership on Metrovías as described in note 1(b).

(c) Contingency in equity method investee

Included in the notes to the financial statements as of December 31, 1996 of Coviares S.A. , an equity method investee is the following:

The tax authority of the Province of Buenos Aires has requested that Coviares S.A., the concessionaire, pay a stamp tax related to the concession contract entered into between Coviares S.A. and the national government. The total tax, plus penalties, interest and other charges totals P$44,903,992 at December 31, 1996. Coviares S.A. is presently contesting the above in the Supreme Court of the Province of Buenos Aires. Coviares S.A.'s management believes that since the concession was granted by the national government, it should not be subject to payment of the tax as the laws of the Province of Buenos Aires strictly govern concessions granted by provinces or municipalities. As a result of the above, and based on the opinion of Coviares S.A.'s legal advisors, Coviares S.A.'s management believes the final decision will be favorable and therefore no provision has been recorded in the financial statements.

(d) General

Metrovías is involved in certain legal proceedings most of which involve accidents caused by the derailment or decoupling of cars. As of December 31, 1996, claims filed against Metrovías for accidents which occurred at the Dorrego Station (Line B), the Pueyrredon Station (Line D), on the Urquiza Line and on the Premetro line, amount to US$6.3 million. Metrovías is also involved in litigation relating to a railroad crossing accident in which two people died. The amount of such claims is US$500,000. The Company has established provisions for amounts exceeding its insurance coverage.

The Company is involved in certain legal proceeding related to accidents caused by stray animals on the highways that it manages. The aggregate amount of such claims is US$8.8 million. The Company believes that it is not liable for any of these claims.

The Company is involved in several legal actions arising in the ordinary course of business, many of which involve labor‑related proceedings. The Company does not believe that the outcome of any such litigation or the cumulative effect of all such legal actions considered as a whole would have a material adverse effect on the Company's financial condition or future results of operations as a whole.

19. Subsequent Events

(a) Polledo acquisition.

On January 7, 1997, the Company entered into a preliminary agreement with the controlling shareholders of Polledo S.A. (Polledo), whose principal operations are construction and equity investments in highway concessions. Under the terms of the arrangement, the Company will merge its equity interests in highway concessionaires Covimet S.A. and Coviares S.A. and the Eriday UTE, a civil construction joint venture, into Polledo. In exchange, it will receive newly authorized shares in Polledo approximating 57.2% of the combined share capital structure. The consummation of the above is subject to certain conditions and approvals which are expected to be completed by June 1997. In addition, under the terms of the agreement, the majority shareholder of Polledo have a put option valued approximately at P$14 million to sell their interests in Polledo to CLISA should the above merger not be consummated. Under the terms of the agreement, approximately P$20.5 million of consolidated indebtedness and approximately P$58.6 million of consolidated total assets of Polledo would be acquired by the Company upon consummation of the merger.

(b) Business developments

Subsequent to March 31, 1997, BRH has obtained the following construction contracts:

 Collector Northeast Paraná Sector II--sewage system, with a participation of 70%.

 Construction of a section National Road number 34, between the provinces of Santa Fe and Santiago del Estero.

Additionally, BRH recently has obtained waste management concessions in the city of Santa Fe, Argentina and the Municipality of the Coast, Province of Buenos Aires, Argentina. The Company's waste management concession in the city of Buenos Aires expired in December 1996. Buenos Aires has received bids for four‑year concessions for five collection zones, rather than the three currently existing. Under this plan, while a bidder might bid on more than one of these zones, no bidder may be granted a concession for more than one. The Company has submitted bids for each of the four concessions, which will be privately managed.

20. Segment Data

The Group is primarily engaged in four business segments; mass transportation management, waste management, toll road management and construction. A summary of the Group's operation by business segment is as follows:

Mass Adjustments

Transportation Waste Toll Road and

Management Management Management Construction eliminiation Total

1997

Sales 131,066,408 51,360,584 18,014,891 123,753,859 -- 324,195,742

Intersegment revenues and other -- -- -- 11,415,788 (11,415,788) --

Combined net sales 131,066,408 51,360,584 18,014,891 135,169,647 (11,415,788) 324,195,742

Operating income 2,882,012 9,825,569 919,109 9,139,143 (1,949,973) 20,815,860

Total assets 105,055,866 38,694,292 151,378,787 200,297,818 (49,056,659) 446,370,104

Capital expenditure 7,416,348 3,195,993 10,971,662 7,312,475 28,896,478

Depreciation and

amortization(*) 4,087,322 737,701 8,261,773 5,960,233 -- 19,047,029

1996

Sales 100,971,830 45,625,001 13,299,123 83,047,071 -- 242,943,025

Intersegment revenues and other -- -- -- 6,404,398 (6,404,398) --

Combined net sales 100,971,830 45,625,001 13,299,123 89,451,469 (6,404,398) 242,943,025

Operating income 1,592,981 9,129,388 1,502,525 (1,792,003) (594,633) 9,838,258

Total assets 68,208,938 32,412,291 145,696,335 223,256,878 (40,211,008) 429,363,434

Capital expenditure 1,852,747 734,600 11,762,230 2,024,614 -- 16,374,191

Depreciation and amortization(*) 3,163,456 593,855 6,271,536 6,948,136 -- 16,976,983

(*) Depreciation and amortization on fixed assets only.

21. Asset and liabilities classified according to their collection or payment maturities

Assets Liabilities Other

Terms Receivables Loans Liabilities(1)

(Pesos) (Pesos) (Pesos)

Without a stated term 15,163,105 -- 15,517,291

Total 15,163,105 -- 15,517,291

With a stated term

Overdue up to three months 22,422,838 46,338 14,961,705

From three to six months 9,418,372 -- 2,518,630

From six to nine months 7,361,951 -- --

From nine to twelve months 4,020,036 -- 600

From one to two years 5,136,453 -- 26,524

From two to three years 653,675 -- 225,973

More than three years 28,266 -- --

Subtotal 49,041,591 46,338 17,733,432

Not yet matured

Up to three months 52,444,933 41,654,580 95,337,720

From three to six months 7,388,675 17,982,490 8,996,676

From six to nine months 3,981,903 8,718,387 7,015,717

From nine to twelve months 3,429,626 6,666,846 6,093,155

From one to two years 6,731,262 20,831,562 18,104,661

From two to three years 150,019 2,283,284 2,682,628

More than three years 1,759,465 1,141,641 652,598

Subtotal 75,885,883 99,278,790 138,883,155

Total 124,927,474 99,325,128 156,616,587

Total 140,090,579 99,325,128 172,133,878

(1) Does not include P$47,011,268 related to deferred highway toll revenue

22. Other expenses

Other

Production Administration operating Totals at March 31,

Items Costs expenses expenses 1997 1996

(Pesos) (Pesos) (Pesos) (Pesos) (Pesos)

Exploitation Cost -- 288,383 -- 288,383 303,590

Freight 3,769,096 86,416 -- 3,855,512 3,437,313

Subcontracted 59,325,628 1,380,444 1,923,720 62,629,792 17,184,843

Salaries and benefits 73,399,099 16,350,418 6,170,637 95,920,154 80,581,649

Other professional fees 10,008,206 6,729,996 274,088 17,012,290 9,331,675

Bid costs 72,776 176,522 104,550 353,848 317,031

Taxes and contributions 7,554,846 2,161,811 1,620,603 11,337,260 6,832,757

Publicity 33,361 412,192 3,438 448,991 347,890

Depreciation of fixed assets 15,743,033 984,890 2,319,106 19,047,029 16,976,983

Reversal of revaluation reserve (2,179,452) -- -- (2,179,452) (3,083,532)

Amortization of building -- -- 2,115 2,115 2,116

Amortization of intangible assets 3,189,576 -- 1,177,698 4,367,274 4,561,095

Maintenance costs 11,752,987 263,086 1,152,368 13,168,441 4,650,709

Travel expenses 733,439 445,460 102,602 1,281,501 1,251,890

Insurance 3,512,624 696,355 232,061 4,441,040 5,375,503

Water and energy 6,634,203 308,089 79,199 7,021,491 7,760,258

Telephone, telex and

correspondence 350,317 336,462 155,998 842,777 1,178,363

Rents 7,248,022 1,225,306 134,964 8,608,292 9,101,972

Printing and supplies 241,977 141,381 31,764 415,122 334,203

Various 9,102,697 4,719,262 1,087,598 14,909,557 12,054,400

UTE partnerships 1,295,774 7,196 574,104 1,877,074 8,929,562

General Expenses 1,780,092 193,460 1,082,660 3,056,212 3,026,490

Fund Collections -- 2,040,900 -- 2,040,900 1,955,930

Penalties, lawsuit and fires 1,743,058 -- -- 1,743,058 1,523,691

Provisions and allowances 243,202 1,341,694 -- 1,584,896 --

Uncollectible accounts 310,471 309,911 185,147 805,529 --

Donations and subsidies -- 7,940 -- 7,940 11,200

Security and supervision 631,013 246,483 1,970,806 2,848,301 2,717,670

Materials and spare parts 8,463,132 153,458 22,097 8,638,687 20,606,616

Totals at March 31, 1997 224,959,177 41,007,515 20,407,323 286,374,015 --

Totals at March 31, 1996 162,074,093 37,435,669 17,762,105 -- 217,271,867

REPORT OF INDEPENDENT ACCOUNTANTS

To the shareholders of

CLISA--Compañía Latinoamericana de Infraestructura y Servicios S.A.

We have audited the combined balance sheets of CLISA--Compañía Latinoamericana de Infraestructura & Servicios, S.A. and Subsidiaries ("the Company") as of June 30, 1996 and 1995, and the related combined statements of income and cash flows for each of the three years in the period ended June 30, 1996, 1995 and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements supporting the Company's investment in Coviares S.A. and Covimet S.A., which are accounted for as equity method investees, representing P$43,717,754 and P$42,167,563 of combined total assets as of June 30, 1996 and 1995, respectively, and its share of the equity in earnings of such investees of P$2,764,396, P$796,888, and P$3,235,938, for each of the three years in the period ended June 30, 1996, 1995 and 1994, respectively. These statements were audited by Price Waterhouse, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the report of the other auditors.

We conducted our audits in accordance with generally accepted auditing standards in Argentina, which are substantially the same as those followed 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 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 and the reports of the other auditors provide a reasonable basis for our opinion.

Effective September 1, 1995, in accordance with a decree of the Argentine government and in accordance with generally accepted accounting principles in Argentina, general price‑level accounting which reflects changes in the purchasing power of the Peso in the historical financial statements was discontinued (see Note 1(c)). Accordingly, the Company's August 31, 1995 account balances adjusted to the general purchasing power of the Peso on August 31, 1995 became the historical cost basis for subsequent accounting and reporting and no gain or loss from exposure to inflation has been reflected subsequent to August 31, 1995. No financial statements for any period subsequent to August 31, 1995 have been restated.

The accompanying combined financial statements were prepared to present the financial position, results of operations and cash flows of the construction, toll road management, mass transportation and waste management businesses of the Company on the basis described in Note 1(a). Accordingly these financial statements are not intended to be a complete presentation of the historical consolidated financial position, results of operations and cash flows of the above mentioned businesses of the Company.

In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the combined financial position of CLISA--Compañía Latinoamericana de Infraestructura & Servicios, S.A. as of June 30, 1996 and 1995 and the combined results of its operations and cash flows for each of the three years ended June 30, 1996, 1995 and 1994 in conformity with generally accepted accounting principles in Argentina.

Córdoba, Argentina COOPERS & LYBRAND

April 30, 1997 HARTENECK, LOPEZ Y CIA.

Eduardo H. Gañan

Partner

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Combined Balance Sheets as at June 30, 1996 and 1995

(In Argentine Pesos adjusted for price level changes

and expressed in constant Pesos for periods prior to September 1, 1995)

1996 1995

ASSETS

Current Assets

Cash (Note 4) 6,454,234 4,991,538

Cash equivalents (Note 8) 4,193,810 6,328,158

Cash in escrow (Note 4) 1,850,001 --

Investments (Note 8) 6,551,712 3,679,500

Receivables, net (Note 5) 102,917,413 106,128,617

Other assets, net (Note 6) 47,619,408 52,566,019

Inventory (Note 7) 30,205,122 38,043,421

Fixed assets to be disposed of (Note 21(a)) 395,119 --

Total Current Assets 200,186,819 211,737,253

Non‑Current Assets

Receivables (Note 5) 11,811,709 13,535,854

Other assets (Note 6) 147,190 890,791

Inventory (Note 7) 5,376,638 5,053,511

Investments (Note 8) 80,482,991 76,377,931

Fixed assets, net (Note 21(a)) 107,848,193 122,990,364

Intangible assets, net (Note 21(b)) 21,961,740 19,160,218

Total Non‑Current Assets 227,628,461 238,008,669

TOTAL ASSETS 427,815,280 449,745,922

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Accounts payable (Note 9) 56,142,099 69,388,311

Loans (Note 10) 67,580,229 93,296,553

Income and other taxes 7,526,851 8,668,704

Salaries and social security payable 10,676,045 13,731,338

Other liabilities (Note 11) 23,440,743 4,767,300

Total Current Liabilities 165,365,967 189,852,206

Non‑Current Liabilities

Accounts payable (Note 9) 6,793,913 16,697,661

Loans (Note 10) 31,882,295 26,372,565

Income and other taxes 1,265,751 2,395,905

Provisions and allowances (Note 21(d)) 14,238,117 8,757,131

Other liabilities (Note 11) 42,565,442 61,166,572

Total Non‑Current Liabilities 96,745,518 115,389,834

TOTAL LIABILITIES 262,111,485 305,242,040

Minority interest 24,830,962 20,972,428

SHAREHOLDERS' EQUITY (Note 12) 140,872,833 123,531,454

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 427,815,280 449,745,922

The accompanying notes are an integral part of these combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Combined Statements of Income

for the years ended June 30, 1996, 1995 and 1994

(In Argentine Pesos adjusted for price level changes

and expressed in constant Pesos for periods prior to September 1, 1995)

1996 1995 1994

Sales 336,207,824 429,262,592 302,961,425

Cost of sales (Note 21(e)) (249,803,115) (319,706,048) (214,603,353)

Gross profit 86,404,709 109,556,544 88,358,072

Administrative expenses (Note 21(g)) (48,999,735) (64,824,656) (43,920,723)

Other operating expenses (Note 21(g)) (23,943,098) (32,370,290) (15,778,859)

Operating income 13,461,876 12,361,598 28,658,490

Other income, net 2,923,105 4,212,401 1,407,682

Income from permanent investments 3,107,131 4,047,910 4,688,171

Financing income (expense):

generated by assets (Note 15) 15,049,158 (8,892,265) 7,305,746

generated by liabilities (Note 15) (24,429,087) 5,089,039 (3,724,808)

Income before taxes and

minority interest 10,112,183 16,818,683 38,335,281

Income tax (418,355) (5,166,287) (8,695,930)

Minority interest (4,019,845) (1,941,087) (4,269,957)

Net income 5,673,983 9,711,309 25,369,394

The accompanying notes are an integral part of these combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Combined Statements of Cash Flows

for the years ended June 30, 1996, 1995 and 1994

(In Argentine Pesos adjusted for price level changes

and expressed in constant Pesos for periods prior to September 1, 1995)

1996 1995 1994

Cash flows from operating activities:

Net income 5,673,983 9,711,309 25,369,394

Adjustments to reconcile net income to

net cash from operating activities:

Depreciation and amortization 31,732,702 26,329,398 20,265,894

Amortization of deferred highway toll

revenues 5,511,740 10,714,276 10,421,654

Minority interest 4,019,845 1,941,087 4,269,957

Loss from sale of fixed assets 44,801 976,755 1,056,447

(Gain) from sale of equity

investments (1,041,294) -- --

Reversal of revaluation reserve (5,853,605) (10,826,342) (8,947,799)

Income from permanent investments (3,107,131) (4,047,910) (4,688,171)

Changes in operating assets and

liabilities:

Inventories 8,894,153 8,490,598 (20,561,297)

Provisions and allowances 7,061,400 5,971,233 184,644

Receivables (1,940,510) (44,136,558) (23,633,541)

Accounts payable (18,556,265) 26,538,523 2,279,118

Net cash provided by operating activities 32,439,819 31,662,369 6,016,300

Cash flows from investing activities:

Purchase of fixed assets (23,459,401) (32,131,628) (20,633,142)

Increase in intangible assets (2,122,424) (7,778,838) (2,147,843)

Increase in other investments (9,663,004) (5,422,340) (16,772,859)

Proceeds from the sale of fixed assets 2,656,059 5,642,069 747,137

Other -- 910,569 --

Net cash used in investing activities (32,588,770) (38,780,168) (38,806,707)

Cash flows from financing activities:

Increase in other assets (276,948) (68,074,648) (10,777,548)

Increase (decrease) in other liabilities (1,803,889) 3,887,266 465,195

Shareholder contributions 1,054,629 1,928,736 301,910

Assumed distributions to shareholders 3,597,569 (11,239,832) 1,057,374

Payments of cash dividends (706,350) (536,052) --

Proceeds from issuance of debt (2,387,712) 80,627,194 40,265,039

Net cash provided by (used in) financing

activities (522,701) 6,592,664 31,311,970

Net increase (decrease) in cash and

cash equivalents (671,652) (525,135) (1,478,437)

Cash and cash equivalents at the

beginning of the year 11,319,696 11,844,831 13,323,268

Cash and cash equivalents at the end

of the year 10,648,044 11,319,696 11,844,831

The accompanying notes are an integral part of these combined financial statements.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Combined Financial Statements

For the years ended June 30, 1996, 1995 and 1994

1. Preparation of financial statements

(a) Basis of presentation

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. ("CLISA" or the "Company"), which is 97.6% owned by Roggio S.A., was organized as a "sociedad anonima" under the laws of Argentina in October 1996. CLISA and its subsidiaries are referred to collectively hereinafter as the "Group" or "CLISA Group." The businesses combined for the purposes of this presentation were not legal subsidiaries of CLISA as of June 30, 1996. As of December 31, 1996, all businesses combined have become legal subsidiaries of CLISA based on the ownership percentages indicated herein.

The Company, based in Argentina, conducts its business through two direct subsidiaries: Benito Roggio E Hijos S.A. ("BRH") and Caminos Australes S.A. ("Caminos"). These subsidiaries of CLISA through their respective operations and investments are primarily engaged in four major operating activities: mass transportation management, waste management, toll road management, and construction. The Company conducts the majority of its operations in Argentina, with some operations in Uruguay, Mexico, Chile, and Paraguay.

These financial statements present the combined assets and liabilities and results of operations of the CLISA Group at their historical amounts and include adjustments based on certain assumptions as described below. These assumptions and related adjustments, are in the view of management, necessary to present the financial position, results of operations and cash flows as if the Group had operated on a stand alone basis for the periods presented. The combined financial statements however, are not necessarily indicative of the financial position, results of operations and cash flows in the future or what would have been attained had the Group operated independently.

All significant intercompany transactions between the combined companies of the Group have been eliminated in the combination.

The adjustments and underlying assumptions upon which the combined financial statements are based are as follows:

Roggio restructuring in 1994

Prior to September 1994, various diverse business activities of the Roggio family were carried out through BRH. In September 1994, certain business lines such as banking, real estate and energy were divested from BRH and placed into separate holding companies majority owned by Roggio S.A. Consequently, all assets, liabilities and allocated equity related to these business lines were transferred out of BRH as of September 1994. For the purposes of this presentation, the restructuring has been given effect as of July 1, 1994.

Administrative expenses incurred on behalf of affiliates

For the year ended June 30, 1995 and 1994, BRH incurred certain administrative expenses, primarily salary related, on behalf of Roggio S.A. affiliates divested in 1994. As these expenses related to entities not included in the CLISA Group combined financial statements, they have been excluded from the combined financial statements.

Corporate expenses incurred by parent

During fiscal year 1996, Roggio S.A. did not allocate certain corporate expenses to the Group, primarily salary related costs, incurred on the Group's behalf. As part of the carve out adjustments these costs have been allocated to CLISA and included in the fiscal year 1996 combined financial statements of the CLISA Group.

Permanent investments

Two equity method investees of the Group, Covisur S.A. and Grupo Concesionario del Oeste S.A. ("GCO") have been accounted for utilizing financial statement information for the twelve‑month period ended March 31. In the opinion of management, there are no significant variations for the period April 1 through June 30, 1996 and 1995 which would require adjustment to or additional disclosure in these combined financial statements.

The income from permanent investments and investments in all other associated companies accounted for under the equity method have been recorded based on the equity method investees' financial statements using twelve‑month information as at and for the years ending June 30, 1996 and 1995.

During 1996, BRH's investments in certain associated companies which had been accounted for under the equity method were sold to Roggio S.A. Accordingly, these investments have been excluded from the combined financial statements for all periods presented.

Amounts to be paid to shareholders as a result of formation of CLISA

Upon formation of CLISA, Roggio S.A. and a minority shareholder of BRH and Caminos contributed their entire interests in these companies in exchange for a similar proportionate interest in CLISA which results in a liability of P$18.4 million, which partially offsets P$25.6 million in debts owed by Roggio S.A. to CLISA.

Other carve out adjustments

The tax effect of the above adjustments has been calculated at the effective tax rate for each period. Further, minority interest has been adjusted for the proportionate share of the adjustments.

Shareholders' equity

The shareholders' equity included in the combined financial statements represents the historical shareholders' equity of BRH and Caminos, and has been adjusted to give effect to the carve out adjustments previously described and the formation of CLISA as a legal entity.

Pro‑rata consolidation of UTEs

The Group proportionately consolidates its investments in Union Transitoria de Empresas (UTE). An UTE is similar to a business partnership in that it represents a contractual arrangement between or among separate entities formed in accordance with the Argentine law for the purpose of performing a specific work or project. An UTE is not a separate legal entity.

(b) Principles of combination

The following subsidiaries of BRH and Caminos are combined in these financial statements:

Percentage

held as at

December 31,

Name of entity 1997 1996 Primary activity

Benito Roggio E Hijos S.A. (BRH) 92.99 92.16 Construction and waste

management

Subsidiaries:

Cliba Ingenieria Ambiental S.A.* 55.00 55.00 Waste management

Sehos S.A.* 70.00 70.00 Hospital maintenance

Rail S.A. de Inversiones * 99.00 99.00 Mass transportation

Metrovías S.A.* (1) 55.30 55.30 Mass transportation

Caminos Australes S.A. (Caminos) 99.37 99.37 Holding company

Subsidiaries:

Covicentro S.A.* 53.77 53.77 Toll road management

Red Vial Centro S.A.* 57.00 52.00 Toll road management

* Represents the direct interest of BRH and Caminos in the relevant subsidiary.

(1) Through Rail S.A. de Inversiones and BRH ownership percentages of 27.08% and 28.22%, respectively.

The combined financial statements have been prepared in accordance with generally accepted accounting principles used in Argentina ("Argentine GAAP"), which differ in certain significant respects from generally accepted accounting principles in the United States of America ("US GAAP"). Such differences involve methods of measuring the amounts shown in the financial statements, as well as additional disclosures required by US GAAP.

(c) Restatement of financial statements in constant Argentine Pesos

Effective September 1, 1995, in accordance with general resolution No. 272/95 of the National Securities Commission in Argentina (the governmental regulatory agency for public companies) and in accordance with Argentine GAAP, the Group began accounting for its financial transactions on an historical cost basis, without considering the effects of inflation. Prior to September 1, 1995, the financial statements had been prepared on the basis of general price level accounting which reflects changes in purchasing power of the Peso in the historical financial statements. At the end of each reporting period and as of August 31, 1995 for the current year, the financial statements were stated in the general purchasing power of the Peso, using changes in the Argentine Wholesale Price Index ("WPI") as follows:

• Non‑monetary items and income statement amounts were adjusted to reflect the then current general purchasing power.
• Monetary items were not adjusted as such items are, by their nature, stated in terms of current general purchasing power in the financial statements.
• Monetary gains or losses were recognized in the income statement, reflecting the effect of holding monetary items and were included within financing results.

In addition, the financial statement information of periods prior to August 31, 1995 have been updated to Pesos of general purchasing power at the end of August 31, 1995 ("constant Pesos"). The August 31, 1995 balances, adjusted to the general purchasing power of the Peso at that date, became the historical cost basis for subsequent accounting and reporting.

The amounts shown in the general price level statements do not purport to represent the appraised value, replacement cost, or any other measure of the current value of the assets or the prices at which transactions would take place currently.

The following are the changes in the inflation rate based on the WPI for the following periods:

Two months ended August 31, 1995 0.390%

Year ended June 30, 1995 8.105%

Year ended June 30, 1994 0.246%

(d) Use of estimates

The preparation of the combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. Significant accounting policies

(a) Revenue recognition

Construction

Revenues from construction contracts are recognized upon approval by the customer of the work performed, and are determined based on a percentage of completion method calculated as the ratio of earned revenues to total contract price, after considering accumulated costs and estimated costs to complete. If the estimates of costs to complete long‑term contracts indicate a loss on a combined contracts basis, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Concessions

A concession is a right of specified duration, granted by the federal government or a provincial government, to exploit, build, establish, operate and maintain a public form of transportation or other public service. Upon termination of a concession, the concessioned operations revert to the government. Certain concessions are renewable upon renegotiation by the concessionaire and governmental agency. A summary of the significant concessions and significant accounting policies thereto follows:

(i) Highway concessions in Argentina:

Toll revenues: In return for operating, maintaining and occasionally improving the facility in accordance with the agreement, the concessionaire has the right to the toll fees derived from operation of the concessioned highway for the term of the concession. Toll fees are recognized into earnings based on the expected margin on the project. Toll fees collected in excess of those that are earned are classified as deferred revenue. The operating and maintenance costs are recognized as expenses in the period incurred.

Revenue subsidies: Certain toll road concession contracts were amended in 1991 to modify the toll fee structure. Under the terms of the amendments, highway concessionaires agreed to receive pre‑determined subsidies on a monthly basis for the duration of the concession in exchange for agreeing not to increase toll fees as originally contemplated in the agreements. The Group recognizes the subsidies as revenue as amounts become contractually due each month. Total revenues from subsidies were P$9,962,516, P$9,666,378 and P$8,486,447 for the years ended June 30, 1996, 1995, and 1994, respectively.

(ii) Subway concessions--Metrovías:

In November 1993, Metrovías S.A., a subsidiary of the Group, was awarded a 20 year concession to operate the Buenos Aires Subway (BAS), which had previously been operated by the government. The concession contract is extendible for two successive ten year periods upon mutual agreement by the parties. Under the terms of the concession, Metrovías was granted the right to use the existing subway assets with such assets remaining the property of the government throughout the term of the concession. Accordingly, these subway assets are not reflected in these combined financial statements.

Fare and leasing revenue: The concession agreement entitles Metrovías to collect toll fares from subway passengers, rents from the leasing of commercial kiosks and shops in stations, fees from advertising on coaches and in stations, and other services. Revenue relating to such items is recognized as income when earned. Metrovías is also responsible for the operating costs of the BAS which are recognized as expenses in the period incurred.

Capital investment program: The concession contract requires Metrovías to make certain capital investments to the subway for which Metrovías receives payment from the government. The capital investment amounts, which are pre‑determined in the concession contract, are recognized as revenues upon approval by the government agency responsible for payment. The costs associated with the acquisition and construction of fixed assets under the capital investment program are classified as inventory and expensed in the period in which the revenue is recognized. All assets constructed and or purchased under the capital investment program are the property of the government throughout the term of the concession.

Subsidies: Under the terms of the concession contract, Metrovías is to receive a subsidy from the government agency responsible for the subway from 1994 to 1999 and is to pay a fee to this same agency during the remaining years of the concession. The subsidy or fee is equal to the amount by which the fare revenue projected at the time the concession was granted is exceeded by or exceeds the projected cost of operating the BAS for each year, which includes the concessionaire's return. The amount of the subsidy and fee is adjustable to the extent that the inflation‑adjusted projected cost of operating the subway is greater than or less than the projected cost. This is measured through a pre‑established price index agreed upon at the outset of the concession. The subsidies are recorded as revenues when received from the government. The scheduled fees, currently estimated at P$344 million over 15 years, will be recognized in the years they are paid. Total subsidies received relating to the subway concession contract for the years ended June 30, 1996, 1995, and 1994 amounted to P$15,393,266, P$20,028,929 and P$11,638,171, respectively.

(iii) Waste management concessions:

These concessions allow the concessionaire to perform services such as collecting and transporting refuse, sweeping streets, maintaining parks, and clearing utility lines. The Group receives payments from various municipalities in return for these waste management services provided. Revenues for these services are recognized as earned.

(b) Cash and cash equivalents

The Company considers all highly liquid temporary investments with maturities of three months or less to be cash equivalents.

(c) Investments

Current investments

Current investments include fixed term instruments and government debt securities. These investments have fixed maturities and are valued at their cost plus accrued interest at year end.

Long‑term investments

Long‑term investments consist primarily of permanent investments and real estate. Permanent investments in companies that are less than 50% owned and over which the Group has significant influence are accounted for under the equity method. All other permanent investments in companies are recorded as an investment at cost. Dividends from cost investees are recognized as income as received.

(d) Inventories

Materials and spare parts

Materials and spare parts used in the construction and subway businesses are valued at replacement cost which does not significantly differ from cost at the time of purchase. The estimated total value of this inventory does not exceed its net realizable value.

Construction for third parties

Construction costs on contracts in progress and costs on completed contracts pending approval are included in inventory. These costs include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, and depreciation.

(e) Fixed assets

Machinery and equipment, vehicles, buildings and land acquired prior to July 1, 1992, are recorded at their appraised value as of such date. All other fixed assets are recorded at historical cost. All fixed assets are restated in Argentine Pesos as explained in 1(c) and depreciation is provided using the straight‑line method at the following yearly rates:

Asset Rate(%)

Machinery and equipment 10.00

Vehicles 20.00

Furniture and fixtures 10.00

Buildings 2.00

Subway building improvements 8.33

Other 8.33

The appraisal as of July 1, 1992 increased the carrying value of the fixed assets by P$44,469,325, which was recorded as an increase in the appraisal revaluation reserve account classified as a component of shareholders' equity. The depreciation on the appraised value of the fixed assets is charged to the income statement. While, the appraisal revaluation reserve account in shareholders' equity is amortized into income using the same depreciation rate as is applied to the related fixed asset. Further, any remaining revaluation reserve relating to assets disposed of is considered in the gain or loss calculated upon disposal. For the years ended June 30, 1996, 1995 and 1994, the amortization of the asset revaluation reserve amount charge against income amounted to P$5,461,173, P$9,977,557 and P$8,301,567, respectively. At June 30, 1996, the remaining balance in the asset revaluation reserve included within shareholders' equity amounted to P$9,549,529.

Subway improvements outside the capital investment program are owned by the Company and are capitalized.

Costs (direct materials, direct labor, allocated overheads and subcontractor costs) associated with the construction and/or improvement of highways awarded under concessions are classified as fixed assets. These costs are amortized on a straight line basis over terms not exceeding the remaining concession period.

The carrying value of fixed assets does not exceed their recoverable values, which are based on estimates made by the Group's management.

(f) Goodwill

Goodwill is recorded as the excess of cost over the proportionate share of the shareholders' equity acquired of interests held by others. Goodwill is amortized on a straight line basis over the life of the respective concession contract to which it relates, which does not exceed 20 years.

Upon acquisition of a non‑controlling interest in a minority investee, the excess of the proportionate net book value acquired over the purchase price (negative goodwill) is amortized into income immediately.

(g) Other intangible assets

Other intangible assets include development fees and pre‑operating costs which are valued at historical cost, net of accumulated amortization. These assets are amortized on a straight‑line basis over periods ranging from four to ten years, which do not exceed the term of the related concession.

(h) Severance payments

Severance payments made to employees are expensed as incurred. The Group does not contribute to any employee pension plans.

(i) Provisions for litigations, contingencies and allowances

An allowance is recorded for bad debts relating to receivables based on the risk of uncollectability. The allowance is shown as a contra account to the related receivable balance.

The Group is involved in various legal actions which have arisen in the ordinary course of its business. Provisions have been established to cover losses on litigation matters and other contingencies which are both probable of occurring and for which amounts can be reasonably estimated.

(j) Maintenance and repair expenses

Maintenance and repair expenses which totaled P$8,839,138, P$6,895,893 and P$6,628,353 for the years ended June 30, 1996, 1995, and 1994, respectively, are expensed as incurred.

(k) Income tax provisions

Income tax provisions as of June 30, 1996, 1995, and 1994 have been calculated at the statutory 30% tax rates, and are based upon the current taxable income of each period, as defined by Argentine tax law. The Group does not recognize deferred taxes.

(l) Foreign currency translation

For foreign subsidiaries which prepare their financial statements in currencies other than the reporting currency, the translation to Argentine Pesos is performed by applying the following procedure:

• The foreign currency financial statements (both balance sheet and income statement) of the controlled or related companies are translated from their local currency to U.S. dollars by applying the official exchange rate as at the end of the year.
• The dollars are then translated to Pesos by applying the exchange rate set by the Banco de la Nacion Argentina in force at the end of the year.
• The difference arising on translation of the financial statements is reflected in financing income.

Assets and liabilities denominated in foreign currency are translated at the prevailing exchange rate at year end. Foreign currency transaction gains and losses are recorded within financing results.

3. Acquisitions

Metrovías

At June 30, 1994, the Group held a 33.3% interest in Metrovías through its subsidiaries BRH and Rail S.A. de Inversiones. In May 1995, the Group purchased an additional 16.7% interest in Metrovías for a total consideration of P$5,921,000 payable in cash and promissory notes. Goodwill recognized on this transaction totaled to P$2,815,792. Further in May 1995, the Group acquired an additional 5.3% interest in Metrovías from another shareholder in exchange for its ownership interest in Trenes de Buenos Aires S.A., a separately awarded railway concession, plus the settlement of amounts owed between the various parties, totaling P$2,730,024. Goodwill recognized on this transaction amounted to P$2,730,024. The Group's interest in Metrovías as a result of these acquisitions increased to 55.3% at June 30, 1995. The goodwill related to the aforementioned acquisitions is being amortized on a straight‑line basis over the remaining term of the concession.

As of June 30, 1995, Metrovías' balance sheet has been combined with the Group. Metrovías' results of operations have been included in the combined income statement of the Group as though it had been acquired as of July 1, 1994 with minority interest for the period July 1, 1994 through May 31, 1995 reflecting the 66.7% share of the net income not pertaining to the Group during this period.

In 1994, Metrovías was accounted for via the equity method. Total sales and net income of Metrovías for the year ended June 30, 1994 were P$55,610,487 and P$1,387,444, respectively. Total assets and liabilities of Metrovías as at June 30, 1994 were P$27,442,494 and P$14,116,208, respectively.

4. Cash

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Cash held 2,148,172 1,074,255

Cash in bank 1,542,186 1,715,929

Cash and cash in bank in UTE partnerships 2,763,876 2,201,354

Total 6,454,234 4,991,538

Cash in escrow 1,850,001 --

5. Receivables

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Billed and certified contract receivables 14,938,560 11,589,028

Toll road subsidies 6,164,723 2,080,629

Accounts receivable 9,791,354 22,861,023

Notes receivable 29,262,187 25,116,183

Related parties 15,742,071 12,366,347

Trade accounts receivable in UTE partnerships 29,267,170 33,392,188

Total 105,166,065 107,405,398

Allowance for doubtful accounts (See Note 21(d)) (2,248,652) (1,276,781)

Total 102,917,413 106,128,617

Non‑current

Notes receivable 10,664,327 11,119,216

Trade accounts receivable in UTE partnerships 1,147,382 2,416,638

Total 11,811,709 13,535,854

Included in notes receivable at June 30, 1996 and 1995 are amounts totaling P$27,454,000 and P$28,145,603, respectively, due from two construction contracts. These notes bear interest at 10.25% and 15.18%, respectively and are due in monthly installments through December 1997.

6. Other assets, net

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Value added tax 3,289,051 2,572,796

Related companies 16,692,799 13,649,756

Due from others 5,387,042 6,685,149

Other 11,548,994 12,146,591

Other assets in UTE partnerships 11,585,522 18,000,188

Total 48,503,408 53,054,480

Allowance for doubtful accounts (See Note 21(d)) (884,000) (488,461)

Total 47,619,408 52,566,019

Non‑current

Other 104,470 104,466

Other assets in UTE partnerships 42,720 786,325

Total 147,190 890,791

7. Inventory

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Materials and spare parts 9,089,254 8,042,795

Contracts in progress 14,990,333 16,473,664

Advances to suppliers 1,309,351 2,191,495

Inventories in UTE partnerships 5,088,970 11,395,249

Total 30,477,908 38,103,203

Provision for inventory losses (272,786) (59,782)

Total 30,205,122 38,043,421

Non‑current

Contracts in progress 5,376,638 5,053,511

8. Investments

The Group's investments consist of the following:

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Fixed rate investments 6,780,546 4,154,066

Government bonds 2,000,000 574,985

Loans to related parties 410,176 3,879,354

Investments held by UTE partnerships 1,554,800 1,399,253

Total 10,745,522 10,007,658

Classified as:

Cash equivalents 4,193,810 6,328,158

Investments 6,551,712 3,679,500

10,745,522 10,007,658

Non‑current

Real estate

Building at Las Heras 294--Córdoba 8,213 9,581

Land at Las Heras 294--Córdoba 6,835 6,835

Velez Sarsfield 372/388--Córdoba 87,834 89,282

Berruti 3359--Buenos Aires -- 1,583,419

Puerto Madero--Buenos Aires -- 189,665

Negotiable bonds -- 1,158,835

Other investments 3,753,936 1,225,915

Investment in associated companies (See Note 21(c)) 76,626,173 72,114,399

Total 80,482,991 76,377,931

9. Accounts payable

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Suppliers 28,226,903 29,465,015

Notes payable to vendors 7,459,190 6,195,468

Customer advances (see Note 17(b)) 6,278,131 8,380,924

Related parties 1,284,437 1,302,723

Guarantee deposits from subcontractors 931,127 684,150

Other 627,836 230,751

Trade payables in UTE partnerships 11,334,475 23,129,280

Total 56,142,099 69,388,311

Non‑current

Notes payable to vendors 4,779,890 5,732,496

Related parties -- 4,367,880

Other 291,016 6,525,905

Trade payables in UTE partnerships 1,723,007 71,380

Total 6,793,913 16,697,661

The notes payable to vendors refers to amounts due to vendors for the purchase of equipment. The notes have variable interest rates and due dates ranging from July 1996 to May 1999.

10. Loans

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Bank overdrafts 4,966,643 5,237,687

Bank loans(1) 57,395,982 73,995,578

Bank loans UTE partnerships 5,217,604 14,063,288

Total 67,580,229 93,296,553

Non‑current

Bank loans 31,091,422 26,226,395

UTE partnership bank loans 790,873 146,170

Total 31,882,295 26,372,565

(1) As a result of the September 1994 BRH restructuring and divestiture more fully described in Note 1(a), negotiable bonds issued with a face value of US$10,000,000 remained a liability of BRH. The bonds are guaranteed by Roggio S.A. and Caminos. Each of the businesses divested from BRH severally guarantee the outstanding bond amount in an amount equal to the percentage of their respective equity upon divestiture. The proceeds received of P$9,628,775, net of loan costs, were applied as follows:

(a) P$4,840,585--For payment of loans granted by Banco de Galicia and Buenos Aires S.A. totaling P$5,005,375 (includes principal, interest and perfecting tax). The difference was paid with internal funds.

(b) P$4,788,190--For working capital purposes.

As of June 30, 1996, the amount outstanding under these negotiable instruments was US$4,000,000.

11. Other liabilities

June 30, June 30,

1996 1995

(Pesos) (Pesos)

Current

Related parties 8,536,561 398,037

Prepaid subway tolls 1,980,919 1,582,135

Other 5,054,867 1,741,402

Payables in UTE partnerships 7,868,396 1,045,726

Total 23,440,743 4,767,300

Non‑current

Related parties -- 16,454,701

Deferred highway toll revenues 40,804,986 35,293,237

Other 1,292,745 8,876,575

Payables in UTE partnerships 467,711 542,059

Total 42,565,442 61,166,572

Included within related party balances at June 30, 1996 and 1995 are pending capital contributions to an equity method investee amounting to P$6,534,563 (current in 1996) and P$14,294,047 (non‑current in 1995).

Included within Other is the amount due, including accrued interest, on installment notes for the purchase of 16.7% of Metrovías in 1995. The total amounts outstanding at June 30, 1996 and 1995 were P$3,367,143 and P$3,000,000, respectively. This loan is guaranteed by Metrovías S.A.

12. Shareholders' equity

Changes in shareholders' equity for each of the years ended June 30 were as follows:

June 30, June 30, June 30,

1996 1995 1994

(Pesos) (Pesos) (Pesos)

Balance at beginning of the year 123,531,454 120,027,534 101,902,333

Capital contributions 13,531,000 11,125,000 --

Assumed contributions

(distributions) to shareholders(1) 3,597,569 (7,354,832) 1,057,374

Reversal of revaluation reserve (5,461,173) (9,977,557) (8,301,567)

Net income 5,673,983 9,711,309 25,369,394

Balance at end of the year 140,872,833 123,531,454 120,027,534

(1) Includes adjustments as described in Note 1(a) and should not be interpreted to be an indication of future dividend or contribution levels.

13. Restricted assets

The following table summarizes the net book value of fixed assets, investments, and other assets included in the Group's balance sheet which have been pledged as collateral or guarantees and the corresponding debt arrangements.

Debt Amount at Type of

Description Book Value Debt Collateralized June 30, 1996 Guarantee

(Pesos) (Pesos)

Fixed assets

Machinery and equipment 7,262,497 Notes payable to vendor 7,978,560 Pledge

Vehicles 561,640 Notes payable to vendor 231,887 Pledge

Total 7,824,137 Total 8,210,447

Investments

Shares in Coviares S.A. 25,295,231 Loan granted to Coviares S.A.(3) 82,334,100 Pledge

Shares in Covicentro S.A. 4,664,296 Loan granted to BRH 10,000,000 Pledge

Shares in Red Vial Centro S.A. 4,352,277 Loans granted to BRH(1) 4,250,205 Pledge

Shares in Covisur S.A. 6,171,825 Loan granted to BRH 7,238,840 Lien

Total 40,483,629 Total 103,823,145

Other assets

Notes receivable and investments 26,082,356 Loans granted to BRH(2) 26,364,562 Pledge

Accounts receivable and cash

in escrow 14,233,005 Negotiable bonds (see Note 18(a)) 25,957,561 Pledge

Total 40,315,361 Total 52,322,123

(1) Comprised of BRH loans from Banco de Galicia and Citibank, both repayable in September 1996.

(2) Comprised of BRH loan from Banco Provincia de Buenos Aires, repayable in installments through May 1999, as well as various other loans.

(3) Represents a pledge of 100% of BRH's shares to secure repayment of BRH's proportionate share of the loan.

Restrictions in equity method investees:

Included within the financial statements of Coviares S.A. and Covimet S.A., equity method highway management investees, are the following disclosures:

Coviares S.A. has conveyed the rights to 30% of the toll and other revenues related to the concessioned Buenos Aires--La Plata highway, as a guarantee for a syndicated bank loan totaling U.S.$82,334,100. Further, Coviares, S.A. is restricted from paying dividends or any other distributions throughout the loan period.

Covimet S.A. has pledged its shares in Coviares S.A. and its right to a return of irrevocable contributions with respect to not yet authorized capital increases as collateral for the U.S.$82,334,100 syndicated bank loan described above. In addition, Covimet S.A. guarantees the payment of the obligation.

14. Limitation on profit distributions

Argentine law No. 19,550 requires individual companies to appropriate 5% of each year's net income to a legal reserve until the total amount of the reserve equals 20% of its authorized and outstanding capital stock.

As established by the respective concession contracts, highway concessionaires, Covisur S.A., Concanor S.A., Covicentro S.A., Covinorte S.A., and Red Vial Centro S.A. are required to maintain a minimum capital stock amount equal to the net accumulated highway investment to date plus the amount of net highway investment costs expected to be incurred for the following year.

15. Financing income (expense)

June 30, June 30, June 30,

1996 1995 1994

(Pesos) (Pesos) (Pesos)

Generated by assets

Interest 15,188,575 7,543,099 9,236,172

Effects of inflation (907,339) (16,435,364) (2,075,956)

Exchange difference 767,922 -- 145,530

Total 15,049,158 (8,892,265) 7,305,746

Generated by liabilities

Interest (25,679,346) (13,691,748) (5,605,333)

Effects of inflation 1,250,259 20,043,066 2,496,527

Exchange difference -- (1,262,279) (616,002)

Total (24,429,087) 5,089,039 (3,724,808)

Net financing income (expense) (9,379,929) (3,803,226) 3,580,938

16. Transactions with controlled and related companies

Amount included in Balance due (to)

Income Statement for from Group

the year ended June 30, at June 30, (1)

Related parties Description of transaction 1996 1995 1996 1995

(Pesos) (Pesos) (Pesos) (Pesos)

Roggio S.A. Sales 125,000 -- 114,950 --

Loans from Group 5,095,970 1,414,008 7,137,525 2,960,901

Grupo Concesionario del

Oeste, S.A. Sales 1,183,030 399,794 91,125 326,905

Loans to Group -- -- (1,013,186) --

Loans from Group -- -- 678,035 --

Loan facility -- -- (6,534,563) (14,294,047)

Taym S.A. Purchases (3,951,048) (4,099,486) (393,894) (470,104)

Loans from Group -- -- 580,280 --

Loans to Group -- -- -- (296,208)

Concanor S.A. Sales 356,726 54,123 1,834 16,755

Net loans to Group (44,002) (8,076) (406,688) (398,037)

Covinorte S.A. Sales 59,226 1,683,902 299,150 269,847

Loans to Group -- -- (300,000) --

Covisur S.A. Sales 6,013,321 8,752,973 3,056,252 4,994,257

Loans from Group -- -- 165,000 --

Loans to Group -- -- -- (1,064,134)

Coviares S.A. Sales 5,255,611 5,481,294 1,710,937 4,770,870

Loans from Group 1,661,190 -- 7,446,139 4,812,335

Loan facility -- -- (7,408) --

Covimet S.A. Loans from Group -- -- 433,999 (5,194,423)

Servicios del Centro

S.A. Loans from Group -- -- -- 4,115,990

SICSA Purchases, net (2,692,463) (361,879) 905,484 (361,879)

Loans from Group -- -- -- 2,007,800

Catrel S.A. Sales 5,400,000 1,007,137 6,352,500 958,792

Empalme S.A. Sales -- 1,678,448 410,630 835,612

Intelcel S.A. Sales -- 6,405,986 -- 210,101

Aufe S.A. Sales 262,977 -- 66,755 --

Loans from Group -- -- 44,600 222,464

Loan facility -- -- (387,309) --

Credit on account -- -- 204,042 --

Directors and

Shareholders Advances -- -- 1,392,507 (930,876)

Directors' fees (619,794) (649,563) -- --

Other related parties Sales 798,180 630,492 591,847 532,681

Loans from Group -- -- 904,765 3,618,681

Loan facility -- -- (3,600) --

Banco del Suquía S.A. Purchases (3,560,085) (3,450,831) (517,700) (272,167)

(1) Loans from (to) Group represent net amounts owed between the Group and such related parties.

In 1995, Metrovías entered into two contracts, one with a minority shareholder for services related to the development of Metrovías' commercial plan and another with SICSA to provide services related to the administration of the capital investment program. The total combined fees paid to the minority shareholder and SICSA for the years ended June 30, 1996 and 1995 amounted to P$5,296,550 and P$2,581,471, respectively. SICSA transferred its rights to these contracts to BRH during October, 1996.

17. Metrovías concession

(a) Spare parts

In accordance with the concession contract, Metrovías has been granted the right to use the existing subway fixed assets and any other improvements made as a result of the capital investment program, all of which are owned by the government. Included in the assets were spare parts necessary for the repair, upkeep and improvement of the subway, with an approximate value of P$14,500,000. At the end of the concession period, all original spare parts received and any replacement spare parts will be returned to the government in a condition and at a level sufficient to operate the subway under normal conditions for six months. The Group reflects spare parts on the balance sheet only to the extent that the total spare parts inventory is in excess of the estimated spare parts to be returned to the government.

(b) Purchase of railcars

In April 1994, Metrovías purchased 113 used electric railcars for installation and use in Line B of the Buenos Aires subway system. The railcars were purchased on behalf of MEYOSP, the Argentine Ministry of Economy and Public Works, under the terms of the capital investment program, and also on behalf of the Municipality of the City of Buenos Aires. Metrovías obtained possession and title of the railcars and upon payment of the debt obligations incurred will transfer title of such assets to MEYOSP and the Municipality of the City of Buenos Aires. Metrovías retains the right to use the railcars throughout the term of the concession.

The total purchase price, including the cost of the railcars and related expenses, amounted to P$33,600,000. The amount purchased under the capital investment program, representing approximately 55% of the total purchase price, was financed through a loan from Eximbank to Metrovías, denominated in Japanese yen. Under the terms of the arrangement, the government reimburses Metrovías for interest and principal payments. The remainder of the purchase price was paid by Metrovías and reimbursed in installments by the Municipality of the City of Buenos Aires. In May 1996, Metrovías agreed to purchase 18 additional electric railcars owned by the Marubeni Corporation at a total cost of approximately US$5,770,000.

The railcars and the related costs have been classified as fixed assets. These assets are not being depreciated as they will be transferred to the government agencies upon full payment of the obligations. The reimbursements Metrovías receives from the Argentine government or Municipality of the City of Buenos Aires are classified as customer advances within accounts payable. As of June 30, 1996, the Municipality of the City of Buenos Aires has reimbursed Metrovías for its portion of the capital improvements, and therefore these advances and related fixed assets have been removed from the balance sheet. As of June 30, 1996, the fixed assets reflected represent the railcars purchased under the capital investment program for MEYOSP. In addition as of June 30, 1996, the balance due to Eximbank amounted to P$10,347,087 (reflected within loans) and the reimbursements received to date from MEYOSP for payments due on the Eximbank loan (reflected as customer advances) totaled P$6,278,131.

18. Contingencies and commitments

(a) Contingent debt

Amount of

debt under Guarantor

guarantee Company

(Pesos)

Proportional guarantee of syndicated loan in favor of

Coviares S.A. with an outstanding balance totaling

US$82.3 million (see Note 13) 8,566,040 BRH

Joint guarantee of Coviares shareholders' for the

performance of the contract 12,546,651 Caminos

Joint and several guarantee on loan issued by

Citibank and Banco de Galicia to Roggio S.A. 5,080,136 Caminos/BRH

Negotiable bond for US$25.9 million(1) 18,170,293 BRH

Joint and several financing for Coviares S.A.'s

equipment purchases 2,316,747 BRH

Guarantee for loans issued by Banco Quilmes to

Coviares S.A. 811,400 Caminos

Joint and several guarantee to selling shareholders of

Catrisa S.A. in connection with the sale of their

interests to Relevamiento Catastral S.A., an affiliate 2,200,000 BRH

Notes pertaining to Catrel S.A., an affiliate,

endorsed by BRH 28,498 BRH

Guarantee for loan issued by Banco Ciudad de Buenos

Aires to Catrel S.A. 2,250,000 BRH

Guarantee to BANADE bank for loans to Grancor S.A.,

an affiliate 4,382,016 BRH

Guarantees to banks for Emprigas S.A., an affiliate 1,007,047 BRH

Guarantee to Banco Sudameris for loans to BRH

Paraguay, an affiliate 500,000 BRH

Guarantee to Banco Provincial de Buenos Aires and

Bice for loans to Covisur S.A. 3,000,000 BRH

Guarantee to Banco Pan de Azucar for commercial papers

of Sicsa, an affiliate 5,000,000 BRH

Joint and several guarantee to IJM, an equity investee

shareholder, for loans to Grupo Concesionario del

Oeste S.A. 15,228,335 BRH

Guarantee to Shell Argentina for advance to Grupo

Concesionario del Oeste S.A. 5,221,794 BRH

Total 86,308,957

(1) In December 1995, BRH and Roggio S.A., as co‑issuers, privately placed simple non‑convertible negotiable bonds totaling US$25,890,000 bearing interest at a fixed rate of 14% with principal due in installments through 1998. As co‑issuers, BRH and Roggio S.A., who jointly guaranteed the offering, have agreed that their responsibilities for servicing the principal and interest requirements are 30% and 70% respectively, reflecting their proportionate proceeds from the offering.

(b) Legal matters

Arbitration of contract Collector Viña del Mar--Valparaiso sewage system

On January 4, 1995, Constructora Consorcio Oceßnico Ltda. (Consorcio Oceanico), in which BRH participates jointly with Companía Brasileira de Projetos e Obras, reported the cancellation of the contract for the construction of Collector Viña del Mar--Valparaíso sewage system, which was being constructed for Esval S.A (Esval), a Chilean government agency. The cause for such cancellation, as expressed by Consorcio Oceánico, was the failure on the part of Esval to fulfill the contract terms.

As required by the contract, the resolution of the matter is to be decided through arbitration. Consorcio Oceánico demanded the legal termination of the contract as a result of Esval's default, along with damage compensation of P$16,275,760. Esval requested restitution for construction advances and damage compensation totaling P$26,229,687. The opinions of the legal advisors are in favor of the actions taken by Consorcio Oceánico as they believe that the company complied with the requirements of the contract and law.

As of this date, both parties have responded to the demands and the matter is in a period of review with a decision expected by December 1997. The Group has not recognized any provision in the combined financial statements for this matter. The loss on the contract, which has been reflected in the results of operations for the years ended June 30, 1995 and 1994, totaled P$4,651,825 and P$544,183, respectively.

Burlington Northern Arbitration

BRH is currently involved in arbitration proceedings with Burlington Northern as a result of an agreement entered into on September 16, 1993 (the "Burlington Northern Agreement") pursuant to which Burlington Northern agreed to transfer all of its rights and obligations as a shareholder of Metrovías to BRH in the event that Metrovías was awarded the concession to operate the Buenos Aires Subway and the Urquiza Line. This transfer was in exchange for payment of the amount of Burlington Northern's stock subscription in Metrovías, reimbursement of US$1,275,000 of expenses and indemnification of Burlington Northern against any claims made by third parties. In December 1995, the transfer was initiated by Burlington Northern; however, BRH informed Burlington Northern that the guarantees requested were not required as no situation giving rise to the obligation to deliver the guarantees had occurred.

In January 1996, Burlington Northern declared the Burlington Northern Agreement had terminated because BRH had not complied with its obligation thereunder. Burlington Northern submitted to arbitration a claim against BRH for damages resulting from such termination. BRH answered Burlington Northern's claim and counterclaimed. Burlington Northern has been notified of BRH's counterclaim and its response is currently pending.

The share rights and obligations subject to this arbitration are not considered by CLISA group as part of its share ownership of Metrovías as described in note 1(b).

(c) Contingency in equity method investee

Included in the notes to the audited financial statements as of June 30, 1996 of Coviares S.A., an equity method investee is the following:

The tax authority of the Province of Buenos Aires has requested that Coviares S.A., the concessionaire, pay stamp taxes related to the concession contract entered into between Coviares S.A. and the national government. The total tax, plus penalties, interest and other charges totals P$44,903,992 at June 30, 1996. Coviares S.A. is presently contesting the above in the Supreme Court of the Province of Buenos Aires. Coviares S.A.'s management believes that since the concession was granted by the national government, it should not be subject to payment of provincial or municipal taxes. As a result of the above, and based on the opinion of Coviares S.A.'s legal advisors, Coviares S.A.'s management believes the final decision will be favorable and therefore no provision has been recorded in the financial statements.

(d) General

Metrovías is involved in certain legal proceedings most of which involve accidents caused by the derailment or decoupling of cars. As of June 30, 1996, claims filed against Metrovías for accidents which occurred at the Dorrego Station (Line B), the Pueyrredón Station (Line D), on the Urquiza Line and on the Premetro line, amounted to US$6.3 million. Metrovías is also involved in litigation relating to a railroad crossing accident in which two people died. The amount of such claims is US$500,000. The Company has established provisions for amounts exceeding its insurance coverage.

The Company is involved in certain legal proceedings related to accidents caused by stray animals on the highways that it manages. The aggregate amount of such claims is US$8.8 million. The Company believes that it is not liable for any of these claims.

The Company is involved in several legal actions arising in the ordinary course of business, many of which involve labor‑related proceedings. The Company does not believe that the outcome of any such litigation or the cumulative effect of all such legal actions considered as a whole would have a material adverse effect on the Company's financial condition or future results of operations as a whole.

19. Subsequent events (unaudited)

(a) Formation of CLISA (holding company)

CLISA, the holding company, was organized on October 21, 1996 and registered on November 15, 1996. On November 27, 1996 CLISA acquired the shares of BRH and Caminos in exchange for debt. CLISA's initial capital stock was P$12,000. At the extraordinary shareholder's meeting held on December 13, 1996, the capital stock was increased by P$140,000,000 through the conversion of a portion of the debt owed to the shareholders who contributed their interest in BRH and Caminos. As of this date, capital stock totals P$140,080,000 and consists of the following:

Number of Shares Share Value Voting

Class A 4,800 P$ 1.00 5 votes per share

Class B 140,075,200 P$ 1.00 1 vote per share

Total 140,080,000

(b) Polledo acquisition.

On January 7, 1997, the Company entered into a preliminary agreement with the controlling shareholders of Polledo, a construction company whose principal assets are equity investments in highway concessions. Under the terms of the arrangement, the Company will merge its equity interests in highway concessionaires Covimet S.A. and Coviares S.A. and the Eriday UTE, a civil construction joint venture, into Polledo. In exchange, it will receive newly authorized shares in Polledo approximating 57.2% of the combined share capital. The consummation of the above is subject to certain conditions and approvals which are expected to be completed by October 1997. In addition, under the terms of the agreement, the majority owner of Polledo has a put option valued at approximately P$14.0 million to sell its interest in Polledo to CLISA should the above merger not be consummated. Under the terms of the agreement, approximately P$20.5 million of consolidated indebtedness and approximately P$58.6 million of consolidated total assets of Polledo would be acquired by the Company upon consummation of the merger.

(c) Business developments

Subsequent to June 30, 1996, BRH has obtained the following construction contracts:

• Construction of five schools in Merlo, Province of Buenos Aires, Argentina.
• Work for Hormigon Armado on the New Engraving Plant, Córdoba, Argentina.
• Resurfacing of National Route Number 14 between Tramo Alvear and La Cruz, Province of Corrientes, Argentina.
• Transportation center improvements for the Plaza Miserere station, subway Line A, Buenos Aires, Argentina.
• Refurbishment of building at Avenida de Mayo 760, Buenos Aires, Argentina.
• Construction of a section of Rosario highway between Roldan and Carcarañá, Province of Córdoba, Argentina.
• Laying of piping in the Dock Sud refinery, Province of Buenos Aires, Argentina.
• Construction of a 63,000 square meter 5 complex penitentiary, Province of Córdoba, Argentina.
• Construction of the western access into Buenos Aires, Argentina.
• Construction of section of Route 2 between Maipu and Las Armas, Province of Buenos Aires, Argentina.

Additionally, BRH recently has obtained waste management concessions in the city of Santa Fe, Argentina and the Municipality of the Coast, Province of Buenos Aires, Argentina. The Company's waste management concession in the city of Buenos Aires expired in December 1996. Buenos Aires has received bids for four‑year concessions for five collection zones, rather than the three currently existing. Under this plan, while a bidder might bid on more than one of these zones, no bidder may be granted a concession for more than one. The Company has submitted bids for each of the four concessions, which will be privately managed.

(d) Capital reduction

At the CLISA shareholders' meeting on March 10, 1997, the shareholders authorized a capital reduction in the amount of P$70,000,000, of which P$68,320,000 is payable to Roggio S.A. and P$1,680,000 is payable to Inversar S.A. In addition, it was agreed that such capital reduction be applied exclusively to the shares subscribed by Roggio S.A. and Inversar S.A. from the capitalization of their credits arising from the share transfer to the Company authorized by the Extraordinary General Meeting of Shareholders held on December 13, 1996, in accordance with the portion of the total shares subscribed to by each of them.

20. Segment data

The Group is primarily engaged in four business segments; mass transportation management, waste management, toll road management, and construction. A summary of the Group's operation by business segment is as follows:

Mass Adjustments

As at and for Transportation Waste Toll Road and

the year ended Management Management Management Construction Eliminiations Total

June 30, (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos)

1996:

Net sales 135,685,449 65,398,493 23,556,963 111,566,919 -- 336,207,824

Intersegment revenues

and other -- -- -- 9,325,194 (9,325,194) --

Combined net sales 135,685,449 65,398,493 23,556,963 120,892,113 (9,325,194) 336,207,824

Operating income (loss) 952,152 14,374,250 4,108,277 (5,450,298) (522,505) 13,461,876

Total assets 69,370,357 41,492,817 144,476,067 209,135,608 (36,659,569) 427,815,280

Capital expenditures 4,053,587 1,001,472 14,917,742 3,177,331 -- 23,150,132

Depreciation and

amortization(2) 4,357,937 954,024 10,013,391 9,791,079 -- 25,116,431

1995:

Net sales 118,335,365 68,514,634 17,929,901 224,482,692 -- 429,262,592

Intersegment revenues

and other -- -- -- 11,717,575 (11,717,575) --

Combined net sales 118,335,365 68,514,634 17,929,901 236,200,267 (11,717,575) 429,262,592

Operating income (loss) (1,807,390) 16,169,670 790,709 (2,444,645) (346,746) 12,361,598

Total assets 74,237,053 38,351,495 124,961,310 245,813,969 (33,617,905) 449,745,922

Capital expenditures 7,214,656 2,039,899 18,261,080 7,568,795 -- 35,084,430

Depreciation and

amortization(2) 3,346,085 1,245,869 5,376,369 12,968,492 -- 22,936,815

1994:

Net sales (1) 55,962,612 16,220,851 230,777,962 -- 302,961,425

Intersegment revenues

and other (1) -- -- 3,052,217 (3,052,217) --

Combined net sales (1) 55,962,612 16,220,851 233,830,179 (3,052,217) 302,961,425

Operating income (loss) (1) 9,703,953 2,992,936 16,328,035 (366,434) 28,658,490

Total assets (1) 39,659,410 86,617,364 216,392,529 (19,761,943) 322,907,360

Capital expenditures (1) 1,383,713 13,871,326 7,982,695 -- 23,237,734

Depreciation and amortization(2) (1) 350,547 4,179,885 14,266,033 -- 18,796,465

At June 30, 1996:

Number of concessions 1 20 9 -- -- --

Concession period 20 years 4 months ‑ 14 13 ‑ 22 2/3 -- -- --

years years

(1) Investment in Metrovías was accounted for under the equity method.

(2) Depreciation and amortization of fixed assets only.

21. Other financial statement information

The following tables present additional financial statement disclosures required under Argentine GAAP:

(a) Fixed assets

(b) Intangible assets

(c) Investments

(d) Provisions and allowances

(e) Cost of sales

(f) Foreign currency assets and liabilities

(g) Other expenses

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Combined Financial Statements

(a) Fixed assets

Depreciation

Net Net

Accumulated carrying carrying

Value at the Value at at the Accumulated value at value at

beginning of the end of beginning Amount of at the end June 30, June 30,

Principal account the year Addition Deductions Transfers the year of the year Decreases the year of the year 1996 1995

(Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos)

Machinery and equipment 67,265,051 2,555,696 (4,170,960) 65,649,787 (35,733,761) 2,484,901 (8,693,901) (41,942,761) 23,707,026 31,531,290

Vehicles 18,384,435 1,585,163 (1,154,408) 18,815,190 (15,088,702) 880,100 (1,488,104) (15,696,706) 3,118,484 3,295,733

Furniture and fixtures 10,095,154 1,244,579 (546,798) 10,792,935 (3,893,506) 214,366 (1,293,239) (4,972,379) 5,820,556 6,201,648

Buildings 7,316,069 1,766,233 (289,648) 8,792,654 (762,460) 17,379 (253,834) (998,915) 7,793,739 6,553,609

Building improvements 4,661,249 342,103 5,003,352 (1,745,509) (1,597,848) (3,343,357) 1,659,995 2,915,740

Rail car improvements 4,013,849 903,478 4,917,327 (1,112,598) (1,556,535) (2,669,133) 2,248,194 2,901,251

Rail cars 26,780,040 2,661,915 (12,825,000) 16,616,955 16,616,955 26,780,040

Land 2,522,472 (72,413) 2,450,059 2,450,059 2,522,472

Highway concessions 60,305,008 14,707,274 75,012,282 (20,549,151) (10,013,391) (30,562,542) 44,449,740 39,755,857

Other 778,347 66,911 (3,074) 842,184 (245,623) 1,582 (219,579) (463,620) 378,564 532,724

Total at June 30, 1996 202,121,674 25,833,352 (6,237,301) (12,825,000) 208,892,725 (79,131,310) 3,598,328 (25,116,431) (100,649,413) 108,243,312 --

Total at June 30, 1995 152,071,578 58,995,557 (8,945,461) -- 202,121,674 (58,547,821) 2,353,326 (22,936,815) (79,131,310) -- 122,990,364

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Combined Financial Statements--(Continued)

(b) Intangible assets

Amortization Net

Accumulated Net carrying carrying

Original Value at the Charge Accumulated value at value at

At beginning At end of beginning for the at the end of June 30, June 30,

Principal account of year Additions year of the year year the year 1996 1995

(Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos)

Goodwill 1,235,310 5,157,537 6,392,847 (92,833) (403,575) (496,408) 5,896,439 1,142,477

Pre‑operating expenses 15,249,646 -- 15,249,646 (3,079,638) (1,812,481) (4,892,119) 10,357,527 12,170,008

Development fees 5,124,118 1,269,889 6,394,007 (767,214) (3,581,687) (4,348,901) 2,045,106 4,356,904

Other deferred charges 1,727,307 2,987,546 4,714,853 (236,478) (815,707) (1,052,185) 3,662,668 1,490,829

Total at June 30, 1996 23,336,381 9,414,972 32,751,353 (4,176,163) (6,613,450) (10,789,613) 21,961,740 --

Total at June 30, 1995 14,725,458 8,610,923 23,336,381 (789,484) (3,386,679) (4,176,163) -- 19,160,218

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Combined Financial Statements--(Continued)

(c) Investments in associated companies

Book value at June 30, Summary Information for Investees Companies

Nominal Principal Shareholders' Ownership

Type Amount value 1996 1995 activity Date Capital equity Net Income Percentage

(Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (1)

Taym S.A. A & B 120,000 0 381,599 130,030 waste 06/30/96 12,000 813,198 503,108 50.00%

management

Grupo Concesionario del Oeste S.A. 60,000,000 1 20,195,830 21,154,749 highway

concession 03/31/96 60,000,000 61,078,911 (1,546,550) 34.00%

Concanor S.A. A, B, C & D 460,000 5 1,056,856 1,102,987 highway

concession 06/30/96 2,300,000 2,747,936 379,709 38.46%

Covinorte S.A. A, B, C & D 860,000 5 1,978,487 2,124,456 highway

concession 06/30/96 4,300,000 5,142,935 (379,350) 38.47%

Covisur S.A. A & B 3,180,000 10 6,171,825 5,428,970 highway

concession 03/31/96 31,800,000 32,435,300 9,493,712 25.00%

Coviares S.A. A & B 150,798,281 1 25,295,231 24,135,786 highway

concession 06/30/96 150,798,281 290,993,519 (397,350) 8.78%

Covimet S.A. A & B 100,000 1 18,422,523 18,031,777 highway

concession 06/30/96 100,000 113,509,076 11,528,158 16.23%

Aufe S.A. A, B & C 11,850,000 1 2,845,073 highway

concession 06/30/96 11,850,000 11,908,637 76,538 24.00%

Servicios Urbanos de Puebla S.A.

de C.V. 273,720

Other 5,029 5,644

Total 76,626,173 72,114,399

(1) Represents the direct interest of BRH and Caminos in the relevant subsidiary.

CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A.

Notes to the Combined Financial Statements--(Continued)

(d) Provisions and allowances

Balance at Balance at

beginning end of

Description of year Increases Deductions year

(Pesos) (Pesos) (Pesos) (Pesos)

Year ended June 30, 1996

Deducted from assets

Allowance for doubtful trade

receivables 1,276,781 1,989,145 (1,017,274) 2,248,652

Allowance for other receivables 488,461 395,539 -- 884,000

Provision for inventory losses 59,782 216,099 (3,095) 272,786

Total 1,825,024 2,600,783 (1,020,369) 3,405,438

Included under liabilities

Provision for contingencies 7,470,163 3,970,236 (4,241) 11,436,158

Provision in UTE partnerships 1,123,113 1,939,496 (321,026) 2,741,583

Other provisions 163,855 141,010 (244,489) 60,376

Total 8,757,131 6,050,742 (569,756) 14,238,117

Year ended June 30, 1995

Deducted from assets

Allowance for doubtful

trade receivables 763,461 612,322 (99,002) 1,276,781

Allowance for other receivables -- 488,461 -- 488,461

Provision for inventory

losses -- 59,782 -- 59,782

Total 763,461 1,160,565 (99,002) 1,825,024

Included under liabilities

Provision for contingencies 2,510,578 6,378,248 (1,418,663) 7,470,163

Provision in UTE partnerships 1,279,098 -- (155,985) 1,123,113

Other provisions 57,785 221,617 (115,547) 163,855

Total 3,847,461 6,599,865 (1,690,195) 8,757,131

(e) Cost of sales

For the year ended June 30,

Description 1996 1995 1994

(Pesos) (Pesos) (Pesos)

Inventory at the beginning of the year 43,096,932 52,663,141 31,439,238

Subtotal 43,096,932 52,663,141 31,439,238

Purchase of raw materials and

production costs

Purchase of raw materials 29,136,456 55,122,880 57,516,738

Production costs (see Note 21(g)) 213,151,487 255,016,959 178,310,518

Subtotal 242,287,943 310,139,839 235,827,256

Inventory at the end of the year 35,581,760 43,096,932 52,663,141

Subtotal 35,581,760 43,096,932 52,663,141

Cost of sales 249,803,115 319,706,048 214,603,353

(f) Foreign currency assets and liabilities

Balance in foreign Exchange Balance at June 30,

Item currency rate 1996 1995

(Pesos) (Pesos)

ASSETS

Current assets

Cash US$ 188,446 1.0000 188,446 4,278

Cash Real 10,817 1.0040 10,860 --

Accounts receivables US$ 34,674,037 1.0000 34,674,037 28,173,402

Accounts receivables Real 187,795 1.0040 188,547 843,276

Accounts receivables Guar 4,258,061,856 0.000485 2,065,160 1,400,190

Total current assets 37,127,050 30,421,146

Non‑current assets

Accounts receivable US$ 9,338,325 1.0000 9,338,325 12,720,068

Total non‑current assets 9,338,325 12,720,068

TOTAL ASSETS 46,465,375 43,141,214

LIABILITIES

Current liabilities

Accounts payable US$ 7,051,574 1.0000 7,051,574 5,652,993

Accounts payable Real 5,283 1.0040 5,304 --

Accounts payable Guar 1,252,513,402 0.000485 607,469 --

Accounts payable Y 146,926,923 0.009152 1,344,675 --

Loans US$ 48,429,047 1.0000 48,429,047 49,677,532

Loans Y 284,921,873 0.009152 2,607,605 3,588,105

Loans Guar 1,616,686,598 0.000485 784,093 --

Total current liabilities 60,829,767 58,918,630

Non‑current liabilities

Loans Y 845,660,003 0.009152 7,739,480 13,323,007

Loans US$ 25,487,871 1.0000 25,487,871 18,641,790

Total non‑current liabilities 33,227,351 31,964,797

TOTAL LIABILITIES 94,057,118 90,883,427

US$ US Dollars

Y Japanese Yen

Real Brazil Reals

Guar Paraguay Guarani

(g) Other expenses

Other

Production Administrative operating Total at June 30,

Items Costs expenses expenses 1996 1995 1994

(Pesos) (Pesos) (Pesos) (Pesos) (Pesos) (Pesos)

Exploitation costs 0 490,636 0 490,636 440,849 302,352

Freight 4,111,659 452 0 4,112,111 8,943,094 6,600,129

Subcontracted 29,794,900 817,598 1,877,379 32,489,877 35,905,455 56,608,119

Salaries and benefits 77,665,774 24,172,783 8,298,124 110,136,681 138,081,635 73,425,085

Other professional fees 8,946,462 4,897,238 983,235 14,826,935 17,041,343 17,876,270

Bid costs 53,908 190,894 185,530 430,332 2,172,714 2,451,161

Taxes and contributions 6,968,854 1,466,269 2,170,522 10,605,645 11,725,130 3,092,431

Publicity 30,680 413,079 23,208 466,967 638,924 504,015

Depreciation of fixed assets 21,368,931 1,140,389 2,607,111 25,116,431 22,936,815 18,796,645

Reversal of revaluation reserve (4,260,051) 0 (64,554) (4,324,605) (6,248,342) (8,202,799)

Amortization of building investments 1,452 1,369 2,821 5,904 2,838

Amortization of intangible assets 5,497,356 1,320 1,114,774 6,613,450 3,386,679 1,466,591

Maintenance costs 7,112,547 531,449 1,195,142 8,839,138 6,895,893 6,628,353

Travel expenses 746,104 579,247 243,400 1,568,751 3,504,394 4,278,684

Insurance 6,320,961 737,629 369,610 7,428,200 11,715,389 5,539,009

Water and energy 9,962,718 276,421 88,719 10,327,858 10,339,920 716,763

Telephone, telex and correspondence 402,055 739,540 383,525 1,525,120 2,654,909 2,929,389

Rents 10,911,702 1,172,483 188,402 12,272,587 23,801,117 16,134,734

Printing and supplies 120,219 276,087 83,809 480,115 1,006,555 958,392

Various 5,669,455 5,805,814 914,214 12,389,483 24,300,325 9,969,390

UTE partnerships 10,653,319 1,911,559 1,060,751 13,625,629 11,176,351 16,308,839

General expenses 184,038 171,662 311 356,011 436,664 515,372

Fund collections 80,780 5,570 95,430 181,780 56,436 299,594

Penalties, lawsuit and fires 2,372,377 76,035 2,448,412 3,552,807 0

Uncollectible accounts 2,612,030 2,612,030 3,195,184 0

Donations and subsidies 13,950 13,950 63,261 2,002

Loss for contracts 129,126 0 129,126 2,760,786 520,421

Security and supervision 1,129,536 384,776 2,100,608 3,614,920 5,400,300 286,321

Materials and spare parts 7,178,077 113,373 22,479 7,313,929 6,321,414 0

Totals at June 30, 1996 213,151,487 48,999,735 23,943,098 286,094,320 -- --

Totals at June 30, 1995 255,016,959 64,824,656 32,370,290 -- 352,211,905 --

Totals at June 30, 1994 178,310,518 43,920,723 15,778,859 -- -- 238,010,100

ANNEX A

INVESTOR LETTER

CLISA--Compañía Latinoamericana de

Infraestructura & Servicios S.A.

Leandro N. Alem 1050 9th Floor

1001 Buenos Aires, Argentina

Citicorp Securities, Inc.

Citibank Canada Securities Limited

Citibank International plc,

Citicorp Capital Markets S.A.

as Initial Purchaser

c/o Citicorp Securities, Inc.

399 Park Avenue

New York, New York 10022

and

The Bank of New York, as Trustee

Ladies and Gentlemen:

In connection with our proposed purchase of US$ principal amount 11% Guaranteed Senior Notes Due 2004 (the "Senior Notes") of CLISA--Compañía Latinoamericana de Infraestructura & Servicios S.A. (the "Issuer"), we confirm that:

1. We understand that the Senior Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf or on behalf of any investor account for which we are purchasing Senior Notes to offer, sell or otherwise transfer such Senior Notes prior to (i) the date which is two years after the later of the date of original issue and the last date on which the Issuer or any affiliate of the Issuer was the owner of such Senior Notes (or any predecessor thereto) and (ii) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date") only (a) to the Issuer, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) so long as the Senior Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a person we reasonably believe is a "qualified institutional buyer" under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is purchasing at least US$250,000 of Senior Notes and that is purchasing for its own account or for the account of such an institutional accredited investor, after delivery of an investor letter duly executed by such transferee or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Senior Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring such Senior Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Restriction Termination Date of the Senior Notes pursuant to clauses (d), (e) or (f) above to require the delivery of an opinion of counsel, certification and/or other information satisfactory to the Issuer and the Trustee.

2. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that is purchasing at least US$250,000 of Senior Notes, purchasing for our own account or for the account of such an institutional accredited investor that is purchasing at least US$250,000 of Senior Notes, and we are acquiring the Senior Notes for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Senior Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment for an indefinite period.

3. We are acquiring the Senior Notes purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion.

4. You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administration or legal proceeding or official inquiry with respect to the matters covered hereby.

Very truly yours,

(Name of Purchaser)

By:

Name:

Title:

Date:

Upon transfer, the Senior Notes would be registered in the name of the new beneficial owner as follows:

Name:

Address:

Taxpayer ID Number:

ANNEX B

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN

ARGENTINE GAAP AND US GAAP

The combined financial statements in this document have been prepared in accordance with Argentine GAAP, which differs in certain significant respects from U.S. GAAP. The significant differences between Argentine GAAP and U.S. GAAP relevant to the financial information of the Company are described below. Only differences with a significant potential impact on the statements of income and shareholders' equity were considered.

Restatement of Financial Statements in Constant Argentine Pesos

In accordance with Argentine GAAP, effective September 1, 1995, the Company began accounting for its financial transactions on a historical cost basis, without considering the effects of inflation. Prior to September 1, 1995 the financial statements had been prepared on the basis of general price level accounting which reflects changes in purchasing power of the Peso in the historical financial statements. In addition, the financial statement information of periods prior to August 31, 1995 were updated to Pesos of general purchasing power at the end of August 31, 1995 ("constant Pesos"). The August 31, 1995 balances, adjusted to the general purchasing power of the Peso at that date, became the historical cost basis for subsequent accounting and reporting. The inclusion of price‑level adjustments in the financial statements was considered appropriate through August 31, 1995 in view of the past inflationary conditions in Argentina.

Under U.S. GAAP, historical costs are maintained in the basic financial statements and no inflationary effects are recognized. However, when an Argentine company issues its financial statements in an offering document in the U.S., the effects of inflation are not eliminated from the financial statements. Recognition of the effects of inflation is considered by the Company's independent auditors a more meaningful presentation than historical cost‑based financial reporting because it represented, through August 31, 1995, a comprehensive measure of the effects of price level changes in the Argentine economy.

Government Subsidy and Fee Payments

The Company recognizes, under Argentine GAAP, the subsidy and fee related to the Metrovías subway concession in the periods when they become due from or payable to the Argentine government as they are considered revenue adjustment mechanisms built into the concession. Throughout the term of the concession, tariff rates are established by the government and are not designed to recover the cost of the capital improvements being made and therefore the subsidies represent supplementary revenues during the initial years when the capital improvements are minimal. Conversely, the fees paid to the government in subsequent years represent the theoretical excess revenues above those to which the concessionaire is entitled, resulting from the increased ridership levels correlated with the scheduled capital improvements.

Under U.S. GAAP, the Company would recognize the aforementioned subsidies and fees utilizing a systematic allocation over the term of the concession based on the relative value of the subway system as affected by capital expenditures funded by the government to expand subway capacity. To the extent that the value is deemed to be negative, subsidies would be recognized as income. Fees to the government would be recognized in the income statement as an expense in proportion to the capital improvements being made to the subway, which may not coincide with when they are currently payable. As of June 30, 1996, the subway concession value remains negative and the amortization of the fee in relation to the capital improvements made to date is minimal. Therefore, as of June 30, 1996, the difference between Argentine GAAP and U.S. GAAP is not significant. There is no current authoritative U.S. accounting literature governing the accounting for concession subsidies, and management believes that its present accounting treatment is appropriate. However, should the Company decide to offer securities in a public offering in the U.S., it is possible that the Securities and Exchange Commission would require the Company to utilize a different method of accounting for such concession.

Income Taxes

Under Argentine GAAP, income taxes are recognized on the basis of amounts currently due in accordance with Argentine tax regulations, and deferred taxes, including net operating loss carry forwards, are not recognized. U.S. GAAP would require the Group to account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"), which is a comprehensive liability method of accounting for income taxes. Under the comprehensive liability method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. A deferred tax asset is recognized for temporary differences that will result in deductible amounts in future years and for net operating loss carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Preoperating Expenses

Argentine GAAP permits, but does not require, that preoperating costs be capitalized. Accordingly, the Company has capitalized as intangible assets certain preoperating costs associated with the mass transportation concession and is amortizing such costs on a straight‑line basis over the expected benefit periods, not exceeding ten years. Under U.S. GAAP, these costs would be recognized as expense in the period in which they are incurred.

Percentage of Completion of Construction Projects

In accordance with Argentine GAAP, the Company does not recognize the estimated revenues on unbilled costs for construction that has been completed but upon which approval from the government or other customers is pending. Conversely, for U.S. GAAP, these estimated revenues would be recognized in the period that the work was completed and collection is reasonably assured.

In addition, under Argentine GAAP, the Company calculates the provision for losses on long‑term construction contracts on a combined contract basis and will recognize a loss to the extent that the total estimated costs to complete these contracts exceeds the total remaining estimated revenues. The application of the percentage of completion method of accounting under U.S. GAAP for long‑term contracts requires that provisions for estimated contract losses be reflected on an individual contract basis.

Equity Method Investees

Permanent investments in companies are accounted for under Argentine GAAP using the equity method when ownership is a permanent investment of less than 50% and the investor exerts influence. U.S. GAAP generally requires that investments owned between 20% and 50% be accounted for under the equity method and less than 20% owned investees be accounted for under the cost method unless the investor exerts significant influence. For those entities that would be recorded at cost under U.S. GAAP, the dividends received would be recorded in income with no reduction to the investment account.

Capitalized Interest

Argentine GAAP allows, but does not require, companies to capitalize interest on self‑constructed assets or third party construction projects. Therefore, for Argentine GAAP purposes, the Group does not capitalize any interest for qualifying assets such as the highway concession. Pursuant to U.S. GAAP, the Company would be required to capitalize interest on the qualifying self‑constructed assets.

Revaluation of Fixed Assets

Under Argentine GAAP companies were permitted to value their fixed assets at restated appraised values resulting from an appraisal revaluation performed by an independent expert. Under U.S. GAAP, companies would not state fixed assets at more than their historical acquisition cost, subject to an impairment evaluation. There is no difference in depreciation expense under Argentine GAAP and U.S. GAAP as, under Argentine GAAP, the depreciation on revalued assets that is charged to the income statement is then transferred to, and offset against, the revaluation reserve account in shareholders' equity.

Pro rata Consolidation of UTEs

The Group proportionally consolidates its income statement and balance sheet in all UTE investments under Argentine GAAP. Under U.S. GAAP, if a UTE meets the definition of a joint venture (JV), a proportional consolidation is generally considered appropriate where the JV is involved in the construction industry. Other UTEs, where joint control is not present, would be accounted for by the equity method or would be fully consolidated with a minority interest being reflected.

Shareholder Contributions

Under Argentine GAAP, shareholder commitments for future capital contributions are reflected in the financial statements when authorized, which is prior to actual shareholder contributions. Therefore, to the extent that the Company has committed to make future capital contributions in equity method investees, this is reflected as an increase in the investment in the equity method investee and a liability in the financial statements of the Company. Shareholder commitments for future capital contributions are generally not recorded until the contributions are made under U.S. GAAP.

Negative Goodwill

Under Argentine GAAP, upon acquisition of a non‑controlling interest in an investee, the excess of the proportionate net book value acquired over the purchase price (negative goodwill) is amortized into income immediately. Under U.S. GAAP, the purchase price for a non‑controlling interest in an equity method investee would generally be recorded as the basis of the investment with no resulting negative goodwill.

Goodwill

The amount of goodwill recorded under Argentine GAAP for the acquisition of Metrovías in May 1995, would be adjusted under U.S. GAAP to take into consideration the net assets of Metrovías at the date of acquisition after applying U.S. GAAP adjustments.

Rent Bonuses

Under Argentine GAAP, non‑refundable rent bonuses received at the inception of a lease agreement are recorded as income upon receipt. Under U.S. GAAP, rent bonuses on lease agreements are generally amortized on a straight‑line basis over the term of the lease.

No person has been authorized to give any information or to make any representations in connection with the Offering other than those contained in this Confidential Offering Memorandum and, if given or made, such other information or representations must not be relied upon as having been authorized by the Company or any other person. Neither the delivery of this Confidential Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to its date. This Confidential Offering Memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any securities other than the securities to which it relates. This Confidential Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful.

TABLE OF CONTENTS

Page

Service of Process and Enforcement of Civil Liabilities ii

Offering Memorandum Summary 1

Risk Factors 11

Use of Proceeds 18

Exchange Rate Information 18

Capitalization 19

Selected Consolidated and Combined Historical Financial Information 20

Management's Discussion and Analysis of Financial Condition and Results

of Operations 22

Company Background and History 38

Business 39

Management 68

Principal Shareholders 70

Certain Transactions with Related Parties 71

Description of Indebtedness of the Company and its Joint Ventures 72

Description of the Senior Notes 76

Taxation 109

Plan of Distribution 114

Notice to Investors 115

Legal Matters 118

Independent Public Accountants 118

Public Official Documents 118

Available Information 118

Index to Consolidated Financial

Statements F‑1

Annex A--Investor Letter A‑1

Annex B--Summary of Significant Differences Between Argentine GAAP and US GAAP B‑1

US$100,000,000

11 5/8% Guaranteed Senior Notes

due 2004

CLISA--Compañía

Latinoamericana

de Infraestructura

& Servicios S.A.

CONFIDENTIAL

OFFERING MEMORANDUM

Citicorp Securities, Inc.

Galicia Capital Markets S.A.

Dated May 22, 1997