Mirgor - Annual Report 2005 | FinancialReports.eu


Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria	Financial Statements for the fiscal year beginning January 1, 2005, and ended December 31, 2005, jointly with the Auditor’s Report (Translation into English – originally issued in Spanish)

BOARD OF DIRECTORS

CHAIRMAN

Roberto G. Vazquez (*)

VICE-CHAIRMAN

José Fara (*)

DIRECTORS

Nicolás Martín Caputo

José Luis Caputo

Alejandro Carrera (*)

ALTERNATE DIRECTORS

Jorge Antonio Caputo

Diego García Villanueva

Mauricio Blacher

Eduardo Garcia Terán

Martín Basaldúa

STATUTORY AUDIT COMMITTEE

Statutory auditors

Aldo Carugati

Karén Grigorian

Enrique Crespi

Alternate statutory auditors

Pablo Moreno

Gabriel Casella

Benjamín Harriague

(*) Audit Committee members.

LETTER TO THE SHAREHOLDERS

To the Shareholders:

In compliance with current legal requirements and Company by laws, we are pleased to submit for your consideration the documentation related to the financial statements fiscal year No. 35 ended December 31, 2005.

Framework in which the fiscal year’s activities were developed

In the 2004 Letter to the Shareholders, we presented some doubts on the economy's ability to sustain the growth rate of the prior 18 months as well as on the continuity of the promoters of this trend.

A special note was made on the uncertainty on the closing of the agreements with foreign creditors and the International Monetary Fund, sustaining commodities prices, the BCRA’s (Central Bank of Argentina) ability to maintain the foreign exchange rate and the effects on the economy of the results of Congressional elections.

A few days ago, the data on the 2005 GDP was published; from such information, it is clear that the concerns that we had at year-end no longer exist thanks to the results. Although some analysts had some doubts on whether this pace is sustainable over the current fiscal year, the auto industry has maintained the levels it had by the end of 2005.

Partly, Argentina had to pay with increased inflation the effects of this healthy economy that we have lived. We have been provided with a wide range of explanations, based on the ideas of analysts: Excessive monetary issuance, increase in aggregate expenditure without a similar level of investments to balance it, abuse in monopoly power, adjustment of relative prices after the devaluation.

The truth is that these factors have accumulated tensions in the economy that are still effective in 2006, such as the lack of adjustment of public utility rates, increases in the costs of raw material, increases in rates and taxes, and strong salary demands.

Most analysts agree that the investment rate necessary to maintain these growth rates without adding inflation pressures is not being achieved, mainly regarding foreign investment.

It is to be expected that the Government will be able to provide a juristic security image that will improve relationships with foreign players and that may convince them that the cyclical crises of the Argentine economy will not spoil the recovery achieved over the past few years.

Auto industry

Once again it has played a significant role in Argentina’s industrial activity and it placed the sector in values close to the average amounts of the 1990s.

An important issue in this case is the gradual recovery of exports as investments mature; such recovery enabled the launch of new vehicles, such as Peugeot 307 and Toyota Hilux. It is clear that the modernization of the models manufactured shows a more competitive profile of local factories.

Domestic demand increased at a rate higher than production, 29.1%, exceeding for the fourth time in history 400,000 units. However, there is still a major share of imported vehicles which fell from 65.2% to 64.4% in 2005. In absolute values, the number of imported cars sold in Argentina in 2005, 259,400 units, exceeded the historical record of 2004.

The explanation for this is that Argentine production is focused on increased value cars and the largest demand in Argentina is related to small cars, in which Brazil is more specialized. Proof of this is that VW Gol continues to be the sales leader after several years on the market.

Estimations for the coming year allow us to expect production to grow and reach demand levels, which will enable a positive balance in the vehicles trade balance.

An unresolved matter for the sector is improving the share of Argentine cars on the Brazilian market which, so far, has not taken advantage of the appreciation of the real as compared to the Argentine peso in its results.

As to our Mercosur partner, Argentina made clear the position stated by the President, his successive ministers of economy and industry secretary on the free trade of the sector that should be in effect by the end of 2005. The trade balance of the sector resulted in deficit even though it did not exceed the limits established by flex (maximum deficit level established).

This issue has been under negotiation in early 2006 but Argentina has stated the need to balance sector trade on the basis of supplementary investments among companies, especially regarding auto-makers.

Auto production increased by 22.8%, with a strong growth of Toyota, Peugeot, and Daimler Chrysler. In the former two cases, the improvement is related to the new models that are being manufactured and in the last case it is related to a decision from the Head Office to transfer production from Germany to the plant located in Argentina.

With 319,000 manufactured units, it was possible to increase by two-fold the amount manufactured only three years ago.

Company activities

A major event occurred during 2005: the repurchase of the shares held by Valeo by a local group of shareholders from the parent Il Tevere. This change was related to the interest that Mirgor expand its businesses to other industrial sectors and that Valeo focus its attention on the auto-markets that require more attention.

The negotiation considered the execution of technical and commercial agreements through 2013 to support the Company’s auto strategy.

Despite the growth in auto production for 2005, the units sold by Mirgor did not increase by the same proportion.

The sales of air conditioning systems rose from 111,020 units sold in 2004 to 123,165 units sold in 2005, which represents an increase of only 10.9%.

This result is related to the explanation that the new models launched are the ones with the highest demand.

In the case of Mirgor products, the sharp fall of the new Corsa significantly affected the growth expectations that had been set. General Motors modified its products strategy and is currently focusing its production on the Corsa Classic model. With General Motors, we achieved a major objective as obtaining a quality index of zero defects in the products of its line throughout fiscal 2005.

A part of this fall was compensated with the incorporation in September of one of the versions of Peugeot 307.

The Company’s sales increased by 43.8%, from ARS 201 million to ARS 289 million. The main cause for this change in sales resulted from the new business line of the subsidiary Interclima.

In the auto sector, consolidated sales increased by about 19% as a result of an increased share in the cooling systems that rose from 67% to 74%. The sales mix to more complex products also favors billing amounts.


	Breakdown of Mirgor’s results (in number of units)
	2005		2004		Difference

Total	123,069		110,908		12,161

Old models
Sprinter	17,439	14.2%	14,012	12.6%	3,427
Corsa I	22,411	18.2%	11,898	10.7%	10,513
Partner	12,959	10.5%	7,975	7.2%	4,984
Kangoo	13,043	10.6%	9,089	8.2%	3,954
Megane	6,635	5.4%	6,751	6.1%	(116)
Gol	-	-	-	-	-
Polo	20,937	17.0%	20,075	18.1%	862
Caddy	5,002	4.1%	5,821	5.2%	(819)
Subtotal	98,426	80.0%	75,621	68.2%	22,805



New models
Corsa II	11,200	9.1%	26,396	23.8%	(15,196)
Clio	10,999	8.9%	8,891	8.0%	2,108
307	2,372	1.9%	-	-	-
Mpv	72	0.1%	-	-	-
Subtotal	24,643	20.0%	35,287	31.8%	(13,088)


	Customer share in Mirgor’s sales (in units)
	2005	2004

Daimler Chrysler	14.2%	12.6%
Volkswagen	21.1%	23.3%
General Motors	27.3%	34.5%
Renault	24.9%	22.3%
Peugeot	12.5%	7.2%

In connection with condenser sales, there was a change in the share in sales. Exports to Valeo Brazil fell after the plant in such country launched the investments that had been decided before Valeo left Il Tevere.

Valeo compensated this fall allowing Mirgor to engage in the provision of condensers for Peugeot 206 on the domestic market and it granted the purchase order for the condensers of the new Celta to be launched in fiscal 2006. Our subsidiary Interclima prepared for this incorporating new high-performance condenser manufacture technology, used for the equipment mentioned.

The line of residential air conditioners was the one that grew the most: it increased by threefold representing almost 25% of the Company’s sales in fiscal 2005. The plant manufacturing this equipment was granted its ISO 9001:2000 certificate.

Based on market data, the total volume of residential air conditioning was close to 750,000 units sold during the last season. This segment, unlike the auto sector, shows an important seasonality.

The units sold by Interclima increased from 17,463 in 2004 to 61,425 in 2005. However, we should bear in mind that 2004 was not a full year since production was launched in the last few months of the year.

Extension of the Letter to the Shareholders’ under Presidential Decree No. 677/2001

In connection with personnel compensation policies, the Company’s Board of Directors maintained effective the policy of providing compensation on the considered market salaries, including within them performance and objective meeting evaluations, without any option plans or any other variables. Such policy is also applied to the Board of Directors. Compensation is thus granted to those having executive functions at the Company and fees payable to non-payroll directors are approved by the Shareholders’ Meeting.

As seen in fiscal 2004, the Company’s financial position has shown solvency and soundness having fully met all its commitments. The new projects and developments addressed during the year were financed by the Company itself. Considering the high demand levels expected for the coming years as to competitiveness and efficiency, innovation, and new businesses, in order to maintain market leadership, we will need to reinforce liquidity with third-party financing so as not to affect working capital.

Consolidated Financial Statements Analysis

(figures stated at values as of 12-31-05)

Income for the year

Sales for the year amounted to ARS 288,935,000 representing a 43.3% year-to-year increase. At this point, apart from the increase in the volume of auto activities, the consolidation of the new business line of residential air conditioning of the parent Interclima was fundamental.

Net income for 2005 amounted to ARS 19,723,000 representing 6.8% of sales against income for 2004 in the amount of ARS 7,300,000. In addition, financial expense and holding losses amounted to ARS 6,844,000, representing 2.4% of sales and a 23.4% year-to-year decrease, when they accounted for 4.4% of sales. This is because in the current year the Company has not suffered any major changes in allowances for assets or in exchange rates.

Administrative expenses amounting to ARS 11,334,000 represent 3.9% of current-year sales considering that those for the prior fiscal year amounted to ARS 9,069,000 and representing 4.5% on sales.

The transactions with the Parent are detailed in note 7 to the financial statements.

Cash flows

The cash provided by ordinary consolidated transactions, net of changes in assets and liabilities for fiscal 2005, amount to ARS 14,811,000, while during the fiscal year ended December 31, 2004, the cash provided amounted to ARS 4,913,000. P&E purchases for the current year amounted to ARS 2,291,000, while in the prior year purchases amounted to ARS 1,804,000. During the current year no cash was provided by or used in extraordinary transactions.

In connection with the cash related to financial activities, during fiscal 2005, loans were settled in the amount of ARS 19,224, while in fiscal 2004, the settlements amounted to ARS 15,659,000 as agreed upon duly, net cash flows from financial activities represented cash used in the amount of ARS 11,224,000 in the light of cash provided totaling ARS 1,241,000 in fiscal 2004.

The cash flows described herein entailed cash provided during 2005 in the amount of ARS 1,350,000 smaller by ARS 2,541,000 than the cash provided in 2004 totaling ARS 3,891,000.

Financial position

Shareholders’ equity for fiscal 2005 amounted to ARS 82,412,000, showing a 31.5% year-to-year increase.

Current liquidity ratio for 2005 amounted to 1.59 while, in fiscal 2004, such ratio amounted to 1.73; in addition, the fixed assets-to-shareholders’ equity ratio was equal to 0.13 and 0.21 for 2005 and 2004, respectively.

Total consolidated assets increased by 49.1% as compared to prior year amounting to ARS 188,266,000.

Prospects

Although there are some doubts similar to the ones for the prior year in connection with inflation, salary conflicts, the economy’s ability to keep the pace, the first auto manufacturing estimations show that activity will remain at levels similar to those for Q4 2005.

In the case of the auto industry, Mirgor will launch the production of new models for Peugeot (all 307 versions) and Volkswagen (model to be launched in Q2 2006).

These projects demand that assemble lines and warehouses be readjusted as well as the consideration of new tools to be used to inject large plastic parts.

This requirement and the adjustment of our inventories policy to achieve increased flexibility to program changes were two requirements that we had to commit to our customers considering that most of the production of both models will be exported.

Over the last few weeks a piece of news that was anxiously awaited by the market in connection with the future of Renault in Argentina was published.

Unluckily, no specific project was announced, which may be considered as a lack of interest in Argentine manufacture considering that the Company is producing models that have been on the market for several year.

Also in the case of General Motors and Ford, a definition is expected on the models that they will manufacture in the future although it is widely-known that in the case of Mirgor the former company is the most important one to evaluate the possibilities of increasing business activity.

Several modifications were made in the condensers plant in La Tablada to incorporate new technologies that were necessary to modernize the facilities and launch new products such as the condenser of the new Celta manufactured by GM Brazil.

The closing of the agreement with Valeo was indispensable to launch these investments that were carried out during the January plant stoppage and which will be completed in the next few months.

We also expect the residential air conditioning business to continue growing. This increase in activity makes it necessary for the Interclima plant to be adequate to these new volumes.

With this boost of some new businesses, the Company should also update its logistics and IT systems to maintain efficiently our operations for the coming year.

Proposal submitted by the Board of Directors

Earnings distribution

Unappropriated retained earnings at end of year include the following information:


Item		In thousands of ARS

Unappropriated retained earnings at beginning of year		48,936
Income for the year		19,723
Total as of December 31, 2005		68,659
To Legal Reserve		-
Balance at the disposal of the Shareholders’ Meeting		68,659

The Board of Directors’ requests the Shareholders’ Meeting to make the decision on the dividend distribution policy.

Acknowledgement

The Board of Directors wishes, once again, to express its deep gratitude to the management and employees for their collaboration during the current year as well as the suppliers and customers for the trust in the Company and the support granted.

March 10, 2006

ROBERTO G. VAZQUEZ

Chairman

AUDITOR’S REPORT

To the Chairman and Directors of

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

We have audited the accompanying balance sheets of MIRGOR S.A.C.I.F.I.A. as of December 31, 2005, and 2004, and the related statements of income, of changes in shareholders’ equity, and of cash flows for the years then ended. We have also audited the accompanying consolidated balance sheets of MIRGOR S.A.C.I.F.I.A. and its subsidiary as of December 31, 2005, and 2004, 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.
We conducted our audits in accordance with auditing standards effective 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 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.
As of December 31, 2005, and 2004, the Company and its subsidiary booked noncurrent VAT and minimum presumed income tax credits amounting to ARS 5,745,585 and ARS 5,264,016, 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 of December 31, 2004, the subsidiary carried noncurrent minimum presumed income tax credits of uncertain recoverability amounting to ARS 356,562, which was favorably solved during the current year. Therefore, our current opinion on the financial statements as of such date is no longer affected by this uncertainty.
2 -
In our opinion, subject to the effect of the adjustments that may have been required if the uncertainty described in paragraph 3 had been resolved, the financial statements mentioned in paragraph 1 present fairly, in all material respects, the financial position of MIRGOR S.A.C.I.F.I.A. and the consolidated financial position of MIRGOR S.A.C.I.F.I.A. with its subsidiary as of December 31, 2005, and 2004, and the related results of its operations and its cash flows for the years then ended, in conformity relevant CNV (Argentine Securities Commission) regulations.
In compliance with current regulations, we further report that:
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.
The financial statements of Mirgor S.A.C.I.F.I.A. 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 IGJ (regulatory agency of business associations) of Tierra del Fuego dated December 13, 2000.
The information included in points 2 and 3 of the “Summary of events for the year ended December 31, 2005" filed by the Company to meet CNV and BCBA regulations, results from the accompanying financial statements as of December 31, 2005, and 2004, and as of December 31, 2003, 2002, and 2001, (after being restated into constant pesos through February 28, 2003, as detailed in note 1(b) to the accompanying financial statements), not included in the document attached hereto, on which we have issued our reports on March 10, 2004, March 10, 2003, and March 8, 2002, respectively, to which we refer and that should be read jointly with this report. The information for the fiscal years ended December 31, 2002, and 2001, was not amended by Company Management to incorporate certain changes in professional accounting methods adopted by the Company as from January 1, 2003.
During the fiscal year ended December 31, 2005, we have billed fees related to audit services rendered to the issuer, representing 100% of the total amount billed to the issuer on any and all account, 71% of the total audit fees billed to the issuer, the parent and subsidiary, and 71% of the total amount billed to the issuer, its parent and subsidiary on any and all account.
3 -
As of December 31, 2005, liabilities accrued in employer and employee contributions to the Integrated Pension Fund System, as recorded in the Company’s accounting books, amount to ARS 265,967, none of which was due and payable as of that date.

Buenos Aires,

March 10, 2006

PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.

C.P.C.E.C.A.B.A. Vol. I Fo. 13

KAREN GRIGORIAN

Partner

Certified Public Accountant (UBA)

C.P.C.E.C.A.B.A. Vol. 175 Fo. 031

Einstein 1111 – Río Grande – Tierra del Fuego, Argentina.

FISCAL YEAR No. 35 BEGINNING JANUARY 1, 2005

Main business: Manufacture of air conditioning equipment for vehicles.

Date of registration with the Public Registry of Commerce:

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

Expiration date of the articles of incorporation: May 31, 2070.

SUMMARY OF EVENTS (*)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

(Figures stated in Argentine pesos - Note 1.b)

BRIEF COMMENT ON THE COMPANY'S ACTIVITIES FOR THE YEAR

The evolution observed in 2005 completely exceeded the economic uncertainties presented in late 2004. On the other hand, the Company kept up with the sustained pace of this growth.

Consolidate sales for fiscal 2005 amounting to ARS 288,935,000 represent a 43.3% year-to-year increase. This shows the recovery of the auto market, as well as the relative importance represented by the new business of the subsidiary Interclima related to residential air conditioning systems.

The auto sector showed a major increase based on increased exports and the continuity of the growth in domestic demand.

Mirgor profited from this growth from 133,169 total units sold in 2004 to 145,524 units sold in 2005, representing a 9.3% increase. On the other hand, the billing amount was favored by the change in the product mix reflected by a 21.1% growth in air conditioning systems.

The exports from our subsidiary Interclima fell during the current year. They compensated with an increase in the local share of condensers. Another major milestone was a significant investment in new technology that will allow us to recover a portion of this market with new products for Brazil.

In other aspects, the whole structure of the Company adequately followed the Company’s pace, thus being able to meet the targets set for the current year.

CONSOLIDATED BALANCE SHEET STRUCTURE


	12/31/2005	12/31/2004	12/31/2003	12/31/2002	12/31/2001

Current assets	162,979,749	99,680,710	67,547,756	66,879,625	60,949,060
Noncurrent assets	25,286,311	26,556,016	32,391,773	38,458,205	56,790,548
Total assets	188,266,060	126,236,726	99,939,529	105,337,830	117,739,608
Current liabilities	102,745,881	57,508,603	33,133,081	30,199,587	44,280,865
Noncurrent liabilities	3,100,800	6,032,289	11,411,548	16,836,705	-
Total liabilities	105,846,681	63,540,892	44,544,629	47,036,292	44,280,865
Minority interest	7,315	5,196	4,119	3,530	5,514
Shareholders’ equity	82,412,064	62,690,638	55,390,781	58,298,008	73,453,229
Total liabilities and shareholders' equity	188,266,060	126,236,726	99,939,529	105,337,830	117,739,608

CONSOLIDATED STATEMENT OF INCOME STRUCTURE


	12/31/2005	12/31/2004	12/31/2003	12/31/2002	12/31/2001

Operating income (loss) from recurring operations	27,929,181	17,491,758	414,982	1,723,633	(3,175,913)
Financial income (expense)	(6,844,081)	(8,938,563)	(994,056)	(16,139,916)	(6,666,470)
Other (expenses) / revenues	(855,261)	88,840	(1,535,015)	(356,707)	(935,779)
Income tax	(505,080)	(1,341,100)	(792,549)	(384,214)	-
Minority interest
in subsidiaries	(2,119)	(1,078)	(589)	1,983	97
Net income (loss)	19,722,640	7,299,857	(2,907,227)	(15,155,221)	(10,778,065)

STATISTICAL DATA (1)


Volume of units	12/31/2005		12/31/2004		12/31/2003		12/31/2002		12/31/2001
	Quarter	Accum.	Quarter	Accum.	Quarter	Accum.	Quarter	Accum.	Quarter	Accum.

Production (2)	117,689	358,217	92,533	275,243	63,595	215,288	43,303	147,618	26,995	178,250

Sales (3)	85,267	256,059	77,832	232,293	51,810	186,643	41,063	137,478	23,990	123,219

* Local	78,415	206,949	54,464	150,632	27,582	84,255	20,333	67,590	17,172	73,093
Equipment with air conditioning	25,206	90,593	21,413	74,837	16,274	41,451	12,346	35,839	11,442	47,004
Equipment without air conditioning	7,749	32,572	10,623	36,183	6,487	25,065	4,857	19,056	5,730	26,089
Dashboards	5,873	22,359	7,173	22,149	4,821	17,739	3,130	12,695
AA Res.	39,587	61,425	15,255	17,463
* Exports	6,852	49,110	23,368	81,661	24,228	102,388	20,730	69,888	6,818	50,126

1. As from fiscal 2004, the units sold by Interclima S.A. are disclosed as statistical information.
Including the one related to Interclima S.A.
The units sold among companies are not included.
RATIOS


	12/31/2005	12/31/2004	12/31/2003	12/31/2002	12/31/2001

Liquidity	1.59	1.73	2.04	2.21	1.38
Solvency	0.78	0.99	1.24	1.24	1.66
Fixed asset-to-equity capital ratio	0.13	0.21	0.32	0.37	0.48
Return on equity	0.24	0.12	(0.05)	(0.26)	(0.17)

Curr. assets/curr. liab.

Shareholders' equity / Total liabilities

Noncurrent assets / Total assets

Income for the year / Shareholder’s equity before income.

LISTED PRICE (values per ARS 1 nominal value)


JAN 04	JAN 05	FEB 04	FEB 05	MAR 04	MAR 05
24.50	26.30	23.10	28.20	24.10	28.00
APR 04	APR 05	MAY 04	MAY 05	JUN 04	JUN 05
23.55	29.00	22.40	29.25	21.00	28.50
JUL04	JUL 05	AUG 04	AUG 05	SEP 04	SEP 05
23.10	28.60	21.50	30.60	23.25	35.50
OCT 04	OCT 05	NOV 04	NOV 05	DEC 04	DEC 05
22.80	35.00	22.20	37.50	26.00	37.35

PROSPECTS

The activity of automakers and the definition on the products that they will finally decide to manufacture will be the factors determining the businesses to be addressed.

The Company will continue with its investment plan for the new products to be delivered throughout 2006; to such end it will use its own and third-party funds to finance the works and investments in infrastructure, molds, tools, machinery, and devices necessary to such end as well as in the adaptation of inventory levels with flexible processes allowing a quick readaptation to the requirements that may appear.

With the incorporation of new technology, the subsidiary Interclima is also ready to face a new year full of challenges. The objective to be met will be the launch of a new condenser for General Motors Brazil. As to residential air conditioning, new activity increases are expected; therefore, the manufacturing plant is being refurbished to suit such needs.

Buenos Aires,

March 10, 2006

ROBERTO G. VAZQUEZ

Chairman

(*) Information not covered by the auditor's report except for 2, 3 and 5.

Einstein 1111 – Río Grande – Tierra del Fuego, Argentina

FINANCIAL STATEMENTS FOR FISCAL YEAR No. 35,

FOR THE FISCAL YEAR BEGINNING JANUARY 1, AND ENDED DECEMBER 31, 2005,

PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

Main business: Manufacture of air conditioning equipment for vehicles.

Date of registration with the Public Registry of Commerce:

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

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

Expiration date of articles of incorporation: May 31, 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.


	Argentine pesos
20,000,000 shares of common stock, face value ARS 0.10 each Subscribed, paid-in, issued and registered with the Public Registry of Commerce.	2,000,000

Supplementary information

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2005

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004

ASSETS

CURRENT ASSETS

Cash - Note 2	19,024,378	17,674,115
Trade receivables - Note 2	78,911,844	36,224,616
Tax credits - Note 2	2,736,541	533,832
Other receivables - Note 2	309,326	1,159,785
Inventories - Note 2	61,997,660	44,088,362
TOTAL CURRENT ASSETS	162,979,749	99,680,710

NONCURRENT ASSETS

Tax credits - Note 2	6,722,068	5,832,788
Other receivables - Note 2	460,037	903,567
Intangible assets - Note 1(f)b	195,345	356,069
Property & equipment - Note 1(f)a	17,908,861	19,463,592
TOTAL NONCURRENT ASSETS	25,286,311	26,556,016
TOTAL ASSETS	188,266,060	126,236,726

Notes 1 through 4 to the consolidated financial statements, exhibit H and notes 1 through 12

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.

Supplementary information

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2005

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004

LIABILITIES

CURRENT LIABILITIES

Trade payables - Note 2	82,364,442	36,745,075
Salaries, payroll taxes and taxes payable - Note 2	8,370,330	5,109,475
Customer prepayments - Note 2	8,697,347	4,291,125
Loans - Note 2	2,422,084	10,676,655
Other liabilities	891,678	304,307
Allowances	-	381,966
TOTAL CURRENT LIABILITIES	102,745,881	57,508,603

NONCURRENT LIABILITIES

Loans - Note 2	3,100,800	6,032,289
TOTAL NONCURRENT LIABILITIES	3,100,800	6,032,289
TOTAL LIABILITIES	105,846,681	63,540,892

MINORITY INTEREST IN SUBSIDIARIES	7,315	5,196

SHAREHOLDERS’ EQUITY	82,412,064	62,690,638
TOTAL LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY	188,266,060	126,236,726

Notes 1 through 4 to the consolidated financial statements, exhibit H and notes 1 through 12

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.

Supplementary information

CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004

Net sales (including VAT benefits amounting to 43,406,235 and 28,977,895, respectively)	288,935,341	201,622,556
Cost of goods sold	(241,443,067)	(169,496,879)
Gross revenues	47,492,274	32,125,677

Administrative expenses (Exhibit “H”)	(11,333,531)	(9,068,901)
Selling expenses (Exhibit “H”)	(8,229,562)	(5,565,018)
Financial income (expense) and holding gains (losses) from assets:
Interest	108,783	1,092,711
Foreign exchange difference	254,704	83,452
Holding gains (losses) - Inventories	(1,275,547)	2,013,573
Allowance for doubtful accounts	(572,852)	(400,000)
Impairment in value of property and equipment	281,691	(281,691)
Impairment in value of tax credits	(288,875)	(3,345,000)
Impairment in value and obsolescence of inventories	(2,239,588)	(2,501,739)
(Loss)/gain from bondholdings	(67,359)	167,527
Financial income (expense) and holding gains (losses) from liabilities:
Interest	(2,698,630)	(2,829,277)
Foreign exchange difference	(347,127)	(2,938,119)
Other income and expense, net	(854,542)	88,840
Income before income tax	20,229,839	8,642,035
Income tax	(505,080)	(1,341,100)
Income after income tax	19,724,759	7,300,935
Minority interest in subsidiaries	(2,119)	(1,078)
Income for the year, net	19,722,640	7,299,857

Notes 1 through 4 to the consolidated financial statements, exhibit H and notes 1 through 12

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.

Supplementary information

CONSOLIDATED STATEMENT OF CASH FLOWS (1) FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

(Figures stated in Argentine pesos – Note 1.b)


	12/31/2005	12/31/2004
CHANGES IN CASH
Cash at beginning of year	17,674,115	13,782,709
Cash at end of year	19,024,378	17,674,115
Increase in cash	1,350,263	3,891,406

CAUSES OF CHANGES IN CASH

OPERATING ACTIVITIES
Net income for the year	19,722,640	7,299,857
Interest and foreign exchange difference accrued	1,508,394	1,767,259
Income tax	505,080	1,341,100
Adjustments to calculate net cash flows from operating activities
P&E depreciation and intangible assets amortization	4,247,871	5,031,569
Income from the sale of P&E	(14,600)	(15,227)
Minority interest	2,119	1,078
Increase in the allowance for inventories obsolescence and impairment in value	2,239,588	2,501,739
Increase in the allowance for bad debts	572,852	400,000
(Decrease) increase in the allowance for P&E impairment in value	(281,691)	281,691
Increase in the allowance for impairment in value of tax credits	288,875	3,345,000
(Decrease) increase in the allowance for warranties and increased costs	(381,966)	381,966
Changes in operating assets and liabilities
Increase in trade receivables	(43,259,361)	(21,122,050)
Increase in inventories	(19,969,872)	(9,891,027)
Increase in trade payables	45,619,367	16,506,430
Decrease in salaries, payroll taxes and other taxes payable (net of tax credits)	(1,234,150)	(768,528)
Increase (decrease) in customer prepayments	4,227,207	(1,520,822)
Increase in other receivables and payables	1,879,426	541,175
Interest paid	(861,061)	(1,168,280)
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES	14,810,718	4,912,930

Notes 1 through 4 to the consolidated financial statements, exhibit H and notes 1 through 12

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.

Supplementary information

CONSOLIDATED STATEMENT OF CASH FLOWS (1) FOR THE FISCAL YEAR

ENDED DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR YEAR

(Figures stated in Argentine pesos – Note 1.b)


	12/31/2005	12/31/2004

INVESTMENT ACTIVITIES
P&E additions	(2,291,401)	(1,803,819)
P&E sales	55,277	23,294
Investment in intangible assets	-	(435,179)
Investment in preoperating expenses	-	(46,996)
NET CASH FLOW USED IN INVESTMENT ACTIVITIES	(2,236,124)	(2,262,700)

FINANCING ACTIVITIES
Loan repayment	(19,224,331)	(15,658,824)
Inflows from new debts	8,000,000	16,900,000
NET CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES	(11,224,331)	1,241,176
CASH DECREASE	1,350,263	3,891,406

Cash comprises cash in hand and cash in banks.

Notes 1 through 4 to the consolidated financial statements, exhibit H and notes 1 through 12

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.

Supplementary information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos – Note 1.b)

SIGNIFICANT ACCOUNTING POLICIES
Accounting standards applied to financial statements preparation and presentation:

As established by CNV (Argentine Securities Commission) Resolution No. 368, the consolidated financial statements are required to be presented before the stand-alone financial statements. This regulation only implies a change in the location of consolidated information, and it does not modify the fact that basic financial statements constitute the main information and consolidated financial statements are supplementary, as set forth by Argentine Business Associations Law and current professional accounting standards. Therefore, and for the correct interpretation thereof, these consolidated financial statements should be read together with the stand-alone financial statements.

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 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 FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolution (TR) No. 6.

The Company’s financial statements recognize the changes in the purchasing power of the peso through February 28, 2003, in accordance with Presidential Decree No. 664/2003 and CNV General Resolution No. 441. Under professional accounting standards the restatement method established in Technical Resolution No. 6 should have been discontinued only as from October 1, 2003. The effects of failing to recognize variations in the currency purchasing power until such date were immaterial with respect to the accompanying 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 consolidated statements have been incorporated line by line following the method of FACPCE Technical Resolution No. 21, with the applicable deletions.

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, 2005 and December 31, 2004, as the case may be, line by line with those of its subsidiary, Interclima Sociedad Anónima, in which it holds majority voting rights.

The following information reflects the parent-subsidiary relationship:


Equity interest
Subsidiary	Common and in possible votes as of 12/31/2005 and 12/31/2004	Year-end – last financial statements issued

Interclima Sociedad Anónima	99,9667	12/31/2005

In the consolidation, the amounts invested in the subsidiary and the share in income (loss) and cash flows are replaced by all the subsidiary’s assets, liabilities, income (loss) and cash flows, separately disclosing the minority interest. Receivables and payables, and transactions performed among members of the consolidated group were eliminated from the consolidation. Gain (loss) deriving from transactions between members of the consolidated group from intercompany gains (losses) and contained in final assets and liabilities are fully eliminated.

1. Financial statements used in the consolidation:

The financial statements of Interclima Sociedad Anónima as of December 31, 2005, and 2004, were used to prepare the consolidated financial statements as of such dates. The auditor’s report on these financial statements dated March 10, 2006, and March 11, 2005, respectively, included an “except for” qualification related to the income tax payable quantification (such adjustment was considered for the interest valuation and, consequently, in these consolidated financial statements), and with a qualification for unresolved uncertainty related to the recoverability of tax credits.

1. Changes in significant assets:


	12/31/2005	12/31/2004
1. P&E:

Balance at beginning	19,463,592	22,822,091
Additions	2,291,401	1,803,819
Retirements (net of accumulated depreciation)	(40,676)	(8,067)
Decrease (increase) in impairment in value	281,691	(281,691)
Depreciation	(4,087,147)	(4,872,560)
Balance at end	17,908,861	19,463,592

1. Intangible assets:

Balance at beginning	356,069	32,903
Additions	-	482,175
Amortization	(160,724)	(159,009)
Balance at end	195,345	356,069

BREAKDOWN OF MAIN ACCOUNTS


	12/31/2005	12/31/2004
CURRENT ASSETS

Cash

Cash on hand in Argentine pesos	26,106	12,456
Cash on hand in foreign currency	21,208	102,517
Cash in banks in Argentine pesos	10,601,796	10,184,615
Cash in banks in foreign currency	8,375,268	7,374,527
	19,024,378	17,674,115
Trade receivables

Trade receivables	79,398,361	35,095,217
Trade receivables in foreign currency	571,338	566,341
Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 3	-	1,048,061
Allowance for doubtful accounts	(1,057,855)	(485,003)
	78,911,844	36,224,616
Tax credits

VAT credit	1,203,895	390,339
Withholdings and additional withholdings	659,077	-
Other	873,569	143,493
	2,736,541	533,832
Other receivables

Notes receivable	-	662,639
Insurance to be accrued	138,036	217,877
Other	171,290	279,269
	309,326	1,159,785
Inventories

Manufactured products	15,885,451		15,033,064
Raw material	39,527,943		29,138,378
Raw material in transit	13,223,760		8,462,631
Stock at end of year	68,637,154		52,634,073
Prepayments to vendors in Argentine pesos	3,702,391		710,736
Prepayments to vendors in foreign currency	2,320,445		1,166,295
Allowance for impairment in value	(12,662,330)		(10,422,742)
	61,997,660		44,088,362


		12/31/2005		12/31/2004
NONCURRENT ASSETS

Tax credits

VAT credit		3,886,201		3,739,417
Minimum presumed income tax		2,231,599		1,881,161
Reimbursements receivable in Argentine pesos		2,718,042		2,570,351
Promotional benefits receivable		885,447		952,882
Deferred tax credit		3,700,344		3,875,762
Allowance for impairment in value of deferred income tax credit		(3,194,594)		(3,875,762)
Other		128,904		33,977
Allowance for impairment in value of tax credits		(3,633,875)		(3,345,000)
		6,722,068		5,832,788
Other receivables
Notes receivable		-		607,419
Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 3		460,037		296,148
		460,037		903,567
CURRENT LIABILITIES

Trade payables

Suppliers	61,106,400		23,112,218
Vendors in foreign currency	21,214,005		12,803,767
Payables in foreign currency - Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 3	44,037		829,090
	82,364,442		36,745,075
Salaries, payroll taxes and other taxes payable

Salaries and payroll taxes	1,979,167		564,316
Vacation accrual	1,050,817		767,478
Income tax accrual	971,112		-
Health and safety assessment	300,774		230,375
Turnover tax payable	55,009		98,802
Withholdings and additional withholdings	245,907		222,351
Other taxes payable	3,767,544		3,226,153
	8,370,330		5,109,475
Customer prepayments

In foreign currency	8,697,347		4,291,125
	8,697,347		4,291,125
Loans

Financial loans in Argentine pesos	-		8,515,641
Financial loans in foreign currency	2,422,084		2,161,014
	2,422,084		10,676,655


	12/31/2005	12/31/2004
NONCURRENT LIABILITIES

Loans

Financial loans in Argentine pesos	-	908,409
Financial loans in foreign currency	3,100,800	5,123,880
	3,100,800	6,032,289

INFORMATION ON RELATED PARTIES

The payables to and receivables from the parent and other related companies for the transactions carried out during the fiscal year ended December 31, 2005, and 2004, are:


	12/31/2005	12/31/2004
Trade receivables
VALEO SISTEMAS AUTOMOTIVOS LTD (1)	-	1,048,061
Total	-	1,048,061

Other receivables (noncurrent)
IL TEVERE S.A. (2)	460,037	296,148
Total	460,037	296,148

Trade payables
VALEO SISTEMAS AUTOMOTIVOS LTD (1)	-	147,539
VALEO AUTOKLIMATIZACE S.R.O (1)	-	59,499
VALEO CLIMATIZACION S.A.(EURO) (1)	-	9,808
VALEO KLIMASYSTEME GMBH (1)	-	5,643
VALEO COMPONENTES AUTOMOVILES (1)	-	-
VALEO SISTEMAS AUTOMOTIVOS (1)	-	150,645
VALEO SECURITE HABITABLE (1)	44,037	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (1)	-	44,492
VALEO THERMIQUE FRANCIA (1)	-	-
VALEO SIST. AUTO LTDA (1)	-	-
VALEO TERMICO S.A. (1)	-	-
VALEO VYMENIKY TEPLA s.r.o. (1)	-	51,517
VALEO THERMIQUE MOTEUR (1)	-	185,190
VCC UP ECHANGEURS (1)	-	174,757
Total	44,037	829,090

Other payables
VCC UP ECHANGEURS (1)	-	304,307
Total	-	304,307

The transactions performed with related companies and with the parent during the fiscal year ended December 31, 2005, and 2004, are:


	12/31/2005
	Purchase of goods	Sale of goods	Service received	Royalties

VALEO SISTEMAS AUTOMOTIVOS LTD (1)	2,737,393	2,857,137	-	-
VALEO CHINA (1)	220,651	-	-	-
VALEO AUTOKLIMATIZACE S.R.O (1)	736,237	-	-	-
VALEO CLIMATIZACION S.A.(EURO) (1)	247,958	-	-	-
VALEO KLIMASYSTEME GMBH (1)	71,081	-	-	-
VALEO COMPONENTES AUTOMOVILES (1)	48,086	-	-	-
VALEO SISTEMAS AUTOMOTIVOS (1)	1,469,289	-	-	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (1)	223,961	-	-	-
VALEO VYMENIKY TEPLA s.r.o. (1)	3,206,206	-	-	-
VALEO SECURITE HABITACLE (1)	797,321	-	-	-
VALEO THERMIQUE FRANCIA (1)	544,868	-	74,127	-
VALEO THERMIQUE MOTEUR (1)	3,564,067	-	-	-
VALEO ZARAGOZA (1)	4,096,079	-	-	-
VCC UP ECHANGEURS (1)	2,736,244	-	-	752,664
	20,699,441	2,857,137	74,127	752,664


	12/31/2004
	Purchase of goods	Sale of goods	Service received	Royalties

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 CLIMATIZACION S.A.(EURO) (1)	224,295	-	-	-
VALEO KLIMASYSTEME GMBH (1)	90,794	-	-	-
VALEO COMPONENTES AUTOMOVILES (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 MOTEUR (1)	2,943,755	-	-	-
VALEO ZARAGOZA (1)	4,036,024	-	-	-
VCC UP ECHANGEURS (1)	2,928,297	-	-	1,465,587
	21,714,438	4,851,976	202,815	1,465,587

- 1. Related company until September 27, 2005 (See (2)).
- Parent company. On September 27, 2005, the local shareholders of Il Tevere S.A., owner of 52% of Mirgor S.A.C.I.F.I.A., acquired from Valeo System Thermique France its interest in such company; consequently, as from such date, Valeo and the companies from such group are no longer a part of the group of companies of Mirgor S.A.C.I.F.I.A.
INFORMATION BY SEGMENT

The Company and the subsidiary operate in the automotive and residential air filtering services segments. The applicable valuation standards to prepare the information by business segment are described in note 1 to these financial statements.


	AIR CONDITIONING
REVENUES	AUTOMOTIVE	RESIDENTIAL	TOTAL

Sales (net of imputed interest)	188,888,218	56,640,888	245,529,106
Tax benefit	31,436,170	11,970,065	43,406,235
Total	220,324,388	68,610,953	288,935,341

EQUITY

Allocated assets	183,148,157	4,938,887	188,087,044
Addition of P&E and intangibles	1,626,171	665,230	2,291,401

EXHIBIT H

Translation into English – originally issued in Spanish

MIRGOR S.A.

INFORMATION REQUIRED UNDER SECTION 64(I)b, LAW No. 19,550

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005				12/31/2004
Accounts	Operating costs	Administrative expenses	Selling expenses	Total	Total

Salaries & wages	12,779,608	4,196,756	655,298	17,631,662	11,196,138
Contributions and employee benefits	2,987,333	1,059,517	142,452	4,189,302	2,596,687
Insurance	682,262	137,240	6,260	825,762	1,005,726
Training fees and expenses	811,602	834,734	27,393	1,673,729	1,246,504
Taxes, rates and assessments	2,760,003	531,389	1,690,244	4,981,636	3,090,274
Maintenance	593,636	619,009	-	1,212,645	669,679
P&E depreciation	3,000,644	1,059,014	27,489	4,087,147	4,872,560
Intangible assets amortization	15,665	145,059	-	160,724	159,009
Leases and rentals	767,912	-	-	767,912	755,835
Customs clearance and dispatch expenses	6,214,167	-	-	6,214,167	4,644,895
Royalties	-	-	1,812,167	1,812,167	1,194,191
Other	1,502,873	1,220,244	387,828	3,110,945	2,034,715
Transportation, shipping and handling	13,117,278	-	3,480,431	16,597,709	15,204,580
Bank expenses	-	1,278,222	0	1,278,222	1,013,298
Electric Power	376,316	-	0	376,316	249,883
Traveling expenses	-	252,347	0	252,347	193,434
Total as 12-31-2005	45,609,299	11,333,531	8,229,562	65,172,392
Total as 12-31-2004	35,493,489	9,068,901	5,565,018		50,127,408

BALANCE SHEET AS OF DECEMBER 31, 2005,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004
ASSETS
CURRENT ASSETS
Cash - Note 2	17,137,992	17,561,127
Trade receivables - Note 2	17,421,944	19,339,173
Tax credits - Note 2	1,510,281	374,801
Other receivables - Note 2	294,859	1,152,008
Inventories - Note 2	54,133,149	37,698,347
TOTAL CURRENT ASSETS	90,498,225	76,125,456

NONCURRENT ASSETS
Long-term investments - Exhibit C	18,293,834	12,580,275
Tax credits - Note 2	1,952,865	1,625,499
Other receivables - Note 2	460,037	903,567
Property & equipment	15,087,079	16,935,314
Intangible assets	169,236	314,295
TOTAL NONCURRENT ASSETS	35,963,051	32,358,950
TOTAL ASSETS	126,461,276	108,484,406

LIABILITIES
CURRENT LIABILITIES
Trade payables - Note 2	30,855,735	19,685,746
Salaries, payroll taxes and taxes payable - Note 2	2,981,397	1,860,297
Loans - Note 2	2,422,084	10,676,655
Customer prepayments - Note 2	-	4,291,125
Other liabilities - Note 2	4,689,196	3,247,656
TOTAL CURRENT LIABILITIES	40,948,412	39,761,479

NONCURRENT LIABILITIES
Loans - Note 2	3,100,800	6,032,289
TOTAL NONCURRENT LIABILITIES	3,100,800	6,032,289
TOTAL LIABILITIES	44,049,212	45,793,768

SHAREHOLDERS' EQUITY (As per related statement)	82,412,064	62,690,638
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	126,461,276	108,484,406

Notes 1 through 12 and exhibit C are an integral part of these financial statements.

STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2005,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004

Net sales (including VAT benefits amounting to 31,436,170 and 25,927,417, respectively) - Note 4(e)	212,446,319	177,530,265
Cost of goods sold	(178,026,969)	(152,961,674)
GROSS REVENUES	34,419,350	24,568,591

Administrative expenses	(10,728,299)	(8,851,488)
Selling expenses	(6,033,700)	(4,883,537)
Ordinary income from long-term investments - Note 1	5,713,559	1,497,941
Financial income (expense) and holding gains (losses) from assets:
Interest	785,855	955,311
Foreign exchange difference	220,546	(7,294)
Holding gains (losses) - Inventories	(880,798)	1,854,528
Allowance for doubtful accounts	(572,852)	(400,000)
Allowance for impairment in value and obsolescence of inventories	(1,568,865)	(2,166,261)
(Loss)/gain from bond holdings	12,774	(1,945,000)
	(67,359)	167,527
Financial income (expense) and holding gains (losses) from liabilities:
Interest	(2,144,608)	(2,284,757)
Foreign exchange difference	36,087	(2,493,131)
Other income and expenses, net - Note 2	530,950	1,287,427
NET INCOME FOR THE PERIOD	19,722,640	7,299,857
EARNINGS PER SHARE - NOTE 11
BASIC ORDINARY	0.9861	0.3650
DILUTED - ORDINARY	0.9861	0.3650

Notes 1 through 12 and exhibit C are an integral part of these financial statements.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005
	Owner’s contributions
Detail	Capital stock	Capital stock adjustments	Noncapitalized adjustments	Noncapitalized contribution adjustments	Issuance premiums	Subtotal

Balances at beginning of period	2,000,000	4,155,936	497	717	5,243,562	11,400,712
Reimbursement of irrevocable contributions	-	-	(497)	(717)	-	(1,214)
Net income for the period	-	-	-	-	-	-
Balances as of December 31, 2005	2,000,000	4,155,936	-	-	5,243,562	11,399,498


	12/31/2005					12/31/2004
	Retained earnings
	Appropriated retained earnings
Detail	Legal reserve	*Other reserves ()**	Total	Unappropriated retained earnings	Total	Total

Balances at beginning of period	2,280,143	73,708	2,353,851	48,936,075	62,690,638	55,390,781
Reimbursement of irrevocable contributions	-	-	-	-	(1,214)	-
Net income for the period	-	-	-	19,722,640	19,722,640	7,299,857
Balances as of December 31, 2005	2,280,143	73,708	2,353,851	68,658,715	82,412,064	62,690,638

Notes 1 through 12 and exhibit C are an integral part of these financial statements.

STATEMENT OF CASH FLOWS (1) FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004
CHANGES IN CASH
Cash at beginning of year	17,561,127	13,676,384
Cash at end of period	17,137,992	17,561,127
Cash decrease, net	(423,135)	3,884,743

CAUSES OF CHANGES IN CASH

OPERATING ACTIVITIES
Net income for the period	19,722,640	7,299,857
Interest and foreign exchange difference accrued	899,333	1,417,259

Adjustments to reach net cash flows deriving from (used in) operating activities
P&E depreciation and intangible assets amortization	3,380,954	4,388,840
Income from the sale of P&E	(14,600)	(15,227)
Increase net of the allowance for bad debts	572,852	400,000
Increase in the allowance for inventory obsolescence and impairment of value	1,568,865	2,166,261
(Decrease) increase in allowance for impairment in value of tax credits	(12,774)	1,945,000
Income (loss) from long-term investments	(5,713,559)	(1,497,941)
Changes in operating assets and liabilities
Increase in trade receivables	1,344,377	(4,910,625)
Increase in inventories	(18,003,667)	(5,443,458)
Increase in trade payables	11,169,989	1,372,624
Decrease in salaries, payroll taxes and other taxes payable (net of tax credits)	(328,972)	(188,117)
Decrease in customer prepayments	(4,291,125)	(1,520,822)
Increase (Decrease) in other receivables and payables	2,741,004	(694,023)
Interest paid	(861,062)	(1,168,280)

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES	12,174,255	3,551,348

Cash comprises cash on hand and cash in banks

The accompanying notes 1 through 11 and exhibit C are an integral part of these financial statements.

STATEMENT OF CASH FLOWS (1) FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2005, PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	12/31/2005	12/31/2004
INVESTING ACTIVITIES

Net P&E acquisitions	(1,428,336)	(495,896)
P&E sale	55,277	23,294
Investment in intangible assets	-	(435,179)
NET CASH FLOWS (USED IN) INVESTMENT ACTIVITIES	(1,373,059)	(907,781)

FINANCING ACTIVITIES

Loan repayment	(19,224,331)	(15,658,824)
Inflows from loans	8,000,000	16,900,000
NET CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES	(11,224,331)	1,241,176


(DECREASE) INCREASE IN CASH, NET	(423,135)	3,884,743

Cash comprises cash on hand and cash in banks

The accompanying notes 1 through 11 and exhibit C are an integral part of these financial statements.

SUPPLEMENTARY NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005

(Figures stated in Argentine pesos - Note 1.b)

SIGNIFICANT ACCOUNTING POLICIES
Accounting standards applied to financial statements preparation and presentation

The financial statements of the Company have been prepared in accordance with CNV regulations. Current professional accounting standards, approved by the CPCECABA (Professional Council in Economic Sciences of the City of Buenos Aires), differ from those established by the CNV in certain aspects.

The main differences include, among others, requiring the presentation of deferred tax assets and liabilities at nominal values (CNV), while the standards approved by the CPCECABA require presenting them at discounted values and, in addition, there are different effective terms for the restatement in constant currency method, as explained in note 1(b).

Pursuant to the agreement signed in July 2004 between the FACPCE and the CPCECABA for the purpose of unifying professional accounting standards, in April 2005, the FACPCE issued Resolution No. 312/05 approving a series of changes to its technical resolutions (“TRs”) and interpretations. Subsequently, in August 2005, the CPCECABA issued Resolution CD No. 93/2005, whereby it approved the FACPCE's TRs (with the amendments introduced until April 1, 2005), and established that such accounting standards would become generally effective and mandatory for the full years or interim periods belonging to the fiscal years beginning as from January 1, 2006, admitting its early application, and a transition for certain changes related to the comparisons with recoverable values and with the disclosure of certain supplementary information regarding income tax booking, the application of which shall be binding for the years beginning as from January 1, 2008. The CNV issued General Resolutions Nos. 485 and 487 on December 29, 2005, and January 26, 2006, approving them with certain changes, which will be effective for the fiscal years beginning as from January 1, 2006.

The changes of most significance to the Company are detailed below:

- 1. Comparison with P&E recoverable values. Such comparison is required to be made in a single step and an impairment in value shall be recorded whenever the expected presented value of the cash flows (and the net realizable value) are lower than the book value. In addition, the comparison is to be made asset by asset or, if there are objective reasons that make this impossible, at the level of each cash-generating activity. If information is presented by business segment, the same grouping method should be used.
- It is established that the difference between the P&E (and other nonmonetary assets) book value adjusted for inflation and their tax base is a temporary difference that results in the recognition of a deferred liabilities, but it is acceptable to continue to consider it as a permanent difference requiring, in this case, the filing of certain additional supplementary information related to the value of deferred tax liabilities that the Company decided not to recognize as well as the reversal term thereof.
- For matters not contemplated in general or specific accounting standards and that cannot be resolved by using the general framework of accounting standards, effective International Financial Reporting Standards and interpretations approved by the International Accounting Standards Board shall be also applied in the year when such supplementary standards are applicable.

As of the date of issuance of these financial statements, Company Management was analyzing the effects resulting from the abovementioned regulations.

Preparing the financial statements in accordance with current professional accounting standards requires Company Management to consider the estimates and assumptions impacting on the assets and liabilities amounts reported, the disclosure of contingent liabilities and assets as of the date of such financial statements, as well as the revenues and expenses for each period. The final results may differ from such estimates.

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 the changes in the IPIM, i.e. the wholesale price index published in the INDEC, in accordance with the restatement method established in FACPCE Technical Resolution No. 6.

1. Valuation methods

The main valuation methods used to prepare the financial statements were:

Cash:
In Argentine pesos: at nominal value.
In foreign currency: converted at the exchange rate effective as of each year-end to settle these transactions. Foreign exchange differences were charged to the statement of income for each year.
Receivables and payables:
In Argentine pesos: at the present value of the cash flows from which they will be generated discounted, as long as they have material effects, using imputed, explicit or market rates, as the case may be, effective at the time of each transaction.
In foreign currency: at the present value of the cash flows from which they will be generated discounted, as long as they have material effects, using imputed, explicit or market rates, as the case may be, effective at the time of each transaction. These amounts were converted into Argentine pesos at the exchange rate effective as of the year-end for the settlement of the related transactions. Foreign exchange differences were charged to income for each year.
Credit risk: In its usual course of business the Company grants credit to customers, including car plants, that represent about 99% of total service charge income. The Company continuously performs credit assessments of its customers’ financial capacity in order to reduce the potential risk of significant credit losses.
Financial instruments: The Company has not used derivative financial instruments during the fiscal years December 31, 2005, and 2004, or through the date of issuance of these financial statements. Receivables and payables related to usual business and financial transactions are valued as stated in the previous paragraphs and, in the opinion of Company Management, such valuation does not differ from their current value.
Inventories:
Raw materials (including those in transit) were valued at replacement cost at end of each year, considering the cash prices for usual purchase amounts. In addition, imported goods are valued at replacement cost at the foreign exchange rate effective at the end of each year.
The products manufactured were valued at cash reproduction cost at the end of each year limited by the net realization value thereof.
Prepayments to vendors are stated at nominal value, and those related to amounts in foreign currency were converted at the foreign exchange rate effective at the end of each fiscal year.
The value of inventories taken as a whole does not exceed the recoverable value thereof.
Long-term investments in subsidiaries:
Companies under section 33 - Law No. 19,550 (subsidiaries and affiliates): at equity value as established by FACPCE Technical Resolution No. 21, which was calculated based on Interclima S.A.’s financial statements as of December 31, 2005, and December 31, 2004, which include an audit reports dated March 10, 2006, and March 11, 2005, containing except-for qualifications related to the inconsistency in valuing income tax payables and a qualification for unresolved uncertainties about the recoverability of certain tax credits.
In addition, upon determining the value by the equity method, an adjustment to the subsidiary’s book value was taken into account to disclose the effects of failing to book income tax payables (see “Income tax – Situation in Interclima S.A.”)
Gain (loss) from the interest in the subsidiary is disclosed in the statement of income under "Gain (loss) from long-term investments".
P&E
P&E was valued at original cost restated as mentioned in note 1(b), net of accumulated depreciation until the end of each year.
P&E depreciation is calculated by the straight-line method, applying annual rates sufficient to extinguish P&E by the end of their estimated useful lives.
P&E valuation is checked to verify whether their value was impaired when there is any indication that their book value could exceed their recoverable value. The losses and reversals from impairment in value are recognized in financial income (expense) and holding gains (losses) in the statement of income.
The value of P&E, at a cash generating unit level, does not exceed the recoverable value thereof.
Intangible assets
Intangible assets have been valued at original cost restated as mentioned in note 1, net of accumulated depreciation until the end of each year.
Amortization is calculated following the straight-line method.
The valuation of intangible assets is checked to verify whether their value was impaired when there is any indication that their book value could exceed their recoverable value. The losses and reversals from impairment in value are recognized in financial income (expense) and holding gains (losses) in the statement of income.
The book value of intangible assets, considered as a whole, does not exceed the recoverable value thereof.
The licenses to sell products acquired by the Company have been amortized by the straight-line method over three years counted as from their initial economic use, taking into account their capacity to generate earnings in the future.
Allowances and provisions:

Allowances:

For doubtful accounts: set to correct and make adequate the valuation of trade receivables at the estimated recoverable value; it was set on the basis of an individual analysis thereof.
For impairment in value and obsolescence of inventories: it was booked to adjust the value of certain finished products and other obsolete or slow-moving inventories to their estimated recoverable value.
For impairment in value of deferred income tax assets: it was booked to reduce the value of such assets at their probable recoverable value. For that purpose, the Company’s tax situation and estimates were considered.
For impairment in value of tax credits: it was set to reduce the book value of such credits at the estimated recoverable value thereof; the estimates made by Company Management and the opinion of its legal counsel were considered in the assessment thereof.
Shareholders’ equity accounts:

They were restated as mentioned in note 1(b), except for the “Capital stock” account, which remained at original value. The adjustment deriving from the restatement thereof is disclosed under the “Adjustment to capital stock” account.

Statement-of-income accounts:
At nominal value, except for the following cases:
1. Gain (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 “Income tax – Situation in Interclima S.A.”).
2. The depreciation of P&E and the amortization of intangible assets were calculated based on the value of the respective assets, after being restated as described in note 1(b).
3. The cost of goods sold was determined based on monthly replacement costs. Holding gains(losses) are disclosed in the account “Financial income(expense) and holding gains(losses)”.
4. The account “Financial income (expense) and holding gains (losses)” includes: (a) income and financial costs, (b) inventories holding gains (losses), (c) foreign exchange differences and (d) charges and reversals related to doubtful accounts, impairments in value and obsolescence of inventories, impairments in the value of P&E and other assets in general.
5. The Company has segregated the imputed financial components accrued during each period provided that they were significant.
Income tax and deferred tax
Situation of Mirgor S.A.C.I.F.I.A.

The Company assesses the income tax charge by the deferred income tax method, which consists in recognizing (as asset or liability) the tax effect of temporary differences between the book and tax valuation of assets and liabilities, and the subsequent charge to income for the periods in which such assets or liabilities are reversed, and considering the possibility of using net operating losses in the future. Temporary differences determine tax asset or liability balances when their future reversal decreases or increases the tax assessed, respectively.

Minimum presumed income tax is supplementary to income tax, while the latter is levied on taxable income for the year, minimum presumed income tax is a minimum levy determined by applying the current 1% rate on the potential income of certain assets. Therefore, the Company’s tax obligations shall be the higher of these two taxes. However, should minimum presumed income tax exceed income tax in any given fiscal year, such excess may be computed as payment on account of any excess of income tax over minimum presumed income tax occurring in any of the ten subsequent fiscal years.

The Company carries net operating losses amounting to 6,816,192 (out of which 6,587,625 may be used until December 31, 2007, and the remainder, until December 31, 2009). As of December 31, 2005, there were deferred income tax assets amounting to 3,194,594, the value of which was fully impaired based on current expectations about the possibility of using them against taxable income and the Company’s tax situation described in note 4.

The changes in deferred income tax credit and the charge to income for the fiscal year ended December 31, 2005, and 2004, were as follows:


	31/12/2005		31/12/2004
	Deferred tax credit	Income tax -Income / (Loss)	Deferred tax credit	Income tax -Income / (Loss)

Balance at beginning of year, less provision	-	-	-	-
Consumption of NOLs	(1,014,318)	(1,014,318)	-	-
Increase in temporary asset differences	8,037	8,037	35,699	35,699
Decrease in temporary liability differences	599,849	599,849	430,427	430,427
Change in the allowance for impairment in value of deferred assets	406,432	406,432	(466,126)	(466,126)
Balance as of year-end, less provision	-	-	-	-

The reconciliation between the charge to income for income tax and the amount resulting from applying the 35% rate established by effective tax regulations to book income for the year is:


	12/31/2005	12/31/2004
Net income for the period before income tax	19,722,640	7,060,207
Permanent differences (*)	(18,561,406)	(8,391,995)
Year earnings less permanent differences	1,161,234	(1,331,788)
Tax rate	35%	35%
Tax assessed	406,432	(466,126)
Consumption of NOLs	(406,432)	466,126
Income-tax book charge	-	-

(*) It includes the exempt income (loss) under industrial promotion system effective in the Province of Tierra del Fuego.

The detail of the accounts included in the deferred tax credit as of December 31, 2005, and 2004, is:


Temporary differences in assets	12/31/2005	12/31/2004
Nondeductible allowances	759,546	702,128
Foreign exchange difference fiscal 2002	49,381	98,762
NOLs	2,385,667	3,399,985
Temporary differences in liabilities
P&E depreciation	-	(599,849)
Deferred tax credit before the allowance	3,194,594	3,601,026
Allowance for impairment in value of deferred assets	(3,194,594)	(3,601,026)
Deferred tax credit at year-end net of the allowance	-	-

The minimum presumed income tax amount for the year ended December 31, 2005, exceeded income tax and amounted to 283,842. Such amount was booked under noncurrent tax credits, the amount of which accumulated to date totals 1,808,441. The Company’s Management understands that on the basis of the future business plan such amounts will be recoverable.

- Situation in the subsidiary Interclima S.A.

In view of the economic crisis resulting from abandoning the currency board, the Management of the subsidiary considered that the conditions required to apply the tax adjustment for inflation were present. Consequently, it prepared and filed the income tax return for the year ended December 31, 2002, based on adjusted amounts, using the coefficients determined according to domestic WPI variations, which led to the assessment of NOLs amounting to about 5,200,000.

Interclima S.A. Management filed an injunction with justice to seek the related jurisdictional protection because it understood that, due to the high inflation that affected tax year 2002, section 39, Law No. 24,073 dated 1992, should be abrogated, as it established at one the index applicable to the tax adjustment for inflation, which had been introduced to legislation in an economic context differing completely from year 2002.

On July 17, 2003, the judge hearing on the case granted the injunction requested by the subsidiary and instructed the Argentine Government to refrain from filing any administrative or judicial proceeding, making any claim, demand or accusation and imposing penalties based on the alleged prohibition to apply the adjustment for inflation.

On October 15, 2004, the trial court judge hearing on the constitutional protection action filed by the subsidiary decided that the AFIP accept the legitimacy of the adjustment for inflation provided for in Income Tax Law No. 20,628 Title VI and resolved to declare the unconstitutionality of section 4, Law No. 25,561, amending sections 7 and 10, Law No. 23,928, and section 5 of Presidential Decree 214/02, and section 39, Law No. 24,073, since they disregard sections 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.

Had the tax adjustment for inflation not been made, Interclima S.A. would have determined income tax amounting to about 384,342 for 2002, (after computing prior-period NOLs), 854,892 for 2003, 1,279,585 for the year ended December 31, 2004, and 39,793 for year ended December 31, 2005, plus the related interest calculated as of such date amounting to 959,099.

BREAKDOWN OF MAIN ACCOUNTS


	12/31/2005	12/31/2004
CURRENT ASSETS

Cash

Cash in Argentine pesos	22,731	7,321
Cash on hand in foreign currency	21,208	102,517
In banks in Argentine pesos	8,718,785	10,076,762
In banks in foreign currency	8,375,268	7,374,527
	17,137,992	17,561,127
Trade receivables

Trade receivables in Argentine pesos	18,083,720	19,274,435
Trade receivables in foreign currency	396,079	549,741
Allowance for doubtful accounts	(1,057,855)	(485,003)
	17,421,944	19,339,173
Tax credits

VAT credit	1,083,525	269,969
Other	426,756	104,832
	1,510,281	374,801
Other receivables

Notes receivable	-	662,639
Insurance to be accrued	138,036	217,877
Other	156,823	271,492
	294,859	1,152,008
Inventories

Manufactured products	14,027,738	13,925,485
Raw material	35,165,651	24,406,285
Raw material in transit	12,817,765	7,613,510
Stock at end of year	62,011,154	45,945,280
Prepayments to vendors in Argentine pesos	1,123,766	529,327
Prepayments to vendors in foreign currency	2,224,671	881,317
Allowance for impairment in value	(11,226,442)	(9,657,577)
	54,133,149	37,698,347


	12/31/2005	12/31/2004
NONCURRENT ASSETS

Tax credits

VAT credit - Note 4	93,481	93,481
Minimum presumed income tax - Note 4	1,808,441	1,524,599
Promotional benefits receivable - Note 4	885,447	952,882
Reimbursements receivable in Argentine pesos - Note 4	1,016,393	971,705
Deferred income tax credit	3,194,594	3,601,026
Allowance for impairment in value of deferred tax credit	(3,194,594)	(3,601,026)
Other	81,329	27,832
Allowance for impairment in value	(1,932,226)	(1,945,000)
	1,952,865	1,625,499

Notes receivable

Notes receivable	-	607,419
Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 7	460,037	296,148
	460,037	903,567
CURRENT LIABILITIES

Trade payables

Suppliers	10,443,886	7,400,450
Payables to companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 7 - Exhibit G	44,037	732,498
Financial payables in foreign currency	20,367,812	11,552,798
	30,855,735	19,685,746
Salaries, payroll taxes and other taxes payable

Salaries and payroll taxes	1,638,250	455,142
Vacation accrual	780,236	721,883
Health and safety assessment	208,782	165,571
Turnover tax payable	55,009	98,802
Withholdings and additional withholdings	245,907	222,351
Other taxes payable	53,213	196,548
	2,981,397	1,860,297


	12/31/2005	12/31/2004
CURRENT LIABILITIES

Loans

Financial loans in Argentine pesos	-	8,515,641
Financial loans in foreign currency	2,422,084	2,161,014
	2,422,084	10,676,655
Customer prepayments

In foreign currency	-	4,291,125
	-	4,291,125
Other liabilities

Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 7	4,053,228	2,943,349
In foreign currency - Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 7	-	304,307
Royalties payable	295,479	-
Other	340,489	-
	4,689,196	3,247,656
NONCURRENT LIABILITIES

Loans

Financial loans in Argentine pesos	-	908,409
Financial loans in foreign currency	3,100,800	5,123,880
	3,100,800	6,032,289
Other income and expenses, net

Leases and rentals	1,200,000	1,200,000
Other	(669,050)	87,427
	530,950	1,287,427

CAPITAL STRUCTURE – SHAREHOLDERS’ EQUITY
Capital stock status

The Company’s capital stock consists of 20,000,000 book-entry shares of common stock, 0.10 face value each, which is fully registered, subscribed and paid-in, according to the following breakdown:


Class	Votes	Number

“A”	Entitled to three (3) votes each	5,200,000
“B”	Entitled to three (3) votes each	5,200,000
“C”	Entitled to one (1) votes each	9,600,000
Total		20,000,000

Each Class “A”, Class “B” or Class “C” shares have the same rights to collect dividends.

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. T he 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; 3,846,962; 4,176,701; and 4,176,701, respectively.

TAX SITUATION OF THE COMPANY: TAX SYSTEM – TAX CREDITS

The Company is subject to the industrial promotion system under Law No. 19,640 in connection with the assets and for the activities performed in the Province of Tierra del Fuego. In that sense, the Company is entitled to certain tax and customs benefits through 2013, including:

Income tax: Presidential Decree No. 1,395/94 established, as from September 1, 1994, that 85% 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%). After the application of Presidential Decree 615/97, Argentine Government reinstated certain tax benefits granted by Industrial Promotion Law introducing as from August 1, 1997, amendments that provided that the exemption granted to such activities would amount to 100% as established by Law No. 19,640, section 4(a).
Value-added tax: The Company’s sales are subject to VAT at the 21% rate; such tax is collected from customers. 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% of the net sales price to customers so that the tax obligation was reduced to 8% thereof as from April 1995. Presidential Decree No. 615/97 provided that the presumed VAT credit computable as from August 1, 1997, is equivalent to the one resulting from applying 100% on the VAT rate at the bet sale price to customers.
Tax credit certificates: 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 Debt Consolidation Bonds.

DGI (Argentine tax bureau) General Resolution No. 3838/94 regulated the way in which the abovementioned bonds would be obtained; based on that, the Company booked credits in the amount of 1,511,788 (historical value).

On September 17, 1996, the DGI advised the Company of the recognition of a larger amount in favor of the Company (2,194,142) (un-restated historical value) as a result of the application 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 to be requested by other procedures.

The Ministry of Economy and Public Services and Works established through Resolution No. 580/96 that the credits against the Federal Government emerging from the suspension of the industrial promotion established in Law No. 23,697 and prior to April 1, 1991, will be settled through the delivery of Debt Consolidation Bonds.

As a result thereof, the Company booked the credit recognized a the listed price effective as of each fiscal year-end which, as of December 31, 2005, and 2004, amounted to 885,447 and 952,882, respectively.

On May 19, 1997, the Company was advised that the DGI provisionally recognized the amount indicated above.

Customs duties and statistical rate: Not paid by the Company for all the inputs imported and used in its operations in Tierra del Fuego under Law No. 19,640.
Reimbursements in Argentine pesos: As provided for in Law No. 19,640, exports from the continent to Tierra del Fuego profit from these reimbursements.

Owing to the delay in payment by the Federal Government, the Company filed collection requests before Customs Authorities although such requests had unfavorable resolutions at administrative stages, the Company’s legal counsel and Management understand that the transactions carried out within the regulatory framework of Law No. 19,640 and, consequently, it would be entitled to collect the rebates that the regulation then effective barred.

The unfavorable resolutions mentioned above were challenged; thus, the proceedings are in the Customs Legal and Technical Department awaiting the issuance of the respective formal opinions.

Following with the comments included in the previous points, the benefits accrued during the fiscal year ended December 31, 2005, and 2004, amounted to:


	Periods ended December 31,
	2005	2004

Value-added tax	31,436,170	25,927,417

Customs duties and statistical rate (estimated)	17,773,987	13,830,595

In addition and considering the tax system to which the Company is subject, as indicated above, as of December 31, 2005, the Company carried minimum presumed income tax credits in the amount of 1.8 million and the Company and its subsidiary carried VAT credits in the amount of 3.9 million disclosed in noncurrent assets. The recoverability of such credits totaling 5.7 million in the consolidated financial statements and 1.8 million in the stand-alone financial statement depends, among other issues on whether the Companies are able to generate income subject to tax during the coming years. In this respect, the Company’s Management understands that based on its future business plan, such credits will be recoverable.

SIGNIFICANT CUSTOMERS AND LICENSE AGREEMENTS

For the fiscal years ended December 31, 2005, and 2004, the Company’s sales to its most important customers were:


	12/31/2005	12/31/2004
Volkswagen Argentina S.A.	40%	41%
General Motors Argentina	20%	26%
Renault Argentina S.A.	19%	17%
Mercedes Benz	10%	8%
Peugeot Citroen Argentina S.A	10%	6%
Other	1%	2%

PARENT COMPANY

Parent company: Il Tevere S.A.

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

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 (afterwards, Valeo Systemes Thermique), 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., became effective. On March 6, 1998, 10% of the shares of Il Tevere S.A. was transferred; thus the interest in MIRGOR S.A.C.I.F.I.A. was increased to 26%. On September 27, 2005, the Parent’s local shareholders, Il Tevere S.A., owner of 52% of Mirgor S.A.C.I.F.I.A., acquired from Valeo Systems Thermique France its interest in the Company.

As part of the transaction, Mirgor and Valeo reached a business and technological long-term cooperation agreement in order to ensure the continuity in the future provision of products.

INFORMATION ON RELATED PARTIES

For the fiscal year ended December 31, 2005, and 2004, the Company was engaged in transactions with its subsidiary, parent, and other related companies. Receivables and payables in that regard are:


	12/31/2005	12/31/2004

Other receivables
IL TEVERE S.A. (3)	460,037	296,148
Total	460,037	296,148


	12/31/2005	12/31/2004
Trade payables
VALEO SISTEMAS AUTOMOTIVOS LTD (2)	-	102,464
VALEO AUTOKLIMATIZACE S.R.O (2)	-	59,499
VALEO CLIMATIZACION S.A.(EURO) (2)	-	9,808
VALEO KLIMASYSTEME GMBH (2)	-	5,643
VALEO COMPONENTES AUTOMOVILES (2)	-	-
VALEO SISTEMAS AUTOMOTIVOS (2)	-	150,645
VALEO AUTOSYSTEMIY SP. Z.O.O. (2)	-	44,492
VALEO VYMENIKY TEPLA S.R.O. (2)	-	-
VALEO SIST. AUTO LTDA. (2)	-	-
VALEO SECURITE HABITACLE (2)	44,037	-
VALEO THERMIQUE FRANCIA (2)	-	-
VALEO THERMIQUE MOTEUR (2)	-	185,190
VALEO TERMICO S.A. (2)	-	-
VCC UP ECHANGEURS (2)	-	174,757
Total	44,037	732,498

Other payables
VCC UP ECHANGEURS (2)	-	304,307
INTERCLIMA S.A. (1)	4,053,228	2,943,349
Total	4,053,228	3,247,656

The transactions carried out with the subsidiary, parent, and other related companies are:


	12/31/2005
	Purchase of goods	Services received	Royalties	Loans	Other services

VALEO SISTEMAS AUTOMOTIVOS LTD (2)	2,095,322	-	-	-	-
VALEO CHINA (2)	220,651	-	-	-	-
VALEO AUTOKLIMATIZACE S.R.O (2)	736,237	-	-	-	-
VALEO CLIMATIZACION S.A.(EURO) (2)	247,958	-	-		-
VALEO KLIMASYSTEME GMBH (2)	71,081	-	-	-	-
VALEO COMPONENTES AUTOMOVILES (2)	48,086	-	-	-	-
VALEO SISTEMAS AUTOMOTIVOS (2)	1,469,289	-	-	-	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (2)	223,961	-	-	-	-
VALEO VYMENIKY TEPLA s.r.o. (2)	2,438,722	-	-	-	-
VALEO SECURITE HABITACLE (2)	797,321	-	-	-	-
VALEO THERMIQUE FRANCIA (2)	544,868	74,127	-	-	-
VALEO THERMIQUE MOTEUR (2)	3,564,067	-	-	-	-
VALEO ZARAGOZA (2)	4,096,079	-	-	-	-
VCC UP ECHANGEURS (2)	2,736,244	-	752,664	-	-
INTERCLIMA S.A. (1)	10,106,935	-	-	1,109,879	1,200,000
IL TEVERE S.A. (3)	-	-	-	460,037	-
	29,396,821	74,127	752,664	1,569,916	1,200,000

Subsidiary.
Related company until September 27, 2005 (See 3).
Parent company. On September 27, 2005, the shareholders of Il Tevere S.A., owner of 52% of Mirgor S.A.C.I.F.I.A., acquired from Valeo System Thermique France its interest in the Company. Consequently, after such date, Valeo and the related group companies were no longer part of Mirgor .S.A.C.I.F.I.A.’s group of companies.


	12/31/2004
	Purchase of goods	Services received	Royalties	Loans	Other services

VALEO SISTEMAS AUTOMOTIVOS LTD (2)	2,143,045	-	-	-	-
VALEO CHINA (2)	69,059	-	-	-	-
VALEO AUTOKLIMATIZACE S.R.O (2)	723,943	-	-	-	-
VALEO CLIMATIZACION S.A.(EURO) (2)	224,295	-	-	-	-
VALEO KLIMASYSTEME GMBH (2)	90,794	-	-	-	-
VALEO COMPONENTES AUTOMOVILES (2)	166,409	-	-	-	-
VALEO SISTEMAS AUTOMOTIVOS (2)	1,311,239	-	-	-	-
VALEO CLIMATE CONTROL MEXICO (2)	257,586	-	-	-	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (2)	288,043	-	-	-	-
VALEO VYMENIKY TEPLA s.r.o. (2)	1,210,114	-	-	-	-
VALEO SECURITE HABITACLE (2)	1,098,362	-	-	-	-
VALEO THERMIQUE FRANCIA (2)	517,134	202,815	-	-	-
VALEO THERMIQUE MOTEUR (2)	2,943,755	-	-	-	-
VALEO ZARAGOZA (2)	4,036,024	-	-	-	-
VCC UP ECHANGEURS (2)	2,928,297	-	1,465,587	-	-
INTERCLIMA S.A. (1)	11,320,151	-	-	(1,223,994)	1,200,000
IL TEVERE S.A. (3)	-	-	-	296,148	-
	29,328,250	202,815	1,465,587	(927,846)	1,200,000

Subsidiary.
Related company.
Parent company. On September 27, 2005, the shareholders of Il Tevere S.A., owner of 52% of Mirgor S.A.C.I.F.I.A., acquired from Valeo Systems Thermique France its interest in the Company. Consequently, after such date, Valeo and the related group companies were no longer part of Mirgor .S.A.C.I.F.I.A.’s group of companies.
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 on such excess. Based on the unnumbered section subsequent to Section 69 of Income Tax Law, the Company need not withhold any amount on such account.

OFFICIALLY STAMPED BOOKS

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


Journal No.	Officially stamped on	Transactions for the period

48	22-Dec-03	11/22/2003 to 1/5/2004
49	22-Dec-03	1/5/2004 to 3/1/2004
50	27-Apr-04	3/1/2004 to 3/22/2004
51	27-Apr-04	3/22/2004 to 4/26/2004
52	11-Aug-04	4/26/2004 to 6/30/2004
53	20-Sep-04	6/30/2004 to 8/9/2004


Journal No.	Officially stamped on	Transactions for the period

54	20-Sep-04	8/9/2004 to 9/21/2004
55	20-Oct-04	9/21/2004 to 11/1/2004
56	20-Oct-04	11/1/2004 to 12/15/2004
57	1-Feb-05	12/15/2004 to 2/2/2005
58	1-Feb-05	2/2/2005 to 3/17/2005
59	4-May-05	3/17/2005 to 5/1/2005
60	4-May-05	5/1/2005 to 6/7/2005
61	8-Jul-05	6/7/2005 to 7/19/2005
62	8-Jul-05	3/19/2005 to 8/30/2005
63	28-Sep-05	8/30/2005 to 10/4/2005
64	31-Oct-05	10/04/05 to 11/14/05
65	2-Dec-05	11/14/2005 to 11/30/2005

Regarding transactions for the period December 1 through December 31, 2005, 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, in consequence the transactions’ dates are prior to the date on which they were stamped.

BANK LOANS – RESTRICTION ON EARNINGS ALLOCATION

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 and the limitation to distribute dividends during the effectiveness of the loans.

EARNINGS PER SHARE

Net income per share (basic and diluted) is calculated by dividing net income for each period allocable to common shares by the weighted average of outstanding common shares during the same periods. No transactions involving shares of common stock or possible shares of common stock have been performed as from the end of the related year until the issuance of these financial statements.

EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

These financial statements are the English translation of those originally issued in Spanish. They have also been reformatted in a manner different from that presented in Spanish, but in all other respects follows accounting principles that conform with the CNV regulations.

EXHIBIT c

Translation into English – originally issued in Spanish

MIRGOR S.A.

SHARES, DEBENTURES, OTHER SECURITIES ISSUED IN SERIES

AND INTEREST IN ANOTHER COMPANY

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

(Figures stated in Argentine pesos - Note 1.b)


	2005
Securities name and characteristics	Face values	Amounts	Cost values	Equity value	Book values

Noncurrent investments:

Companies under section 33, Law No. 19,550 - Subsidiaries and affiliates

INTERCLIMA Sociedad Anónima	1	11,996	8,815,917	18,293,834	18,293,834
Total noncurrent investments					18,293,834


	2005						2004
	Information on the issuer
		Latest financial statements issued
Securities name and characteristics	Main business activity	Date	Principal	Income for the year	Shareholders' equity	Equity interest %	Book value

Noncurrent investments:

Companies under section 33, Law No. 19,550 - Subsidiaries and affiliates

INTERCLIMA Sociedad Anónima	Manufacturing of autoparts and interchanges for air conditioning and heating systems	12/31/05	12,000	6,363,302	21,968,297	99.97%	12,580,275
Total noncurrent investments							12,580,275

AI assistant

Mirgor Annual Report 2005

AI assistant

Mirgor — Annual Report 2005

More from Mirgor

Mirgor Annual Report 2005