Mirgor — Annual Report 2004

Jun 22, 2005

TRANSLATION INTO ENGLISH ‑ ORIGINALLY ISSUED IN SPANISH

MIRGOR

SOCIEDAD ANONIMA, COMERCIAL, INDUSTRIAL, FINANCIERA,

INMOBILIARIA Y AGROPECUARIA

EINSTEIN 1111 ‑ RIO GRANDE

TIERRA DEL FUEGO

ARGENTINA

financial statements for the YEAR beginning

january 1, 2004, and ended DECEMBER 31, 2004,

TOGETHER WITH THE AUDITOR’S REPORT

TRANSLATION INTO ENGLISH ‑ ORIGINALLY ISSUED IN SPANISH

BOARD OF DIRECTORS

MIRGOR S.A.C.I.F.I.A.

Chairperson

Lic. Roberto Gustavo Vázquez (*)

vice-Chairperson

Mr. José Fara (*)

directors

Mr. Sergio Vélez

Mr. André Gold

Mr. Alejandro Carrera (*)

alternate directors

Mr. José Luis Caputo

Mr.Emmanuel Lemaitre

Mr. Alain Marmugi

Mr. Eduardo García Terán

Mr. Martín Basaldúa

(*) Audit Committee Members

(Translation of the report originally issued in Spanish)

AUDITOR’S REPORT

To the Chairman and Directors of

Mirgor Sociedad Anónima, Comercial, Industrial, Financiera,

Inmobiliaria y Agropecuaria

1. We have audited the accompanying balance sheets of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria as of December 31, 2004, and 2003, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. We have also audited the accompanying consolidated balance sheets of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary as of December 31, 2004, and 2003, the related consolidated statements of income and cash flows for the years then ended, disclosed below as supplementary information. 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.

2. We conducted our audits in accordance with auditing standards generally accepted in Argentina. An audit requires that the auditor plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatements. An audit includes examining, on a selective test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting standards used and the significant estimates made by the Company’s Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

3. As of December 31, 2004, and 2003, the Company and its subsidiary booked noncurrent VAT and minimum presumed income tax credits amounting to ARS 5,620,578 and ARS 4,879,588, respectively, the recoverability of which depends on the companies’ possibility of carrying enough taxable income to absorb them. As of the date of issuance of this report, it is not possible to estimate the recoverable amount of such credits. In addition, as mentioned in the last paragraph of Note 4(2)A to the accompanying financial statements, as of December 31, 2003, the Company and its subsidiary carried other tax credits of doubtful recovery amounting to about ARS 3,345,000, for which an allowance was set during this year. Therefore, our current opinion on the financial statements as of such date is no longer affected by this uncertainty.

4. As mentioned in Note 1 to the accompanying financial statements and in conformity with the regulations issued by the business associations regulatory agency, the Company has not booked the effects of changes in the currency purchasing power generated between March 1, 2003, and September 30, 2003; as required by the professional accounting standards effective in the City of Buenos Aires, Argentina. Had the effects of such changes been recognized, the loss for the fiscal year ended December 31, 2003, and the remaining shareholders’ equity components would have decreased as a whole by about ARS 740,000.

5. Except for the effect of adjustments that might have been required if the resolution of the uncertainty described in paragraph 3 had been known, in our opinion, the financial statements mentioned in paragraph 1 present fairly, in all material respects, the financial position of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and the consolidated financial position of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria with its subsidiary as of December 31, 2004, and 2003, and its results of operations and its cash flows for the years then ended in accordance with C.N.V. (Argentine Securities and Exchange Commission) relevant regulations and, except for the nonrecognition of changes in the currency purchasing power from March 1 through September 30, 2003, in the statement of income, changes in shareholders' equity and cash flows for the year ended December 31, 2003, described in paragraph 4, with professional accounting standards effective in the City of Buenos Aires, Argentina.

6. In compliance with current regulations, we further report that:

7. 1. The financial statements mentioned in paragraph (1) have been transcribed to the Inventory and Financial Statements book and have been prepared, in all material respects, in conformity with the applicable provisions of Argentine Business Associations Law.
8. The financial statements of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria result from books kept, in all formal respects, pursuant to current regulations, except as mentioned in note 9 to the accompanying financial statements and under the conditions established in Ruling No. 1,000/00 of the Business Associations Regulatory Agency of Tierra del Fuego dated December 13, 2000.
9. The information included in points 2 and 3 of the “Summary of events for the year ended December 31, 2004" and points 3, 4, and 5 of the “Supplementary notes to the financial statements as of December 31, 2004, required under section 68 of the B.C.B.A. (Buenos Aires Stock Exchange) regulations”, filed by the Company to meet C.N.V. and B.C.B.A. regulations, results from the accompanying financial statements as of December 31, 2004, and 2003, and as of December 31, 2002, 2001, and 2000, (after being restated in constant pesos through February 28, 2003, as detailed in Note 1(a) to the accompanying financial statements), not included in the document attached hereto, on which we have issued our audit reports on March 10, 2003, March 8, 2002, and March 9, 2001, respectively, to which we refer and that should be read jointly with this report. The information for the years ended December 31, 2002, 2001 and 2000 was not changed by the Company’s Management to include the changes in measurement methods mentioned in Note 1(b) or to reflect the restatement required by the professional accounting standards referred to in paragraph 4.
10. During the fiscal year ended December 31, 2004, we have billed fees related to audit services rendered to the Company, representing 100% of the total amount billed to the Company on any and all account, 82% of the total audit fees billed to the Company, the parent and subsidiary, and 82% of the total amount billed to the Company, its parent and subsidiary on any and all account.
11. As of December 31, 2004, liabilities accrued in employer and employee contributions to the Integrated Pension Fund System resulting from the Company’s accounting books amount to ARS 110,230, none of which was due and payable as of that date.

Buenos Aires,

March 11, 2005

PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L. C.P.C.E.C.A.B.A. - R.A.P.U. Vol. I Fo. 13
Karen Grigorian (Partner) Certified Public Accountant (UBA) CPCECABA Vol. 175 Fo. 031

MIRGOR SOCIEDAD ANONIMA, COMERCIAL, INDUSTRIAL, FINANCIERA, INMOBILIARIA Y AGROPECUARIA

registered office: Einstein 1111 – Río Grande – Tierra del Fuego, Argentina

Main business: Manufacture of air conditioning equipment for vehicles.

Registration date with the Public Registry of Commerce:

• Of the articles of incorporation: June 1, 1971.
• Of the last amendment to of the articles of incorporation: August 12, 2004.

Expiry of the articles of incorporation: May 31, 2070

fiscal year no. 34 beginning january 1, 2004,

summary OF EVENTS

For the fiscal year ended DECEMBER 31, 2004

(Figures stated in Argentine pesos, “ARS”– see Note 1)

1. brief comment on the company’s activities over the FISCAL YEAR. (*)

During 2004, the activity in Argentina grew in a manner that has not been noted for many years. As a result, consumers won trust, which may be noted in the increase in the demand for durable consumption goods, among other things.

In addition, Argentina has tried to put an end to the default. These negotiations had already been successfully concluded as of the date of issuance of these financial statements. Therefore, the growth and stability expectations will allow Argentina to start a period of new investments, depending also on certain decisions that should be made regarding postponed issues such as utility rates and other issues.

The automotive industry activity continues to grow considerably, as compared to the prior decade. This period domestic sales amounted to 311,960 units and exports amounted to 146,426 units. Production increased by 53.5%, as compared to the prior year.

The automotive market recovery was strongly noted in the Company’s activities, both as a result of the increase in sales and in the market penetration. The market share increased from 62% in the prior year to 67%.

Important activities included obtaining Peugeot's purchase order for Peugeot 206 condenser and, in the case of our subsidiary, the consolidation of the welding process of oil coolants and the penetration into a new market, domestic refrigeration.

1. equity structure (figures related to the consolidated statements, stated in constant pesos – see note 1)

		12/31/2004		12/31/2003		12/31/2002		12/31/2001		12/31/2000
Current assets		99,680,710		67,547,756		66,879,625		60,949,060		93,547,581
Noncurrent assets		26,556,016		32,391,773		38,458,205		56,790,548		49,575,217
Total assets		126,236,726		99,939,529		105,337,830		117,739,608		143,122,798
Current liabilities		57,508,603		33,133,081		30,199,587		44,280,865		57,420,394
Noncurrent liabilities		6,032,289		11,411,548		16,836,705		-		-
Total liabilities		63,540,892		44,544,629		47,036,292		44,280,865		57,420,394
Minority interest		5,196		4,119		3,530		5,514		5,608
Shareholders' equity		62,690,638		55,390,781		58,298,008		73,453,229		85,696,796
Total liabilities and Shareholders’ equity		126,236,726		99,939,529		105,337,830		117,739,608		143,122,798

1. income structure (figures related to the consolidated statements and stated in constant pesos – see note 1)

		12/31/2004		12/31/2003		12/31/2002		12/31/2001		12/31/2000
Ordinary operating income (loss)		14,990,019		414,982		1,723,633		(3,175,913)		3,224,474
Financial expense		(6,436,824)		(994,056)		(16,139,916)		(6,666,470)		(5,062,135)
Other (expenses) / revenues		88,840		(1,535,015)		(356,707)		(935,779)		78,478
Income tax		(1,341,100)		(792,549)		(384,214)		-		-
Minority interest gain (loss)		(1,078)		(589)		1,983		97		214
Income (loss), net		7,299,857		(2,907,227)		(15,155,221)		(10,778,065)		1,758,969
Resultado extraordinario		-		-		-		(1,465,501)		-
Resultado neto		7,299,857		(2,907,227)		(15,155,221)		(12,243,566)		1,758,969

1. STATISTICAL DATA (1)

Number of units	12/31/2004				12/31/2003					12/31/2002					12/31/2001					12/31/2000
	Quarter		Accum		Quarter		Accum			Quarter		Accum.			Quarter		Accum.		Quarter			Accum.
Production (2)	92,533		275,243		63,595		215,288			43,303		147,618			26,995		178,250		63,164			232,861
Sales (3)	77,832		232,293		51,810		186,643			41,063		137,478			23,990		123,219		62,452			186,682

* Local	54,464		150,632		27,582		84,255		20,333		67,590		17,172		73,093
Equipment with air conditioning.	21,413		74,837		16,274		41,451		12,346		35,839		11,442		47,004
Equipment without air conditioning	10,623		36,183		6,487		25,065		4,857		19,056		5,730		26,089
Dashboards	7,173		22,149		4,821		17,739		3,130		12,695
AA Res.	15,255		17,463
* Exports	23,368		81,661		24,228		102,388		20,730		69,888		6,818		50,126

1. As from this fiscal year, ICSA discloses the units sold as statistical information.
2. It includes the one related to Interclima S.A.
3. The units sold among companies are not included.

4. ratios (*)

5. CHANGES IN THE MARKET PRICE OF SHARES (*) (1)

December 2004		December 2003		November 2004		November 2003		October 2004		October 2003
26.00		19.75		22.20		18.20		22.80		16.50

September 2004		September 2003		August 2004		August 2003		July 2004		July 2003
23.25		15.70		21.50		14.70		23.10		15.80

June 2004		June 2003		May 2004		May 2003		April 2004		April 2003
21.00		16.10		22.40		15.50		23.55		12.60

January 2004		January 2003		February 2004		February 2003		March 2004		March 2003
24.50		9.40		23.10		10.10		24.10		9.30

• 1. Considering $1.00 per share.

• prospects (*)

The industry activity is expected to continue growing, as long as the pace of the necessary investments remains unchanged.

Based on conversations held, car manufacturers will continue to increase their production and they plan to add new products and expand in some cases the manufacturing plant.

The production of air conditioning for domestic use is expected to reach 30,000 units in 2005.

(*) Information not covered by the auditors’ report

Buenos Aires, March 11, 2005.

	MIRGOR S.A.C.I.F.I.A.
	Lic. Roberto G. Vázquez
	Chairman

MIRGOR SOCIEDAD ANONIMA, COMERCIAL, INDUSTRIAL, FINANCIERA, INMOBILIARIA Y AGROPECUARIA

Financial statements related to fiscal year No. 34 for the period beginning January 1, 2004, and ended DECEMBER 31, 2004, presented comparatively with the prior fiscal year

registeredoffice:Einstein 1111 – Río Grande – Tierra del Fuego, Argentina

Main business: Manufacture of air conditioning equipment for vehicles.

Registration date with the Public Registry of Commerce:

• Of the articles of incorporation: June 1, 1971.
• Of the first amendment to the articles of incorporation: July 1, 1994.
• Of the last amendment to the articles of incorporation: August 12, 2004.

Registration number with the IGJ (regulatory agency of business associations): 40,071

Expiry of the articles of incorporation: April 13, 2070.

Parent company: disclosed in note 6 to the stand-alone financial statements.

Capital structure: see note 3 to the stand-alone financial statements.

The Company is not enrolled in the Statutory Optional System for the Mandatory Acquisition of Public Offerings.

	PESOS
20,000,000 shares of common stock, face value, ARS 0.10 per share Subscribed, paid-in, issued, and registered with the Public Registry of Commerce	2,000,000

MIRGOR S.A.C.I.F.I.A.

Supplementary information

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2004,

AND AS OF DECEMBER 31, 2003

Figures stated in Argentine pesos – See note 1

		2004		2003
ASSETS
CURRENT ASSETS
Cash – Note 2		17,673,528		13,782,122
Short-term investments – Note 2		587		587
Trade receivables – Note 2		36,224,616		15,502,566
Taxes receivable – Note 2		533,832		278,422
Other receivables – Note 2		1,159,785		1,284,984
Inventories – Note 2		44,088,362		36,699,074
TOTAL CURRENT ASSETS		99,680,710		67,547,755
NONCURRENT ASSETS
Other receivables – Note 2		903,567		1,245,621
Taxes receivable – Note 2		5,832,788		8,291,159
Intangible assets – Note 1(e)b		356,069		32,903
Property, plant and equipment – Note 1(e)a		19,463,592		22,822,091
TOTAL NONCURRENT ASSETS		26,556,016		32,391,774
TOTAL ASSETS		126,236,726		99,939,529

Notes 1 through 5 to the consolidated financial statements and notes 1 through 14 to the stand-alone financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of and should be read together with these statements.

MIRGOR S.A.C.I.F.I.A.

Supplementary information

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2004,

AND AS OF DECEMBER 31, 2003

Figures stated in Argentine pesos – See note 1

		2004		2003
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables – Note 2		36,745,075		20,238,645
Salaries, payroll and other taxes payable – Note 2		5,109,475		3,044,863
Customer prepayments - Note 2		4,291,125		4,050,543
Loans – Note 2		10,676,655		5,568,642
Other		304,307		230,388
Total Liabilities		57,126,637		33,133,081
Provisions		381,966		-
TOTAL CURRENT LIABILITIES		57,508,603		33,133,081
NONCURRENT LIABILITIES
Payables
Customer prepayments		-		1,761,404
Loans – Note 2		6,032,289		9,650,144
TOTAL NONCURRENT LIABILITIES		6,032,289		11,411,548
TOTAL LIABILITIES		63,540,892		44,544,629
Minority interest in subsidiaries		5,196		4,119
SHAREHOLDERS’ EQUITY		62,690,638		55,390,781
TOTAL LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY		126,236,726		99,939,529

Notes 1 through 5 to the consolidated financial statements and notes 1 through 14 to the stand-alone financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of and should be read together with these statements.

CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2004,

PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

		2004		2003
Net sales (including VAT benefits amounting to 28,977,895 and 14,068,442)		201,622,556		114,705,458
Cost of goods sold		(171,998,618)		(103,001,015)
GROSS REVENUES		29,623,938		11,704,443
Administrative expenses - Exhibit H		(9,068,901)		(7,970,008)
Selling expenses – Exhibit H		(5,565,018)		(3,287,313)
Loss from long-term investments		-		(32,140)
Financial expense and holding losses from assets
Interest		1,092,711		228,304
Foreign exchange difference		83,452		(871,228)
Holding gains (losses) – Inventories		2,013,573		(2,534,668)
Gain on exposure to inflation		-		(346,836)
Allowance for impairment in value of trade receivables		(400,000)		-
Allowance for P&E impairment in value		(281,691)		-
Allowance for impairment in value in tax credits		(3,345,000)		-
Current investments and tax credits		167,527		(138,327)
Financial expense and holding losses from liabilities
Interest		(2,829,277)		(1,143,778)
Foreign exchange difference		(2,938,119)		3,420,162
Gain (loss) on exposure to inflation		-		392,315
Other expense / income		88,840		(1,535,015)
Income (loss) before income tax		8,642,035		(2,114,089)
Income tax		(1,341,100)		(792,549)
Income (loss) after income tax		7,300,935		(2,906,638)
Minority interest in subsidiaries		(1,078)		(589)
INCOME (LOSS) FOR THE YEAR		7,299,857		(2,907,227)

Additional information

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2004,

PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

		2004		2003
CHANGES IN CASH
Cash at beginning of year		13,782,122		14,014,326
Cash at end of year		17,673,528		13,782,122
Cash increase (decrease)		3,891,406		(232,204)
SOURCES OF CHANGES IN CASH
OPERATING ACTIVITIES
Ordinary income (loss) for the year		7,299,857		(2,907,227)
Interest and foreign exchange difference accrued		1,767,259		(957,741)
Income tax		1,341,100		792,549
Adjustments to reach net cash flows deriving from operating activities
PP&E depreciation and intangible assets amortization		5,031,569		5,402,052
Income from the sale of P&E		(15,227)		11,547
Minority interest		1,078		589
Allowance for impairment in value of inventories (net effect)		2,501,739		729,220
Loss from long-term investments		-		32,140
Allowance for impairment in value of trade receivables		400,000		-
Allowance for PP&E impairment in value		281,691		-
Allowance for impairment in value in tax credits		3,345,000		-
Provision for guarantees and higher costs		381,966		(1,042,593)
Impairment in value of PP&E advances from exposure to inflation		-		1,618
Changes in operating assets and liabilities:
Trade receivables		(21,122,050)		(6,696,151)
Inventories		(9,891,027)		3,386,725
Trade payables		16,506,430		8,598,729
Salaries, payroll and other taxes (net of receivables)		(768,258)		912,785
Customer prepayments		(1,520,822)		(611,799)
Other		541,175		2,650,633
Interest repayment		(1,168,280)		(2,062,094)
Net cash flow provided by operating activities		4,912,930		8,240,982

Additional information

CONSOLIDATED STATEMENT OF CASH FLOWS

		2004		2003
INVESTMENT ACTIVITIES
PP&E acquisition		(1,803,819)		(405,525)
PP&E Sales		23,294		(11,624)
Intangible additions		(435,179)		-
Pre operating expenses additions		(46,996)		-
Net cash flow used in investment activities		(2,262,700)		(417,149)
FINANCING ACTIVITIES
Loan repayment		(15,658,824)		(8,056,037)
Inflows from new debts		16,900,000		-
NET CASH FLOW USED IN FINANCING ACTIVITIES		1,241,176		(8,056,037)
Net cash INCREASE (decrease)		3,891,406		(232,204)

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003.

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

1. Applicable accounting standards

The financial statements as of December 31, 2004 and December 31, 2003, have been prepared following CNV (Argentine Securities Commission) General Resolution No. 368 guidelines, within effective professional accounting standards with the restrictions and additions provided for in Resolution No. 459, which amended Exhibit I to Book No. 7 “Informative System” of such resolution and the discontinuance of the effects of changes in the currency purchasing power set forth by CNV General Resolution No. 441, as indicated in note 1 to the individual financial statements.

1. Valuation and disclosure method summary

The valuation and disclosure methods used in the consolidated financial statements are similar to those disclosed in note 1 to the stand-alone financial statements, except for the valuation of interests in subsidiaries, which in the current statements have been incorporated line by line following the method of FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolution No. 21.

1. Consolidation bases

Following the procedure established in FACPCE Technical Resolution No. 21, MIRGOR S.A.C.I.F.I.A. has consolidated its financial statements as of December 31, 2004 and December 31, 2003, as the case may be, line by line with those of its subsidiary, Interclima Sociedad Anónima, in which it holds majority voting rights.

Corporate control is as follows:

Subsidiary		Interest in the common stock and voting rights as of 12/31/04		Year-end
Interclima Sociedad Anónima		99,9667		31/12/2004

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003- Continued

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - Continued

1. Financial statements used in consolidation

To prepare the consolidated financial statements as of December 31, 2004, the financial statements of Interclima Sociedad Anónima as of that date were used. The audit report on these financial statements includes an “except for” qualification related to the estimation of the income tax payable on March 11, 2005. This adjustment has been considered for the interest valuation and, consequently, in these consolidated financial statements. Such audit report also includes a qualification for uncertainty related to the recoverability of tax credits.

The financial statements of Interclima Sociedad Anónima as of December 31, 2003, were used to prepare the consolidated financial statements as of that date. The audit report thereon, dated March 10, 2004, included an “except for" qualification for the difference in the valuation of the income tax payable (such adjustment has been considered in the consolidated financial statements) and a qualification for uncertainty related to the recoverability of tax credits and receivables from the Argentine Government.

1. Changes in significant assets

		12/31/04 ARS		12/31/03 ARS
1. PP&E
Balance at beginning of year		22,822,091		27,485,464
Additions		1,803,819		417,225
Retirements (net of depreciation)		(8,067)		(11,811)
Impairment		(281,691)		-
Depreciation		(4,872,560)		(5,068,787)
Balance at end of period		19,463,592		22,822,091

		ARS		ARS
1. Intangible assets
Balance at beginning of year		32,903		366,168
Additions		482,175		-
Amortization		(159,009)		(333,265)
Balance at end of period		356,069		32,903

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003 - Continued

NOTE 2 – MAIN ACCOUNT BREAKDOWN

		12/31/04		12/31/03
ASSETS
CURRENT ASSETS
Cash
On hand and imprest fund in Argentine currency		11,869		42,618
On hand in foreign currency		102,517		105,476
In banks in Argentine currency		10,184,615		4,461,304
In banks in foreign currency		7,374,527		9,172,724
		17,673,528		13,782,122
Short-term investments
Savings account in Argentine currency and other		587		587
		587		587
Trade receivables
Trade receivables		35,095,217		15,015,866
Trade receivables in foreign currency		566,341		-
Related Company – Note 3		1,048,061		571,877
Allowance for doubtful accounts		(485,003)		(85,177)
		36,224,616		15,502,566
Taxes receivable
VAT credit		390,339		232,808
Other		143,493		45,614
		533,832		278,422
Other receivables
Notes receivable		758,262		749,597
Interest to be accrued		(95,623)		(95,109)
Insurance to be accrued		217,877		165,060
Other		279,269		465,436
		1,159,785		1,284,984

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003 - Continued

NOTE 2 - MAIN ACCOUNT BREAKDOWN - Continued

		12/31/04		12/31/03
Inventories
Manufactured products		15,033,064		11,433,737
Raw material		29,138,378		22,932,903
Raw material in transit		8,462,631		7,771,539
Stock at end of period		52,634,073		42,138,179
Prepayments to vendors in Argentine currency		710,736		371,927
Prepayments to vendors in foreign currency		1,166,295		2,109,971
Allowance for impairment in value		(10,422,742)		(7,921,003)
		44,088,362		36,699,074
NONCURRENT ASSETS
Other receivables
Notes receivable		695,074		1,426,633
Interest to be accrued		(87,655)		(181,012)
Section 33, Law No. 19,550 companies (subsidiaries and affiliates) – Note 3		296,148		-
		903,567		1,245,621
Taxes receivable
VAT credit		3,739,417		3,266,017
Minimum presumed income tax		1,881,161		1,613,571
Reimbursements receivable in local currency		2,570,351		2,254,264
Promotional benefits receivable		952,882		779,973
Deferred tax credit		3,875,762		4,537,854
Allowance for impairment in value of the deferred tax credit		(3,875,762)		(4,537,854)
Other		33,977		377,335
Allowance for impairment in value		(3,345,000)		-
		5,832,788		8,291,160

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003 - Continued

NOTE 2 - MAIN ACCOUNT BREAKDOWN - Continued

		12/31/04		12/31/03
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables
In local currency		23,351,868		7,650,958
In foreign currency		12,803,767		11,795,559
In foreign currency – related company – Note 3		829,090		792,128
		36,984,725		20,238,645
Salaries, payroll and other taxes
Employee benefits		1,331,794		722,493
Taxes payable		3,777,681		2,322,370
		5,109,475		3,044,863
Customer prepayments
In local currency		-		1,798,553
In foreign currency		4,291,125		2,251,990
		4,291,125		4,050,543
Loans
Financial loans in local currency		8,515,641		2,216,748
Financial loans in foreign currency		2,161,014		3,351,894
		10,676,655		5,568,642
NONCURRENT LIABILITIES
Payables
Loans
Financial loans in local currency		908,409		2,782,244
Financial loans in foreign currency		5,123,880		6,867,900
		6,032,289		9,650,144

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003 – Continued

NOTE 3 – RELATED - PARTY INFORMATION

The transactions with the parent and other related companies are:

		12/31/2004		12/31/2003
Trade receivables
Valeo Sistemas Automotivos Ltd. (1)		1,048,061		571,877
Total		1,048,061		571,877
Other receivables (noncurrent)
Il Tevere S.A. (2)		296,148		-
Total		296,148		-
Trade payables
Valeo Sistemas Automotivos Ltd. (1)		(147,539)		(316,436)
Valeo Autoklimatizace S.R.O. (1)		(59,499)		(70,876)
Valeo Climatization S.A. (Euro) (1)		(9,808)		-
Valeo Klimasysteme GMBH (1)		(5,643)		-
Valeo Sistemas Automotivos (1)		(150,645)		(77,406)
Valeo Climate Control Mexico (1)		-		(18,074)
Valeo Autosystemiy SP. Z.O.O. (1)		(44,492)		(35,981)
Valeo Vymeniky Tepla s.r.o. (1)		(51,517)		(149,164)
Valeo Thermique Moteur (1)		(185,190)		(51,253)
VCC Up Echangeurs (1)		(174,757)		(72,938)
Total		(829,090)		(792,128)
Other payables (current)
VCC Up Echangeurs (2)		(304,307)		(196,641)
Total		(304,307)		(196,641)

notes to the consolidated financial statements as of DECEMBER 31, 2004 AND DECEMBER 31, 2003 – Continued

NOTE 3 – RELATED - PARTY INFORMATION - Continued

		31/12/2004
		Merchandise importation		Merchandise sold		Services received		Royalties		Financial prepayments
Valeo Sistemas Automotivos Ltd. (1)		3,363,421		(4,851,976)
Valeo China (1)		69,059
Valeo Autoklimatizace S.R.O. (1)		723,943
Valeo Climatización S.A. (Euro) (1)		224,295
Valeo Klimasysteme GMBH (1)		90,794
Valeo Componentes Automóviles (1)		166,409
Valeo Sistemas Automotivos (1)		1,311,239
Valeo Climate Control Mexico (1)		257,586
Valeo Autosystemiy SP Z.O.O. (1)		288,043
Valeo Vymeniky Tepla s.r.o. (1)		3,696,077
Valeo Securite Habitacle (1)		1,098,362
Valeo Thermique Francia (1)		517,134				202,815
Valeo Thermique Motear (1)		2,943,755
Valeo Zaragoza (1)		4,036,024
VCC Up Echangeurs (1)		2,928,297						1,465,587
Il Tevere S.A. (2)		-								296,148
		21,714,438		(4,851,976)		202,815		1,465,587		296,148

		31/12/2003
		Merchandise importation		Merchandise sold		Services received		Royalties		Financial prepayments
Valeo Sistemas Automotivos Ltd. (1)		1,548,030		(7,409,208)		-		-		-
Valeo Autoklimatizace S.R.O. (1)		468,804		-		-		-		-
Valeo Climatización S.A. (Euro) (1)		124,516		-		-		-		-
Valeo Klimasysteme GMBH (1)		91,031		-		-		-		-
Valeo Componentes Automóviles (1)		163,420		-		-		-		-
Valeo Sistemas Automotivos (1)		712,415		-		-		-		-
Valeo Climate Control Mexico (1)		376,342		-		-		-		-
Valeo Autosystemiy SP Z.O.O. (1)		89,382		-		-		-		-
Valeo Vymeniky Tepla s.r.o. (1)		2,183,112		-		-		-		-
Valeo Thermique Francia (1)		223,566		-		32,870		-		-
Valeo Thermique Motear (1)		1,404,011		-		-		-		-
Valeo Zaragoza (1)		1,928,363		-		-		-		-
VCC Up Echangeurs (1)		2,221,084		-		-		586,851		-
		11,534,076		(7,409,208))		32,870		586,851		-

(1) Related company.

(2) Parent company.

NOTE 4 – INFORMATION BY SEGMENT

As from the year ended December 31, 2004, the Company operates in two business segments: automotive and residential. The applicable valuation standards to prepare the information by business segment are described in Note 1 to these financial statements.

	AIR CONDITIONING
	AUTOMOTIVE		RESIDENTIAL		TOTAL
REVENUES
Sales (net of imputed interest)	158,277,112		14,367,549		172,644,661
Tax benefit	25,927,417		3,050,478		28,977,895
Total	184,204,529		17,418,027		201,622,556
EQUITY
Allocated assets	108,934,754		17,301,972		126,236,726
Addition of P&E and intangibles	1,143,383		1,142,611		2,285,994

NOTE 5 – EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

These financial statements are the English translation of those originally issued in Spanish.

They are presented in accordance with generally accepted accounting principles in Argentina. The effects of the differences between Argentine generally accepted in the countries in which the accompanying financial statements may be used have not been quantified.

Accordingly, these financial statements are not intended to present financial position, results of operations and changes in financial position in accordance with accounting principles generally accepted in the countries of users of the financial statements, other than Argentina.

EXHIBIT c

shares, debentures, other securities issued in series, and interest in OTHER company for the YEAR ended DECEMBER 31, 2004, presented comparatively WITH THE PRIOR FISCAL YEAR

Figures stated in Argentine pesos – See Note 1(a)

		12/31/04																							12/31/03
												Information on the issuer
														Latest financial statements issued
Securities name and features		Face values		Amounts		Cost values		Value by the equity method		Book values		Main business		Date		Capital		Return for period		Equity		Interest % on capital stock				Book value
Companies under Law No. 19,550, Section 33 (subsidiaries and affiliates)
INTERCLIMA Sociedad Anónima		1		11,996		8,815,917		12,580,275		12,580,275		Auto-part manufacturing and interchanges for air conditioning and heating equipment		12/31/04		12,000		3,235,865		15,604,995		99.97%				11,082,333
Total noncurrent investments										12,580,275																11,082,333
Total investments										12,580,275																11,082,333

EXHIBIT H

INFORMATION REQUIRED BY LAW No. 19,550, section 64 b(i) for the YEAR ended DECEMBER 31, 2004, presented comparatively with the prior FISCAL year

Figures stated in Argentine pesos – See Note 1(a)

		12/31/04								12/31/03
Accounts		Production costs		Administrative expenses		Selling expenses		Total		Total
Salaries and wages		7,566,706		3,087,438		541,994		11,196,138		7,366,577
Payroll taxes and employee benefits		1,672,410		805,462		118,815		2,596,687		1,882,124
Insurance		873,913		125,274		6,539		1,005,726		584,158
Fees and training expenses		292,922		487,745		57,383		838,050		641,114
Taxes, rates, and assessments		1,532,552		521,104		1,036,618		3,090,274		2,335,376
Other administrative expenses		-		2,240,013		-		2,240,013		1,618,854
PP&E depreciation		3,186,904		1,648,078		42,800		4,877,782		5,161,251
Intangible asset amortization		-		153,787		-		153,787		240,801
Other production expenses		2,501,712		-		-		2,501,712		1,598,485
Customs clearance and taxes		5,053,349		-		-		5,053,349		2,456,420
Shipping, handling and freight		12,813,021		-		2,391,559		15,204,580		9,804,945
Export tax		-		-		60,559		60,559		172,446
Other selling expenses		-		-		1,308,751		1,308,751		662,136
Total 12-31-2004		35,493,489		9,068,901		5,565,018		50,127,408
Total 12-31-2003		23,267,366		7,970,008		3,287,313				34,524,687

balance sheet as of DECEMBER 31, 2004 and as of december 31, 2003.

Figures stated in Argentine pesos – See note 1(a)

		12/31/04		12/31/03
ASSETS
CURRENT ASSETS
Cash – Note 2		17,560,540		13,675,797
Short-term investments – Note 2		587		587
Trade receivables – Note 2		19,339,173		14,828,548
Taxes receivable – Note 2		374,801		110,166
Other receivables – Note 2		1,152,008		1,266,005
Inventories – Note 2		37,698,347		34,421,150
TOTAL CURRENT ASSETS		76,125,456		64,302,253
NONCURRENT ASSETS
Long-term investments		12,580,275		11,082,333
Taxes receivable – Note 2		1,625,499		3,415,372
Other receivables – Note 2		903,567		1,245,621
Property, plant and equipment		16,935,314		20,690,057
Intangible assets		314,295		25,384
TOTAL NONCURRENT ASSETS		32,358,950		36,458,767
TOTAL ASSETS		108,484,406		100,761,020

The accompanying notes 1 to 14 are an integral part of these financial statements.

balance sheet as of DECEMBER 31, 2004 and as of december 31, 2003

Figures stated in Argentine pesos – See note 1(a)

		12/31/04		12/31/03
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables– Note 2		19,685,746		18,313,122
Salaries, payroll and other taxes– Note 2		1,860,297		1,628,652
Loans – Note 2		10,676,655		5,568,642
Customer prepayments – Note 2		4,291,125		4,050,543
Other payables – Note 2		3,247,656		1,397,732
TOTAL CURRENT LIABILITIES		39,761,479		30,958,691
NONCURRENT LIABILITIES
Payables
Loans – Note 2		6,032,289		9,650,144
Customer prepayments		-		1,761,404
Other payables – Note 2		-		3,000,000
TOTAL NONCURRENT LIABILITIES		6,032,289		14,411,548
TOTAL LIABILITIES		45,793,768		45,370,239
SHAREHOLDERS’ EQUITY		62,690,638		55,390,781
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		108,484,406		100,761,020

The accompanying notes 1 to 14 are an integral part of these financial statements.

statement of income for the YEAR ENDED DECEMBER 31, 2004, presented comparatively with the prior year

		12/31/04		12/31/03
Net sales (including VAT benefits amounting to 25,927,417 and 14,068,442) – Note 4.2.A.e)		177,530,265		106,727,042
Cost of goods sold		(155,127,935)		(98,564,314)
GROSS REVENUES		22,402,330		8,162,728
Administrative expenses		(8,851,488)		(7,754,753)
Selling expenses		(4,883,537)		(3,056,400)
Ordinary income from long-term investments – Note 1		1,497,941		933,161
Financial expense and holding losses from assets
Interest		955,311		286,238
Foreign exchange difference		(7,294)		(619,331)
Holding (losses) – Inventories		1,854,528		(2,403,648)
Impairment in value of trade receivables		(400,000)		-
Impairment in value in tax credits		(1,945,000)		-
Gain on exposure to inflation		-		(260,408)
Current investments and tax credits		167,527		(138,327)
Financial expense and holding losses from liabilities
Interest		(2,284,757)		(1,109,573)
Foreign exchange difference		(2,493,131)		3,398,917
(Loss) on exposure to inflation		-		356,436
Other (Expense) / Income – Note 2		1,287,427		(702,267)
NET (LOSS) INCOME FOR THE PERIOD		7,299,857		(2,907,227)
NET (LOSS) EARNINGS PER SHARE – NOTE 13
BASIC ORDINARY		0.3650		(0.1454)
DILUTED ORDINARY		0.3650		(0.1454)

statement of CHANGES IN SHAREHOLDERS’ EQUITY FOR YEAR ended DECEMBER 31, 2004,

presented comparatively with the prior year

		12/31/04																						12/31/03
														Appropriated retained earnings
Detail		Capital stock		Capital stock adjustment		Noncapitalized contributions		Noncapitalized contribution adjustments		Issuance premiums		Total		Legal reserve		Other reserves (*)		Total		Unappropriated retained earnings		Total		Total
Balances at beginning of year		2,000,000		4,155,936		497		717		5,243,562		11,400,712		2,280,143		73,708		2,353,851		41,636,218		55,390,781		60,610,549
Balance modification-Note 12		-		-		-		-		-		-		-		-		-				-		(2,312,541)
Modified balances at beginning of year		2,000,000		4,155,936		497		717		5,243,562		11,400,712		2,280,143		73,708		2,353,851		41,636,218		55,390,781		58,298,008
Net income(loss) for the year		-		-		-		-		-		-		-		-		-		7,299,857		7,299,857		(2,907,227)
Balances as of December 31, 2004		2,000,000		4,155,936		497		717		5,243,562		11,400,712		2,280,143		73,708		2,353,851		48,936,075		62,690,638
Balances as of December 31, 2003		2,000,000		4,155,936		497		717		5,243,562		11,400,712		2,280,143		73,708		2,353,851		41,636,218				55,390,781

(*) See note 3(b)

statement of cash flows for year ended DECEMBER 31, 2004, presented comparatively with the prior year

		12/31/04		12/31/03
CHANGES IN CASH (1)
Cash at beginning of year		13,675,797		13,204,957
Cash at end of year		17,560,540		13,675,797
Cash increase		3,884,743		470,840
SOURCES OF CHANGES IN CASH
OPERATING ACTIVITIES
Ordinary income (loss) for the year		7,299,857		(2,907,227)
Interest and foreign exchange difference accrued		1,417,259		(957,741)
Adjustments to reach net cash flows deriving from operating activities
PP&E depreciation and intangible assets amortization		4,388,840		4,784,699
Net (Income) loss from sale of PP&E		(15,227)		11,547
Allowance for impairment in value of trade receivables		400,000		-
Allowance for impairment in value of inventories (net effect)		2,166,261		661,689
Allowance for impairment in value of taxes receivables		1,945,000		-
Income (Loss) from long-term investments		(1,497,941)		(933,161)
Contingency provision		-		(1,042,593)
Impairment in value of PP&E advances from exposure to inflation		-		1,585
Changes in operating assets and liabilities:
Trade receivables		(4,910,625)		(6,707,707)
Inventories		(5,443,458)		3,691,756
Trade payables		1,372,624		8,122,888
Salaries, payroll and other taxes (net of receivables)		(188,117)		1,564,245
Customer prepayments		(1,520,822)		(611,799)
Other		(694,023)		5,230,132
Interest repayment		(1,168,280)		(2,062,094)
NET CASH FLOW (USED IN) OPERATING ACTIVITIES		(3,551,348)		8,846,219

statement of cash flows for the YEAR ended DECEMBER 31, 2004, presented comparatively with the prior year

		12/31/04		12/31/03
INVESTMENT ACTIVITIES
PP&E acquisition		(495,896)		(307,718)
PP&E sales		23,294		(11,624)
Intangible additions		(435,179)		-
NET CASH FLOW USED IN INVESTMENT ACTIVITIES		(907,781)		(319,342)
FINANCING ACTIVITIES
Loan repayment		(15,658,824)		(8,056,307)
Inflows from new debts		16,900,000		-
NET CASH FLOW USED IN FINANCING ACTIVITIES		1,241,176		(8,056,037)
Net cash INCREASE		3,884,743		470,840

(1) Not considering the temporary investments in shares

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004

Figures stated in Argentine pesos – See Note 1.(a)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

1. Restatement into constant pesos

Professional accounting standards provide that financial statements are to be stated in constant pesos and that, in inflationary or deflationary conditions, the financial statements are to be restated into pesos with the purchasing power of the date of issuance of such statements, recognizing in accounts the changes in the “IPIM”, i.e. the wholesale price index published in the INDEC (Argentine Statistics and Census Bureau), in accordance with the restatement method established in Technical Resolution (TR) No. 6 of the FACPCE (Argentine Federation of Professional Councils in Economic Sciences).

The Company’s financial statements recognize the changes in the purchasing power of the peso through February 28, 2003, in accordance with Federal Executive Decree No. 664/2003 and CNV (Argentine National Securities Commission) No. 441. Under professional accounting standards the restatement method established in TR No. 6 should have been discontinued only as from October 1, 2003. Had the effects of variations in the currency purchasing power been recognized until September 30, 2003, the income for the fiscal year ended December 31, 2003, would had increased by about ARS 740,000. The effects of not recognizing such changes on the balance sheet have not been significant.

1. New accounting standards applied to financial statements preparation and presentation

The CNV (Argentine National Securities Commission) issued General Resolution No. 434, dated January 14, 2004 (amended by Resolution No. 45 of March 18, 2004), whereby it adopted, with certain exceptions: (a) FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolutions Nos. 16 through 20, with the amendments introduced by CPCECABA (Buenos Aires City Professional Council) Resolution CD No.87/03, effective for fiscal years initiated January 1, 2003, or thereafter, and (b) FACPCE Technical Resolution No. 21, mandatory for fiscal years beginning April 1, 2004 (which has been applied in advance in these financial statements).

Such accounting standards incorporated changes in the methods for measuring shareholders’ equity and determining income, as well as new disclosure requirements. The changes that were most significant to the Company are the determination of net present value of receivables and liabilities, the quantification of income tax by the deferred tax method, restrictions on the recognition of intangible assets and other disclosure aspects such as earnings per share, as explained in each of the accounts or items in question.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 - Continued

Figures stated in Argentine pesos – See Note 1.(a)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES - Continued

The effects of the changes in the new accounting standards at the beginning of the first fiscal year of their effectiveness have been booked retroactively, which is to say that the Prior-year Income at the beginning of the fiscal year 2003 as indicated in Note 12.

The preparation of the financial statements in accordance with such standards requires that the Company’s Management consider estimates and assumptions that may affect the asset and liability amounts reported, the disclosure of contingent assets and liabilities as of the date of the financial statements, and income and expense amounts reported. The final results may differ from such estimates.

1. Valuation methods

The main valuation methods used to prepare the financial statements:

• Cash, current investments, trade receivables, other receivables and liabilities:

In Argentine pesos: at nominal value at end of the period including, as the case may be, explicit and imputed interest accrued as of such dates, which has been determined by calculating the discounted value of cash flows, following the methods provided in FACPCE Technical Resolution No. 17, Section 4 (as amended by CPCECABA Resolution CD No. 87/03), considering the present economic circumstances due to the current characteristics of the financial market; and so the average interest rate on the financing obtained by the Company was considered.

In foreign currency: at nominal value in foreign currency plus explicit and imputed interest accrued as of period – end, converted at the exchange rates effective as of such dates to

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 - Continued

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES - Continued

convert such transactions. The foreign exchange differences were charged to income for the fiscal period or year, as the case may be.

Other receivables and payables in local currency (except for deferred tax amounts): they have been valued at their estimated value deducted from the amount receivable or payable taking into account the methods provided in FACPCE Technical Resolution No. 17, Section 4 (as amended by CPCECABA Resolution CD No. 87/03). As from this year, reimbursements receivable previously disclosed in other noncurrent receivables are disclosed in Noncurrent tax credits. Such change was also made in the financial statements comparatively presented.

Credit risk: In its usual course of business the Company grants credit to customers, including car plants, that represent about 99% of the total sales. The company evaluates permanently the financial capacity of its customers in order to reduce the possible risk of significant losses due to bad debts.

Financial instruments: the Company does not use derivative financial instruments. Receivables and payables related to usual business transactions are valued as stated in the previous paragraphs and, in the opinion of the management of MIRGOR, such valuation does not differ from their current value.

• Inventories

Raw materials (including those in transit) were valued at replacement cost at end of the period, considering the cash prices for usual purchase amounts. In addition, imported goods are valued at replacement cost at the foreign exchange rate effective at end of the period.

The products manufactured were valued at cash reproduction cost at end of the period limited by the net realization value thereof.

The value of inventories does not exceed their recoverable value.

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES - Continued

• Long-term investments:

Companies covered by Argentine Business Associations Law No. 19,550, Section 33 (Subsidiaries and affiliates): by the equity method as established by Technical Resolution No. 21 of the FACPCE, which was calculated on the basis of the financial statements of Interclima as of December 31, 2004. An audit report including "except for" and uncertainty qualifications has been issued thereon and is dated March 11, 2005.

In addition, the adjustment to reflect the income tax liability has been taken into account when determining the value by the equity method.

Income from the interest in the subsidiary is included in a separate line in the statement of income. Refer to income tax paragraph b).

• PP&E

PP&E have been valued at cost restated to February 28, 2003, as mentioned in note 1(a), less the related accumulated depreciation. Depreciation is calculated applying constant rates on the basis of the estimated useful life of the related assets. The assets subject to lease have been included in this account.

The net book value of PP&E was reviewed to verify whether it has been impaired whenever there were events or changes in circumstances indicating that the value booked cannot be recovered. Should there be any hint and book values exceed the estimated recoverable value, the assets or activities generating cash would be reduced up to the recoverable amount. The PP&E recoverable amount is equivalent to the higher of net realization value end the value in use. Upon determining the value in use, a first comparison should be made with the estimated future cash flows without any deduction. Should the value of cash flows exceed its net realization value and be lower than the net book value, the discounted flow and the net realization value should be compared again to determine the PP&E recoverable value and determine the impairment in value to be booked, as the case may be. Losses from impairment in value are recognized in the statement of income.

Based on the analyses performed there has been no indication that P&E will not be recoverable.

The value of P&E does not exceed its recoverable value.

• Intangible assets

Until December 31, 2002, research and development expenses and licenses related to new products were included in this item, valued at their replacement cost restated as of February 28, 2003, as mentioned in note 1(a), less the related accumulated amortization. These amounts are amortized applying constant rates to extinguish such values over a NINE-year period as from the launch of the new products, which will be amortized based on alternative a(2) set forth under section 8(2)3 of Technical Resolution No. 17, i.e. during the remaining useful life.

As from the effective date of the new technical resolutions mentioned in note 1(b), research and development expenses will be charged to income for the period in which they are incurred.

The licenses to sell products acquired by the Company have been considered in this account, taking into account their capacity to generate earnings in the future, and have been amortized over three years counted as from their initial economic use.

• Allowances:
• Doubtful accounts: to offset and make trade receivables adequate on an individual analysis basis of those presenting uncollectibility rates.
• Impairment in value: calculated on the basis of the recoverable value of deteriorated, obsolete or slow-moving items.
• Impairment in value of asset for deferred tax: it was assessed based on the recoverable value that is determined by the company’s tax situation.
• For impairment in value of tax credits: It has been set to reduce the book value of such credits at their estimated realizable values. In calculating them, the opinion of the Company’s management and legal counsel was taken into account.
• Shareholders’-equity accounts:

Restated through February 28, 2003, in accordance with the method described in point (a) of this note, except for the “Capital stock – Face value” account, which was booked at original value. The adjustment resulting from the restatement as of August 31, 1995, and February 28, 2003, is disclosed in the “Capital stock adjustment” account.

• Statement-of-income accounts

Income (loss) from long-term investments was calculated by the equity method using the Company’s interest percentage on the subsidiary’s income (loss) for the same period deducting intercompany gains (losses). In addition, this account includes the adjustments necessary to make the valuation methods of the abovementioned company consistent with those of the subsidiary and the income tax adjustment (see section b.).

Financial income (expense) and holding gains (losses) include both foreign exchange differences, as well as gain (loss) from inventory holdings, interest, and gains (losses) from exposure to inflation.

Imputed financial components included in income-statement accounts were segregated.

• Income tax – Tax on minimum presumed income (TOMPI)
• Status of Mirgor S.A.

During the current period, the Company did not accrue income tax since taxable income resulted in a NOL under current regulations.

Income tax is booked following the liabilities deferred tax method for all the temporary differences existing as of the balance sheet date between assets and liabilities tax bases and their amounts booked in these financial statements, as set forth under FACPCE Technical Resolution No. 17.

Deferred income tax assets are recognized whenever there are differences that reduced future taxes and accumulated prior-year NOLs that have not been used, to the extent that there could be taxable income available to be offset against them. The book value of deferred income tax assets is reviewed upon preparing the financial statements and it is reduced to the extent that there was no possibility of sufficient taxable income that could be fully or partially offset against deferred income tax assets.

Based on the enforcement entity’s regulations, deferred income tax assets and liabilities have been valued at nominal value and quantified at the rates expected to be applied to the period in which assets are realized and liabilities are settled considering the regulations enacted as of the date of the financial statements, and they are disclosed in noncurrent liabilities or assets, as the case may be.

The professional accounting standards approved by the CPCECABA set forth that deferred taxes receivable and payable should be valued at their discounted value using market rates effective at end of the period or fiscal year. As indicated below, the difference in accounting standards does not impact the shareholders’ equity as of December 31, 2004, and income (loss) for the year then ended.

Taking into account that the Company is carrying forward NOLs amounting to ARS 9,809,161 (out of which ARS 9,485,675 can be used until December 31, 2007, and the rest until December 31, 2009), there would be a deferred tax asset of ARS 3,601,026, which the Company has written off entirely based on current expectations about the possibility of using such NOLs with taxable income and the Company’s tax situation referred to in Note 4.

The tax on minimum presumed income is supplementary to income tax in that, whereas the latter is charged on taxable income for the year, tax on minimum presumed income is the floor tax that is levied on the potential income generated by certain productive assets and is calculated at the rate of 1% of the taxable assets, and in such way that the tax the Company is required to pay in shall be the higher of these two taxes. However, if in any given tax year, tax on minimum presumed income exceeds income tax, such excess may be computed as payment on account of any excess of income tax over tax on minimum presumed income that may arise in any of the ten subsequent years.

In the year ended December 31, 2004, the 21,269 amount assessed for minimum presumed income tax was higher than income tax, which was booked in noncurrent tax credits. The accumulated amount to date is 1,524,599 since the Company’s Management understands that based on its future business plan such amounts would be recoverable.

• 1. Status of the subsidiary ICSA

Interclima S.A. has accrued income tax since it understood that as from the economic crisis due to the abandonment of the convertibility system (currency board, whereby the Argentine peso was pegged at parity with the US dollar) mentioned in Note 10 the tax adjustment for inflation set forth in Income Tax Law should be applied taking into account Argentine current macroeconomic conditions.

The Company prepared and filed the 2002 income tax return, containing such adjustment, by which NOLs amounting to about ARS 5,200,000 were determined.

Had the tax-purposes adjustment-for-inflation not been made, the Company would have determined income tax amounting to about ARS 384,342 for fiscal year 2002 (after computing prior-year NOLs) and ARS 854,892 for fiscal year 2003 and of ARS 1,279,585 for the year ended December 31, 2004, original values without computing financial adjustments.

Interclima S.A. filed a legal remedy to obtain judicial protection since it understands that due to the high inflation that affected fiscal year 2002, section 39 of Law No. 24,073 dated 1992 should be abrogated. This section established an index applicable to the tax adjustment for inflation amounting to 1.00 (one) and suspended the application of such adjustment on taxable income in practice, as it had been regulated within an economic context that differed completely from fiscal year’s 2002. Consequently, these liabilities (ARS 2,518,819 plus interest accrued amounting to about 350,000) have not been booked in the parent´s company financial statements as of December 31, 2004, however, since fiscal year 2003 the company has considered such contingency for the evaluation of the investment. Such decreased value as of the beginning of fiscal year 2003 (ARS 384,214) was considered an Adjustment to Prior-Year Income (see Note 12).

On July 17, 2003, the court hearing the case granted the precautionary measure requested by the company and ordering the Federal Company to refrain from commencing any administrative or legal proceeding or from filing any claim or making any request, as well as from applying any penalty based on the alleged prohibition to apply the adjustment for inflation.

On October 15, 2004, the Trial Court Judge before whom the subsidiary filed its constitutional protection action for the AFIP to accept the legitimacy of the adjustment for inflation provided for in Income Tax Law No. 20,628 Title VI has ruled that Section 4 of Law No. 25,561 amending Sections 7 and 10 of Law No. 23,928, and Section 5 of Presidential Decree 214/02, and Section 39 of Law No. 24,073 since they disregard Articles 14 and 17 of the Argentine Constitution and it has ordered the AFIP to compute the adjustment for inflation in the fiscal year ended December 31, 2002, and filed on May 8, 2003.

• Statement of cash-flows

Under FACPCE Technical Resolutions No. 8 and 9, the statement of cash flows is included as an individual statement. The Company prepared such statement following the indirect methods on the basis of net income (loss) adding or subtracting, as the case may be, the accounts involved in the assessment thereof but not affecting the cash and changes in assets and liabilities as well as the net cash flow “provided by” or “used in” “investment” and “financing” activities. The Company has considered “Cash” to be formed by cash plus readily convertible investments (original placements of less than three months).

note 2 – MAIN ACCOUNT BREAKDOWN

		12/31/04		12/31/03
CURRENT ASSETS
Cash
On hand and imprest fund in Argentine currency		6,734		37,492
On hand in foreign currency		102,517		105,476
In banks in Argentine currency		10,076,762		4,360,105
In banks in foreign currency		7,374,527		9,172,724
		17,560,540		13,675,797
Short-term investments
Savings account in Argentine currency and other		587		587
		587		587
Trade receivables
Trade receivables in Argentine currency		19,274,435		14,913,725
Trade receivables in foreign currency		549,741		-
Allowance for impairment in value of trade receivables		(485,003)		(85,177)
		19,339,173		14,828,548
Taxes receivable
VAT credit		269,969		110,166
Other		104,832		-
		374,801		110,166

note 2 – MAIN ACCOUNT BREAKDOWN - Continued

			12/31/04					12/31/03
Other receivables
Notes receivables			758,262					749,597
Interest to be accrued			(95,623)					(95,109)
Seguros a devengar			217,877					165,060
Other			271,492					446,457
			1,152,008					1,266,005
Inventories
Manufactured products			13,925,485					10,420,164
Raw material			24,406,285					22,064,611
Raw material in transit			7,613,510					7,110,837
Stock at end of period			45,945,280					39,595,612
Prepayments to vendors in Argentine currency			529,327					366,500
Prepayments to vendors in foreign currency			881,317					1,950,354
Allowance for impairment in value			(9,657,577)					(7,491,316)
			37,698,347					34,421,150
NONCURRENT ASSETS
Taxes receivable
VAT credit			93,481						93,481
Minimum presumed income tax			1,524,599						1,503,330
Promotional benefits receivable – Note 4(c)			952,882						779,973
Reimbursements receivable in local currency			971,705						919,770
Deferred tax credit			3,601,026						3,134,899
Allowance for impairment in value of the deferred tax credit			(3,601,026)						(3,134,899)
Other			27,832						118,818
Allowance for impairment in value			(1,945,000)						-
			1,625,499						3,415,372
Other receivables
Notes receivable		695,074					1,426,633
Interest to be accrued		(87,655)					(181,012)
Section 33, Law No. 19,550 companies (subsidiaries and affiliates) – Note 7		296,148					-
		903,567					1,245,621

note 2 – MAIN ACCOUNT BREAKDOWN – Continued

							12/31/04								12/31/03
CURRENT LIABILITIES
Payables
Trade payables
In local currency					7,400,450									6,762,362
Related companies – Note 7					732,498									576,002
In foreign currency					11,552,798									10,974,758
					19,685,746									18,313,122
Salaries, payroll and other taxes
Employee benefits						1,177,025							662,491
Taxes payable						683,272							966,161
						1,860,297							1,628,652
Loans
Financial loans in local currency						8,515,641							2,216,748
Financial loans in foreign currency						2,161,014							3,351,894
						10,676,655							5,568,642
Customer prepayments
In local currency						-									1,798,553
In foreign currency						4,291,125									2,251,990
						4,291,125									4,050,543
Other payables
Companies under Section 33, Law No. 19,550 (subsidiaries and affiliates) – Note 7						2,943,349							1,167,343
In local currency						-							33,748
In foreign currency – Note 7						304,307							196,641
						3,247,656							1,397,732
NONCURRENT LIABILITIES
Payables
Loans
Financial loans in local currency						908,409							2,782,244
Financial loans in foreign currency						5,123,880							6,867,900
						6,032,289							9,650,144
Other payables
Companies under Section 33, Law No. 19,550 (subsidiaries and affiliates) – Note 7				-								3,000,000
				-								3,000,000

note 2 – MAIN ACCOUNT BREAKDOWN – Continued

		12/31/04		12/31/03
OTHER EXPENSE / INCOME
Inventory difference		-		(890,743)
Leases		1,200,000		1,200,000
Other		87,427		(1,011,524)
		1,287,427		(702,267)

note 3 – capital STRUCTURE – SHAREHOLDERS’ equity

1. Capital structure

As provided for in the amendments to the Company’s articles of incorporation approved by the Special Shareholders Meeting held May 27, 1994, the Company’s capital stock was increased from 3.20 to 2,000,000.

The capital stock is represented by 20,000,000, registered, subscribed, paid-in, book-entry shares of common stock, face value 0.10.

The Company’s shares were converted into three classes as detailed below:

Class
A B C	Entitled to three (3) votes each Entitled to three (3) votes each Entitled to one (1) votes each

Class A, B, and C shares are entitled to the same dividend collection rights.

The capital stock structure as of December 31, 2004 and December 31, 2003, was:

Class	Number
A B C	5,200,000 5,200,000 9,600,000
TOTAL	20,000,000

note 3 – capital STRUCTURE – SHAREHOLDERS’ equity – Continued

1. Other reserves - For future dividends

This account includes the decisions made by the Shareholders’ Meetings held May 24, 1995, May 22, 1998, and April 29, 1999, approving the setting of reserves for future dividends in the amounts of 18,784,406, 7,693,924, and 8,353,403, respectively. The Board of Directors would thus be free to allocate such amounts to cash dividend payments, as deemed appropriate. On July 14, 1995, May 12, 1998, December 13, 1999, July 18, 2000, and December 15, 2002, the Board of Directors approved the payment of 9,368,077; 9,342,622; 3,846,962; 4,176,701; and 4,176,701, respectively.

note 4 – COMPANY’S TAX SITUATION: TAX SYSTEM – TAX CREDITS

• 1. Income tax – Minimum presumed income tax

The applicable income tax rate has not changed during the year under analysis.

The changes in deferred income tax credit and the charge to income for the period ended December 31, 2004, were as follows:

	Deferred tax credit		Income tax Income / (Loss)
Balance at beginning of year, less the provision	-
Change in the deferred asset provision	(466,126)		(466,126)
Increase in temporary asset differences	35,699		35,699
Decrease in temporary liability differences	430,427		430,427
Balance as of year-end, less the provision	-		-

note 4 – COMPANY’S TAX SITUATION: TAX SYSTEM – TAX CREDITS – Continued

The reconciliation between the charge to income booked in connection with income tax and the one resulting from applying the 35% rate established by current tax regulations on book income for the period is as follows:

Net income for the year before income tax	7,060,207
Permanent differences	(8,391,995)
Taxable income before temporary differences	(1,331,788)
Tax rate	35%
Book income tax credit before provision	(466,126)
Allowance for impairment in value of deferred asset	466,126
Income-tax book charge	-

The items included in the deferred-tax credit as of December 31, 2004, break down as follows:

Asset temporary differences		12/31/04		12/31/03		Change
Non-deductible allowances		702,128		697,047		5,081
2002 foreign exchange difference		98,762		148,142		(49,380)
NOLs		3,399,985		3,319,986		79,999
		4,200,875		4,165,175		35,700
Liability temporary differences
P&E depreciation		(599,849)		(1,030,276)		430,427
		(599,849)		(1,030,276)		430,427
Deferred tax credit as of year-end before provisions		3,601,026		3,134,899		466,427
Allowance for impairment in value		(3,601,026)		(3,134,899)		(466,127)
Deferred tax credit as of year-end before provisions		-		-		-

• 1. Tax system – Tax credits

Due to the goods and operations carried out in the Province of Tierra del Fuego the Company has been included in the following systems:

1. Industrial promotion system under Law No. 19,640 of 1972 to operate in the Province of Tierra del Fuego. In this sense, the Company is entitled to certain tax and customs benefits through 2013. Such benefits include:

note 4 – COMPANY’S TAX SITUATION: TAX SYSTEM – TAX CREDITS – Continued

1. Income tax: The Federal Executive issued Decree No. 1,395/94 whereby, as from September 1, 1994, 85% (see effect of Presidential Decree No. 615/97) of the price paid by customers out of the earnings related to the Province of Tierra del Fuego would be income-tax exempt (whose rate is 35%).
2. Value-added tax (VAT): as from April 1995, the Company’s sales would be subject to 21% VAT to be charged to the customers of Mirgor S.A.C.I.F.I.A.

Presidential Decree No. 1,395/94 provided that presumed VAT credits computable as from September 1, 1994, would be equivalent to the amount resulting from applying the VAT rate on 61.11% (see effect of Presidential Decree No. 615/97) of the net sales price to customers. Therefore, the tax obligation shrank by 8% thereof as from April 1995.

1. Under Law No. 23,697, the Federal Government suspended the tax benefits during 1989 and 1990. Thus, the Company made payments on account of capital tax and VAT which, under such law, would be reimbursed to the Company through negotiable tax credit certificates.

DGI (Argentine tax bureau) General Resolution No. 3,838/94 provided for the procedure to obtain the tax credit certificates mentioned above. The Company booked such credits in the amount of 1,511,788 based on the difference of the amount originally booked and that requested on June 27, 1995, under the valuation methods disclosed in the resolution.

On September 17, 1996, the DGI issued an opinion recognizing a larger amount in favor of the Company (2,194,142) (un-restated historical value) as a result of the adjustment rate for the prior month used by the Company in the original filing. In addition, the Company booked a 148,853 (un-restated historical value) credit related to the reimbursement of VAT – Vendors to be requested under the VAT on exports recovery system.

Considering that, on May 2, 1996, the Ministry of Economy issued Resolution No. 580/96 and that the credits are previous to April 1, 1991, the Company decided to book the recognized credit at the listed price effective as of each period-end of BOCONS (Debt Consolidation Bonds) issued under Law No. 23,982, as supplemented, which amounted to ARS 812,674 as of September 30, 2004, and to ARS 631,120, as of December 31, 2003.

note 4 – COMPANY’S TAX SITUATION: TAX SYSTEM – TAX CREDITS – Continued

On May 19, 1997, the DGI provisionally recognized the amount indicated above.

1. Customs duties (amounting to about 15% for the Company) and the statistical rate (equivalent to 3%) of all imported inputs used for operation in Tierra del Fuego which, under the benefits granted by Law No. 19,640, are not paid by the Company.
2. The amounts saved by the Company considering the items mentioned in points (b) and (d) are:

	Years ended
	December 31, 2004	December 31, 2003
V.A.T.	25,927,417	14,068,442
Customs duties and statistical rate (approximate amounts)	13,830,595	8,465,081

Although the Tierra del Fuego location provides the Company with certain promotional benefits, as described above, such situation means incurring increased costs such as: salaries, communications, freight, leases and trips, among others.

Presidential Decree No. 615/97 dated July 7, 1997, amending Presidential Decree No. 1,395/94 reinstated certain tax benefits granted under Industrial Promotion Law. Based on such decree, the presumed VAT credit computable as from August 1, 1997, is equivalent to the amount resulting from applying the 100% over the VAT rate (effective at the time of sale) on the net sale price to the customer. In addition, the income tax method was amended as well since the sales carried out from the Province of Tierra del Fuego to the Argentine continental territory are 100% income-tax exempt, as provided for in Law No. 19,640, Section 4(a).

Considering the benefits deriving from this note, the Company does not need to meet additional requirements, except for performing the related activities in Tierra del Fuego.

note 4 – COMPANY’S TAX SITUATION: TAX SYSTEM – TAX CREDITS – Continued

As regards the rebates to be collected in Argentine currency on account of exports from the mainland to the Tierra del Fuego island, owing to delays in payment by the Federal Government, the Company filed a series of requests with the Customs Authority (Promotional Systems Section) to collect such amounts. As of the date of issuance of these financial statements, although unfavorable administrative resolutions were issued, the Company’s legal counsel understands that the transactions carried out by virtue of Law No. 19,640 and, therefore, the collection of rebates set forth by regulations is applicable. Such unfavorable resolutions were challenged; thus, the proceedings are in the Customs Legal and Technical Department awaiting the issuance of the respective formal opinions.

Considering the tax system to which the Company is subject as mentioned in paragraphs 4.1 and 4.2, as of December 31, 2004, the Company and its subsidiary carried tax credits amounting to 5.6 million in the consolidated financial statements (net of an allowance of 3.34 million for risks of impairment in value of receivables from the government charged to income for this year) and to 1.6 million in the stand-alone financial statements (net of 1.94 million for the allowance for the risk of impairment in value of tax credits), which were disclosed in noncurrent assets. The recovery of such credits depends on the companies' possibility of carrying taxable income in the coming years, among other factors. In this respect, the Company’s Management understands that based on its future business plan, such credits will be recoverable.

1. Competitiveness: established by Presidential Decree No. 730/01 to improve competitiveness and foster employment in Argentina. The main benefits established by the companies adhering to such system are:
2. Full corporate indebtedness tax exemption;
3. Full TOMPI exemption;
4. Computation as VAT credit of the amounts paid on account of employer contributions to the SUSS (Single Social Security System).

The benefits mentioned in (a) became effective as from August 31, 2001; those in (b) and (c) became effective as from July 1, 2001. In the case of (a) and (b), the benefits remained in effect through June 30, 2003, while those under (c) ended on November 30, 2001.

note 5 – major customers and license agreements

For the years ended December 31, 2004, and 2003, the Company’s sales to its most important customers were:

		12/31/2004		12/31/2003
Volkswagen Argentina S.A.		41%		44%
General Motor Argentina		26%		16%
Renault Argentina S.A.		17%		8%
Mercedes Benz		8%		5%
Peugeot Citroen Argentina S.A.		6%		6%

A significant portion of the Company’s products are carried out under license agreements executed with Valeo Thermique Habitacle.

note 6 – parent company

Parent Company: Il Tevere S.A.

Registered office: Paseo Colón 221, Piso 2 – Buenos Aires

Main business: holding company

Voting rights: 76.47%

Shareholdings: 52%

On July 15, 1996, the transfer of 40% of Il Tevere S.A.’s shares in favor of Valeo Climatisation, indirect shareholders of 20.8% of the capital stock and 30.59% of the voting rights of MIRGOR S.A.C.I.F.I.A. On March 6, 1998, 10% of the shares of Il Tevere S.A. was transferred to Valeo Climatisation; thus the interest in MIRGOR S.A.C.I.F.I.A. was increased to 26%.

note 7 – RELATED-PARTY INFORMATION

The Company was engaged in transactions with its subsidiary, parent, and other related companies. Receivables and payables in that regard are:

		12/31/2004		12/31/2003
Other receivables (noncurrent)
Il Tevere S.A. (3)		296,148		-
Total		296,148		-
Trade payables
Valeo Sistemas Automotivos Ltd. (2)		(102,464)		(207,881)
Valeo Autoklimatizace S.R.O. (2)		(59,499)		(70,876)
Valeo Climatization S.A. (Euro) (2)		(9,808)		-
Valeo Klimasysteme GMBH (2)		(5,643)		-
Valeo Sistemas Automotivos (2)		(150,645)		(77,406)
Valeo Climate Control Mexico (2)		-		(18,074)
Valeo Autosystemiy SP. Z.O.O. (2)		(44,492)		(35,981)
Valeo Vymeniky Tepla s.r.o. (2)		-		(41,593)
Valeo Thermique Moteur (2)		(185,190)		(51,253)
VCC Up Echangeurs (2)		(174,757)		(72,938)
Total		(732,498)		(576,002)
Other payables (current)
VCC Up Echangeurs (2)		(304,307)		(196,641)
Interclima S.A. (1)		(2,943,349)		(4,167,343) (4)
Total		(3,247,656)		(4,363,984)

note 7 – RELATED-PARTY INFORMATION – Continued

The transactions carried out with the subsidiary, parent, and other related companies for the year ended December 31, 2004 and December 31, 2003, are:

		Merchandise importation		Services received		Royalties		Loans		Other services
Valeo Sistemas Automotivos Ltd. (2)		1,138,156		-		-		-		-
Valeo Autoklimatizace S.R.O. (2)		468,804		-		-		-		-
Valeo Climatización S.A. (Euro) (2)		124,516		-		-		-		-
Valeo Klimasysteme GMBH (2)		91,031		-		-		-		-
Valeo Componentes Automóviles (2)		163,420		-		-		-		-
Valeo Sistemas Automotivos (2)		712,415		-		-		-		-
Valeo Climate Control Mexico (2)		376,342		-		-		-		-
Valeo Autosystemiy SP Z.O.O. (2)		89,382		-		-		-		-
Valeo Vymeniky Tepla s.r.o. (2)		1,348,132		-		-		-		-
Valeo Thermique Francia (2)		223,566		32,870		-		-		-
Valeo Thermique Motear (2)		1,404,011		-		-		-		-
Valeo Zaragoza (2)		1,928,363		-		-		-		-
VCC Up Echangeurs (2)		2,221,084		-		586,851		-		-
Interclima (1)		3,934,544		-		-		(2,862,531)		1,200,000
		14,223,766		32,870		586,851		(2,862,531)		1,200,000

1. Subsidiary company.
2. Related company.
3. Parent company.
4. Current ARS 1,167,343 and non current ARS 3,000,000.

note 8 – income tax withholding on dividends

When dividends are paid in excess of taxable income as provided for in Income Tax Law, a single and definitive 35% amount shall be withheld. Based on the unnumbered section subsequent to Section 69 of Income Tax Law, the Company need not withhold any amount on such account.

note 9 – stamped and sealed books

The books which were stamped and sealed after the related transactions are:

Journal No.	Stamped and sealed	Period transactions
43	July 1, 2003	04/14/03 to 05/30/03
44	July 23, 2003	05/30/03 to 07/22/03
45	July 23, 2003	07/22/03 to 09/02/03
46	September 22, 2003	09/02/03 to 10/09/03
47	September 22, 2003	10/09/03 to 11/22/03
48	December 22, 2003	11/22/03 to 01/05/04
49	December 22, 2003	01/05/04 to 03/01/04
50	April 27, 2003	03/01/04 to 03/22/04
51	April 27, 2003	03/22/04 to 04/26/04
52	August 11, 2004	04/26/04 to 06/30/04
53	September 20,2004	06/30/04 to 08/09/04
54	September 20, 2004	08/09/04 to 09/21/04
55	October 20, 2004	09/21/04 to 11/01/04
56	October 20, 2004	11/01/04 to 11/30/04

Regarding transactions for the period December 1 through December 31, 2004, for administrative reasons, the loose sheets meeting Regulation No. 105/94, issued by the DPJ (regulatory agency of business associations) of Tierra del Fuego, have not yet been transcribed.

NOTE 10 – RECENT SIGNIFICANT ECONOMIC EVENTS

Since early December 2001, Argentine authorities implemented a number of monetary and foreign exchange control measures that mainly included restrictions on the free disposition of funds deposited with banks and the practical impossibility of making transfers abroad, with the exception of transfers related to foreign trade and other authorized transactions, which in some cases are subject to the approval from the BCRA (Central Bank of Argentina). In this regard, other regulations were issued, which further amended the new regulations then in effect, such as: consolidation of foreign exchange markets into a “free” market, B.C.R.A.’s prior authorization to make certain transfers abroad on account of principal and interest servicing; and the temporary suspension of dismissals without fair cause.

NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND - Continued

NOTE 11 – BANK LOANS – RESTRICTION ON EARNINGS ALLOCATION

The Company borrowed loans from different banks.

The borrowing and renegotiation of these loans entails the Company's compliance with certain conditions and requirements, which it has fulfilled to date, especially those related to meeting certain ratios in its quarterly financial statements, especially those aimed at measuring the liabilities-to-interest-paid ratio, as well as those related to keeping limits on the Company’s indebtedness, which should not exceed USD 25 million, as stipulated in the case of the loan from Citibank N.A. Additionally, the Company agreed not to distribute dividends during the term of the loan and not to make annual repayments to the BNP exceeding 25% of the Company’s total payable to such bank. Additionally, the Company has assumed certain commitments normal in this kind of restructuring.

NOTE 12 – CHANGES IN PRIOR-YEAR INCOME (LOSS)

For fiscal year 2003, as a result of applying new accounting standards effective as from January 1, 2003, as indicated in note 1(b), the Company booked such impact on accumulated income (loss) as from December 31, 2002.

The total loss amounted to ARS 1,928,327, which is mostly related to the valuation of receivables and payables at the net present value of the amount receivable or payable, as the case may be, and with the recognition of payables to vendors. ARS 384,214 should be added to that amount due to the adjustment mentioned in note 1(b) (Long-term investments – Equity interests in other companies – Income tax).

NOTE 13 – EARNINGS PER SHARE

Earnings per share (basic and diluted) are calculated by dividing the net income (loss) for the period related to common shares by the weighted average cost of outstanding common shares during the same period. No transactions involving common shares or possible common shares have been performed as from the information issuance date until the conclusion of these financial statements.

NOTE 14 – EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

These financial statements are the English translation of those originally issued in Spanish.

They are presented in accordance with generally accepted accounting principles in Argentina. The effects of the differences between Argentine generally accepted accounting principles and the accounting principles generally accepted in the countries in which the accompanying financial statements may be used have not been quantified.

Accordingly, these financial statements are not intended to present financial position, results of operations and changes in financial position in accordance with accounting principles generally accepted in the countries of users of the financial statements, other than Argentina.