Mirgor — Interim / Quarterly Report 2003

Sep 16, 2003

TRANSLATION INTO ENGLISH ‑ ORIGINALLY ISSUED IN SPANISH

MIRGOR

SOCIEDAD ANONIMA, COMERCIAL, INDUSTRIAL, FINANCIERA,

INMOBILIARIA Y AGROPECUARIA

EINSTEIN 1111 ‑ RIO GRANDE

TIERRA DEL FUEGO

financial statements for the PERIOD beginning

january 1, 2003, and ended JUNE 30, 2003,

TOGETHER WITH THE LIMITED REVIEW

REPORT AND THE STATUTORY AUDIT COMMITTEE’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 Luis Caputo

directors

Mr. Pablo Plesko

Mr. André Gold

Mr. Alejandro Carrera

alternate directors

Dr. Diego García Villanueva

Mr. Bernard Clapaud

Mr. Jean Francois Vingre

Mr. Eduardo García Terán

Mr. Jorge Antonio Caputo

(Translation of the report originally issued in Spanish)

LIMITED REVIEW REPORT ON INTERIM FINANCIAL STATEMENTS

To the Chairman and Directors of

Mirgor Sociedad Anónima, Comercial, Industrial, Financiera,

Inmobiliaria y Agropecuaria

1. We have performed a limited review of the accompanying balance sheet of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria as of June 30, 2003, and the related statements of income, changes in shareholders’ equity and cash flows for the six-month period then ended. In addition, we have performed a limited review of the accompanying consolidated balance sheet of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary as of June 30, 2003, and the related consolidated statements of income and cash flows for the six-month period then ended, which are disclosed as supplementary information. These financial statements are the responsibility of the Company’s Management.

2. Our review was performed in accordance with Technical Resolution No. 7 of the FACPCE (Argentine Federation of Professional Councils in Economic Sciences) applicable to the limited review of interim financial statements. According to such standards, a limited review mainly consists in applying analytical procedures to accounting information and making inquiries of people in charge of accounting and financial issues. The scope of a review is substantially smaller than that of a financial statement audit, the purpose of which is to issue an opinion on the financial statements taken as a whole. Accordingly, we do not express such opinion.

3. As indicated in note 11 to the abovementioned financial statements, the Company carries taxes receivable and receivables from the Government, the recoverability of which is affected by the economic crisis mentioned in such note. In addition, the Company is currently implementing the agreements with financial institutions; such procedure has not concluded as of the issuance date of this report. The valuation and/or disclosure may differ from that indicated in the financial statements mentioned in paragraph (1).

4. As indicated in note 1 to the financial statements mentioned in paragraph (1), as of June 30, 2003, Interclima Sociedad Anónima -the Company’s subsidiary- has not accrued income tax since it understands that the tax adjustment for inflation provided for in Income Tax Law should be applied taking into account current Argentine macroeconomic conditions. Had the adjustment for inflation not been made, Interclima Sociedad Anónima should have booked income tax liabilities amounting to about ARS 363,000.

5. As explained in Note 1 to the accompanying financial statements, and according to the regulations of the business associations enforcement agency, the Company has not accounted for the effects of the variations in the currency purchasing power occurred since March 1, 2003, as required by professional accounting standards effective in the City of Buenos Aires, Argentina. Had the effects of the variations been recognized, (a) the Company’s shareholders’ equity as of June 30, 2003, would have increased to approximately ARS 54,501,861 and the loss for the six-month period then ended would have increased to approximately ARS 2,233,254, and (b) all the items as of June 30, 2002, presented for comparative purposes, would have been restated by applying the adjustment coefficient for the period January through June 2003.

6. The Company has prepared its financial statements as of June 30, 2003, considering the changes in the methods required by the new accounting standards mentioned in note 1 to the accompanying financial statements. As explained in such note, the amounts in the financial statements as of June 30, 2002, presented for comparative purposes, have not been changed to conform them to the new accounting standards referred to above, which affects the comparability of the accompanying financial statements.

7. Based on our review, except as explained in paragraph 4 (a), we are not aware of any material modifications that should be made to the financial statements mentioned in paragraph (1) for them to be presented in conformity with CNV (Argentine Securities Commission) regulations, and (b) except as explained in paragraph (5) as to the failure to recognize the effects of the variations in the currency purchasing power, to be in conformity with professional accounting standards effective in the City of Buenos Aires, Argentina. This statement should be read considering the uncertainties described above in paragraph 3, whose resolution cannot be determined to this reporting date.

8. Regarding the balance sheet of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary as of December 31, 2002, and the related statements of income, changes in shareholders’ equity, and cash flows of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary for the six-month period ended June 30, 2002, presented for comparative purposes, we report that:

9. On March 10, 2003, we issued an audit report on the financial statements of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary as of December 31, 2002, with an except-for qualification due to the inconsistency in the method to value the subsidiary’s income tax accrual and the qualifications for unresolved uncertainties due to the recoverability of taxes receivable and receivables from the Argentine Government and the renegotiation of financial payables. The accompanying financial statements of the Company and its subsidiary as of December 31, 2002, include the effects of the changes in the methods mentioned in paragraph (6), but do not consider the effects of currency purchasing power variations occurred as from March 1, 2003. We have not audited any financial statements as of any date and for any period subsequent to December 31, 2002.

10. On August 23, 2002, we issued a limited review report for the financial statements of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria and its subsidiary for the six-month period ended June 30, 2002, with qualifications for unresolved uncertainties due to the recoverability of tax credits and receivables from the Federal Government and the renegotiation of financial liabilities. Also, such financial statements were not changed by the Company’s management to include the changes mentioned in paragraph (6) and do not consider the effects of the variations in the currency purchasing power occurred as from March 1, 2003.

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

12. The financial statements mentioned in paragraph (1) are disclosed in the inventory and financial statements book.

13. The financial statements of Mirgor Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuariaas of June 30, 2003, result from books kept, in their formal respects, pursuant to current regulations, except as indicated in note 10.

14. The information contained in points (2) and (3) of the “Summary of events for the period ended June 31, 2003” submitted by the Company in compliance with CNV regulations derives from the accompanying financial statements as of June 31, 2003, and as of June 31, 2002, 2001, 2000, and 1999 (after its restatement in constant pesos as mentioned in note 1), not included herein, on which we based our limited review reports dated August 23, 2002, August 10, 2001, August 10, 2000 and August 10, 1999, respectively, to which we refer and should be read with this report as a whole. Such information for the periods ended June 30, 2002, 2001, 2000, and 1999, was not changed by the Company’s management to include the changes mentioned in paragraph (6) and do not consider the effects of the variations in the currency purchasing power occurred as from March 1, 2003.

15. As of June 30, 2003, liabilities accrued in employee and employer contributions to the Integrated Pension Fund System, as recorded in the Company’s books, total ARS 148.635,06, none of which was due and payable as of that date.

Buenos Aires,

August 8, 2003

PISTRELLI, HENRY MARTIN, Y ASOCIADOS S.R.L. C.P.C.E.C.A.B.A. - R.A.P.U. Vol. I Fo. 13
Adolfo Lázara (Partner) Certified Public Accountant (U.B.A.) C.P.C.E.C.A.B.A. Vol. LXIX Fo. 174

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 22, 1997.

Expiry of the articles of incorporation: May 31, 2070

fiscal year no. 32 beginning january 1, 2003,

summary OF EVENTS

For the period ended June 31, 2003

(Figures stated in pesos – see Note 1)

1. overview of the company’s activities during the PERIOD

The change in authorities occurred in the middle of the period did not result in any substantial modification to the economic operation bases.

Mr. Lavagna’s continuity as Ministry of Economy was seen by the markets as a strong signal of policy acceptance by President Kirchner and the markets.

Unfortunately for the Argentine industrial sector, the structure of the Production Ministry was reabsorbed by the Ministry of Economy, which concerns the sector, considering the multiple outstanding issues to be addressed by Mr. Lavagna.

Although the economic figures allowed to meet the requirements set by the IMF, only now are conversations resuming to reach a long-term agreement. This will require important definitions on key issues, such as foreign debt rescheduling, rates of privatized utilities, federal revenue sharing and compensations to banks, among others.

How these issues are settled will determine the future performance of economic agents over the coming years.

In this context, vehicle manufacturing grew by 10.4% as compared to the first half of the prior year. This increase is still very insignificant to start anticipating an industry recovery, especially if compared to the average of the first halves of the last 6 years. A 42% decline is noted in such comparison.

The most significant reason for this situation is the weak domestic demand that increased by 17% as compared to the same period of 2002, but fell 58% as compared to the average of the first halves of the last 6 years.

These amounts are sound in a context where vehicles have become very expensive in relative terms and in which consumers are not willing to take loans due to their high cost and the uncertainties as to the economic future in Argentina.

However, we noted a slight increase in demand, which should not be compared with that by the end of the ‘90s, but with the projected total figures that may increase from 35% to 50% during the year, with respect to 2002, but without fundamental changes that might translate into a comeback to high economic growth rates.

Mirgor’s sales, in units, increased by 16.5% as to air conditioning systems and 8.5% in dashboards, whereas sales in pesos reduced by 14.1%, as compared to the same period in the preceding year.

Variations should be analyzed on a separate basis to understand their origin.

The first reason to be highlighted is the increase in market share during the first half of this year, 36% of vehicles locally manufactured are equipped with Mirgor products, as compared to 24% during the same period the prior year.

The reason is the relative improvement of Mirgor’s customers, jointly with the small delivery to GM for the Nuevo Corsa vehicle. Although negotiations are being carried out with this customer to obtain the final purchase order, some business issues have delayed the agreement, so deliveries are being made as closed purchase orders.

The second reason to be highlighted is the decline in price of all Mirgor products in pesos, as a result of the strong revaluation of the Argentine currency. At the end of the Q2 2002, the dollar exchange rate was close to ARS 3.80 per US dollar, whereas at the end of the same period this year the exchange rate was less than ARS 2.80 per US dollar.

Due to the significant share of foreign currencies in the Company’s products, price adjustment schemes are agreed with customers contemplating these variations.

Another issue that affected the decline in the amount of sales was the decrease in the air conditioning systems share, from 59% to 43%, most significantly in VW, which is receiving equipment reduction orders by its Mexican client.

During the period, 9,081 systems were sold for vehicles with air conditioning, 11.6% more than in the same period the prior year. Also, 6921 systems were delivered to customers for vehicles without air conditioning, i.e., 23.6% more than in the period April-June 2002.

The mix of sales was affected by the cancellation of the Xsara project, which was manufactured in Uruguay and required an expensive product, as compared to the designs used in most of the vehicles manufactured in Argentina.

Exports of condensers are to be noted. Although the car industry in Brazil has been considerably affected by the decline in sales, our plant’s demand has been constantly growing because our products are intended to two very successful models: Ford Fiesta and the new Eco-Sport.

Despite the peso revaluation, in May we could notice that in a context of balance between the real and the peso our prices are very competitive in such a demanding market.

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

		06/30/2003		06/30/2002 (1)		06/30/2001 (1)		06/30/2000 (1)		06/30/1999 (1)
Current assets		58,364,849		83,324,317		88,248,604		107,451,440		111,877,938
Noncurrent assets		35,736,616		44,775,629		48,517,608		49,891,727		52,678,889
Total assets		94,101,465		128,099,946		136,766,212		157,343,167		164,556,827
Current liabilities		23,463,253		58,033,459		56,317,851		62,134,822		65,045,274
Noncurrent liabilities		15,310,758		6,730,582		-		-		1,559,739
Total noncurrent liabilities		38,774,011		64,764,041		56,317,851		62,134,822		66,605,013
Minority interest		3,656		4,098		5,577		5,810		13
Shareholders' equity		55,323,798		63,331,807		80,442,784		95,202,535		97,951,801
Total liabilities and Shareholders’ equity		94,101,465		128,099,946		136,766,212		157,343,167		164,556,827

1. Originally presented in historical currency and restated until 02/28/03.
2. income structure (figures related to the consolidated statements and stated in constant pesos – see note 1)

		06/30/2003		06/30/2002 (1)		06/30/2001 (1)		06/30/2000 (1)		06/30/1999 (1)
Ordinary operating income (loss)		(823,092)		(112,461)		(1,347,632)		1,743,843		785,723
Financial expense		(955,362)		(9,878,837)		(3,773,630)		(2,385,125)		(3,606,377)
Other (expenses) / revenues		(1,579,844)		(131,542)		(132,782)		110,992		(309,098)
Minority interest gain (loss)		(126)		1,415		30		9		510
Ordinary income (loss), net		(3,358,424)		(10,121,425)		(5,254,014)		(530,281)		(3,129,242)
Extraordinary items
Minority interest loss
Income (loss), net		(3,358,424)		(10,121,425)		(5,254,014)		(530,281)		(3,129,242)

1. Originally presented in historical currency and restated until 02/28/03.
2. STATISTICAL DATA (1)

Number of units	06/30/2003				06/30/2002					06/30/2001					06/30/2000					06/30/1999
	Quarter		Accum		Quarter		Accum			Quarter		Accum.			Quarter		Accum.		Quarter			Accum
Production (2)	46,169		83,979		28,623		51,990			46,822		103,149			68,858		110,071		54,467			99,067
Sales (3)	41,010		79,280		17,820		26,220			22,914		39,541			39,322		68,762		28,997			49,983

* Local	20,434		34,498		17,820		26,220
Equipment with air	9,081		14,659		8,135		12,630
Equipment without air	6,921		11,900		5,600		7,675
Dashboard	4,432		7,939		4,085		5,915
* Exports	20,576		44,782

1. As from this period, 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

June 2003		June 2002		May 2003		May 2002		April 2003		April 2002
16.10		4.30		15.50		4.60		12.60		4.50

January 2003		January 2002		February 2003		February 2002		March 2003		March 2002
9.40		4.10		10.10		4.10		9.30		4.10

1. perspectives

The Company’s major expectation is focused on concluding negotiations with General Motors to reach an agreement for the supply of the new Corsa. Based on preliminary estimates, Mirgor’s market share would approximate to 50%, a percentage that places us in an outstanding position to leverage the Company’s growth as soon as the economic activity resumes its course.

Based on our own estimates, our customers have significantly decreased their inventories over the last few months and this might imply some increases in production for the last half of the year.

While this occurs, the Company continues assessing new possibilities to expand operations, considering the opportunity offered by the need to replace imports.

Río Grande, August 8, 2003.

	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. 33 for the SIX-month period beginning January 1, 2003, and ended JUNE 30, 2003, presented comparatively with the prior year and with the same period the prior 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 22, 1997.

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 7 to the stand-alone financial statements.

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

	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 JUNE 30, 2003, and DECEMBER 31, 2002

Figures stated in pesos – See note 1

		2003		2002
ASSETS
CURRENT ASSETS
Cash – Note 2		11,973,043		8,949,955
Short-term investments – Note 2		1,547		5,064,959
Trade receivables – Note 2		11,239,990		8,806,415
Taxes receivable – Note 2		486,206		1,076,940
Other receivables – Note 2		1,656,245		2,166,336
Inventories – Note 2		33,007,818		40,815,020
TOTAL CURRENT ASSETS		58,364,849		66,879,625
NONCURRENT ASSETS
Other receivables – Note 2		4,292,675		5,039,934
Taxes receivable – Note 2		6,176,839		5,566,640
Intangible assets – Note 1(e)b		138,014		366,168
Property, plant and equipment – Note 1(e)a		25,129,088		27,485,463
TOTAL NONCURRENT ASSETS		35,736,616		38,458,205
TOTAL ASSETS		94,101,465		105,337,830

Notes 1 through 4 to the consolidated financial statements and notes 1 through 16 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 JUNE 30, 2003, and DECEMBER 31, 2002

Figures stated in pesos – See note 1

		2003		2002
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables – Note 2		10,275,775		11,639,916
Salaries, payroll and other taxes payable – Note 2		1,212,429		1,096,562
Customer prepayments		2,913,900		6,423,746
Loans – Note 2		8,752,412		9,457,954
Other		144,957		154,602
Total Liabilities		23,299,473		28,772,780
Provisions		163,780		1,042,593
TOTAL CURRENT LIABILITIES		23,463,253		29,815,373
NONCURRENT LIABILITIES
Payables
Customer prepayments		3,892,318		-
Loans – Note 2		11,418,440		16,836,705
TOTAL LIABILITIES		15,310,758		16,836,705
		38,774,011		46,652,078
Minority interest in subsidiaries		3,656		3,530
SHAREHOLDERS’ EQUITY		55,323,798		58,682,222
TOTAL LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY		94,101,465		105,337,830

Notes 1 through 4 to the consolidated financial statements and notes 1 through 16 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 SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year

		2003		2002
Net sales (including VAT benefits amounting to 5,449,972 and 6,339,831)		46,596,756		54,271,341
Cost of goods sold		(42,761,203)		(48,883,135)
GROSS REVENUES		3,835,553		5,388,206
Administrative expenses - Exhibit H		(3,758,039)		(4,486,606)
Selling expenses – Exhibit H		(879,250)		(992,705)
Other expense / income		(1,579,844)		(131,540)
Financial expense and holding losses
From assets – Note 3		(5,524,554)		8,976,403
From liabilities – Note 3		4,569,192		(18,855,241)
Loss from long-term investments		(21,356)		(21,356)
SUBTOTAL		(3,358,298)		(10,122,839)
Minority interest in subsidiaries		(126)		1,415
(LOSS) INCOME FOR THE PERIOD		(3,358,424)		(10,121,424)

Additional information

Consolidated statement of cash flows for the SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year

		2003		2002
CHANGES IN CASH
Cash at beginning of year		14,014,326		4,999,103
Cash at end of period		11,974,003		5,128,133
Cash (decrease) increase		(2,040,323)		129,030
SOURCES OF CHANGES IN CASH
OPERATING ACTIVITIES
Ordinary income (loss) for the period		(3,358,424)		(10,121,424)
Interest and foreign exchange difference accrued		(2,138,505)		5,162,742
Adjustments to reach net cash flows deriving from operating activities
PP&E depreciation and intangible assets amortization		2,778,202		2,816,006
Minority interest		126		(1,415)
Allowance for impairment in value of inventories (net effect)		(976,402)		9,093,393
Loss from long-term investments		21,356		21,356
Loss from current investments		-		630
Contingency provision		(878,813)		1,959,404
Impairment in value of PP&E advances from exposure to inflation		1,618		625,615
Changes in operating assets and liabilities:
Trade receivables		(2,433,575)		(4,989,847)
Inventories		8,783,604		(27,124,305)
Trade payables		(1,364,141)		7,628,665
Salaries, payroll and other taxes (net of receivables)		96,402		6,779,357
Customer prepayments		382,472		8,531,664
Other		1,226,351		883,755
Interest repayment		(1,450,474)		(934,463)
Net cash flow provided by operating activities		689,797		331,133

Additional information

Consolidated statement of cash flows for the SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year

		2003		2002
INVESTMENT ACTIVITIES
PP&E acquisition		(195,291)		(236,867)
Revenues from PP&E sales		-		34,764
Net cash flow used in investment activities		(195,291)		(202,103)
FINANCING ACTIVITIES
Loan repayment		(2,534,829)		-
NET CASH FLOW USED IN FINANCING ACTIVITIES		(2,534,829)		-
Net cash (decrease) increase		(2,040,323)		129,030

notes to the consolidated financial statements as of JUNE 30, 2003, and 2002

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

1. Applicable accounting standards

The financial statements as of June 30, 2003, and 2002, 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. 434, 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 basic 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. 4 as amended by FACPCE Technical Resolution No. 19 with the applicable deletions.

1. Consolidation bases

Following the procedure established in FACPCE Technical Resolution No. 4 amended by Technical Resolution No. 19, MIRGOR S.A.C.I.F.I.A. has consolidated its financial statements as of June 30, 2003, December 31, 2002, and June 30, 2002, as the case may be, line by line with those of its subsidiary, Interclima Sociedad Anónima, where it holds majority voting rights.

Corporate control is as follows:

Subsidiary		Interest in the common stock and voting rights as of 06/30/03		Period-end
Interclima Sociedad Anónima		99.9667%		06/30/03

notes to the consolidated financial statements as of JUNE 30, 2003, and 2002 - Continued

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - Continued

1. Financial statements used in consolidation

To prepare the financial statements as of June 30, 2003, and 2002, and those as of December 31, 2002, Interclima Sociedad Anónima’s financial statements as of June 30, 2003, and 2002, were used, which rely on the limited review report issued by Pistrelli, Henry Martin y Asociados S.R.L. and Henry Martin, Lisdero y Asociados, respectively, and as of December 31, 2002, with Henry Martin, Lisdero y Asociados’ audit, which have issued the related limited review report, with except-for qualifications and qualifications for unresolved uncertainties -dated August 8, 2003, with qualifications for unresolved uncertainties dated August 23, 2002-, and the audit report with except-for qualifications and qualifications for unresolved uncertainties dated March 10, 2003.

1. Changes in significant assets

		06/30/03 ARS		12/31/02 ARS
1. PP&E
Balance at beginning of year		27,485,463		38,586,113
Additions		195,291		530,341
Retirements (net of depreciation)		(1,618)		(6,395,002)
Depreciation		(2,550,048)		(5,235,989)
Balance at end of year		25,129,088		27,485,463

		ARS		ARS
1. Intangible assets
Balance at beginning of year		366,168		774,116
Amortization		(228,154)		(407,948)
Balance at end of year		138,014		366,168

notes to the consolidated financial statements as of JUNE 30, 2003, and 2002 - Continued

NOTE 2 – MAIN ACCOUNT BREAKDOWN

		06/30/03		12/31/02
ASSETS
CURRENT ASSETS
Cash
On hand and imprest fund in Argentine currency		19,237		17,899
On hand in foreign currency		49,844		848,257
In banks in Argentine currency		6,210,645		7,789,049
In banks in foreign currency		5,693,317		294,750
		11,973,043		8,949,955
Short-term investments
Securities and shares		587		591
Savings account and other in foreign currency		-		5,063,401
Savings account in Argentine currency and other		960		967
		1,547		5,064,959
Trade receivables
Trade receivables		10,802,330		8,225,134
Trade receivables in foreign currency		523,247		666,395
Allowance for doubtful accounts		(85,587)		(85,114)
		11,239,990		8,806,415
Taxes receivable
VAT credit		437,935		1,006,753
Other		48,271		70,187
		486,206		1,076,940
Other receivables
Notes receivable		700,986		1,513,368
Interest to be accrued		(89,362)		(78,248)
Miscellaneous receivables		-		284,635
Other		1,044,621		446,581
		1,656,245		2,166,336

NOTE 2 - MAIN ACCOUNT BREAKDOWN - Continued

		06/30/03		12/31/02
Inventories
Manufactured products		8,603,760		11,335,434
Raw material		25,127,171		31,804,395
Raw material in transit		4,172,805		3,303,341
Stock at end of period		37,903,736		46,443,170
Prepayments to vendors in Argentine currency		402,401		804,366
Prepayments to vendors in foreign currency		917,062		759,267
Allowance for impairment in value		(6,215,381)		(7,191,783)
		33,007,818		40,815,020
NONCURRENT ASSETS
Other receivables
Reimbursements in Argentine currency receivable		2,141,206		2,067,247
Notes receivable		2,453,451		3,410,035
Interest to be accrued		(312,767)		(469,490)
Other		10,785		32,142
		4,292,675		5,039,934
Taxes receivable
Compulsory savings		7,842		7,900
VAT credit		3,187,951		2,984,289
Minimum presumed income tax		1,558,165		1,273,669
Promotional benefits receivable		1,004,755		925,103
Other		418,126		375,679
		6,176,839		5,566,640

NOTE 2 - MAIN ACCOUNT BREAKDOWN - Continued

		06/30/03		12/31/02
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables
In local currency		4,703,796		6,359,492
In foreign currency		5,571,979		5,280,424
		10,275,775		11,639,916
Salaries, payroll and other taxes
Employee benefits		412,944		494,668
Taxes payable		799,485		601,894
		1,212,429		1,096,562
Loans
Financial loans in local currency		3,872,842		4,948,206
Financial loans in foreign currency		4,879,570		4,509,748
		8,752,412		9,457,954
NONCURRENT LIABILITIES
Payables
Loans
Financial loans in local currency		2,347,700		2,807,948
Financial loans in foreign currency		9,070,740		14,028,757
		11,418,440		16,836,705

NOTE 3 – BREAKDOWN OF FINANCIAL INCOME (EXPENSE) AND HOLDING GAINS (LOSSES)

		06/30/03 Provided by				06/30/02 Provided by
		Assets		Liabilities		Assets		Liabilities
		(Expense)/(loss)		(Expense)/(loss)		(Expense)/(loss)		(Expense)/(loss)
		Income/gain		Income/gain		Income/gain		Income/gain
Interest		469,780		(949,055)		33,052		3,313,434
Foreign exchange difference		(1,256,843)		5,125,932		(2,627,345)		(24,279,700)
Holding gains (losses) - Inventories		(5,171,435)				28,978,954
Allowances / provisions		694,325				(4,532,721)
Gain (loss) on exposure to inflation		(346,836)		392,315		(12,631,001)		2,111,025
Current investments and tax credits – Note 5(c)		86,455				(244,536)
Subtotal		(5,524,554)		4,569,192		8,976,403		(18,855,241)
Total		(955,362)				(9,878,838)

NOTE 4 – 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.

EXHIBIT c

shares, debentures, other securities issued in series, and interest in the company for the SIX-month period ended JUNE 30, 2003, presented comparatively WITH THE PRIOR FISCAL YEAR

Figures stated in pesos – See Note 1(a)

		06/30/03																								06/30/02
														Information on the issuer
																Latest financial statements issued
Securities name and features		Face values		Amounts		Cost values		Value by the equity method		Highest investment value		Book values		Main business		Date		Capital		Return for period		Equity		Interest % on capital stock		Book value
Current investments:
BAESA		1.0		246		326,425						587														591
Total current investments												587														591
Companies under Law No. 19,550, Section 33 (subsidiaries and affiliates)
INTERCLIMA Sociedad Anónima		1		11,996		8,815,917		10,878,995		10,785		10,889,780		Auto-part manufacturing and interchanges for air conditioning and heating equipment		06/30/03		12		377,875		10,978,823		99.97%		10,533,388
Total noncurrent investments												10,889,780														10,533,388
Total investments												10,890,367														10,533,979

EXHIBIT H

INFORMATION REQUIRED BY LAW No. 19,550, section 64 b(i) for the SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year

Figures stated in pesos – See Note 1(a)

		06/30/03								06/30/02
Accounts		Production costs		Administrative expenses		Selling expenses		Total		Total
Salaries and wages		2,001,252		1,101,979		197,422		3,300,653		4,236,293
Payroll taxes and employee benefits		437,604		317,576		49,662		804,842		968,187
Insurance		230,107		49,169		2,551		281,827		236,893
Fees and training expenses		77,900		182,633		1,500		262,033		339,423
Taxes, rates, and assessments		232,214		218,050		132,182		582,446		470,940
Other administrative expenses		-		723,342		-		723,342		1,199,070
PP&E depreciation		1,588,587		983,367		24,325		2,596,279		2,682,637
Intangible asset amortization		-		181,923		-		181,923		133,368
Other production expenses		667,754		-		-		667,754		882,314
Customs clearance and taxes		987,644		-		-		987,644		1,678,813
Shipping, handling and freight		3,270,508		-		219,720		3,490,228		4,758,664
Other selling expenses		-		-		251,888		251,888		326,159
Total 2003		9,493,570		3,758,039		879,250		14,130,859
Total 2002		12,433,450		4,486,606		992,705				17,912,761

balance sheet as of JUNE 30, 2003, and 2002

Figures stated in pesos – See note 1(a)

		06/30/03		06/30/02
ASSETS
CURRENT ASSETS
Cash – Note 2		9,609,462		8,140,586
Short-term investments – Note 2		1,547		5,064,959
Trade receivables – Note 2		10,708,180		8,120,841
Taxes receivable – Note 2		312,739		906,803
Other receivables – Note 2		1,632,077		1,864,324
Inventories – Note 2		30,812,001		38,774,595
TOTAL CURRENT ASSETS		53,076,006		62,872,108
NONCURRENT ASSETS
Long-term investments		10,889,780		10,533,388
Taxes receivable – Note 2		3,002,244		2,643,206
Other receivables – Note 2		3,060,454		3,867,128
Property, plant and equipment		22,803,966		24,926,314
Intangible assets		84,262		266,185
TOTAL NONCURRENT ASSETS		39,840,706		42,236,221
TOTAL ASSETS		92,916,712		105,108,329

The accompanying notes 1 to 16 are an integral part of these financial statements.

balance sheet as of JUNE 30, 2003, and 2002 ‑ Continued

Figures stated in pesos – See note 1(a)

		06/30/03		06/30/02
LIABILITIES
CURRENT LIABILITIES
Payables
Trade payables– Note 2		8,730,726		10,190,234
Salaries, payroll and other taxes– Note 2		1,078,724		1,015,461
Loans – Note 2		8,752,412		9,457,954
Customer prepayments		2,913,900		6,423,746
Other – Note 2		642,614		1,459,414
Total Liabilities		22,118,376		28,546,809
Provisions		163,780		1,042,593
TOTAL CURRENT LIABILITIES		22,282,156		29,589,402
NONCURRENT LIABILITIES
Payables
Loans – Note 2		11,418,440		16,836,705
Customer prepayments		3,892,318		-
TOTAL NONCURRENT LIABILITIES		15,310,758		16,836,705
TOTAL LIABILITIES		37,592,914		46,426,107
SHAREHOLDERS’ EQUITY		55,323,798		58,682,222
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		92,916,712		105,108,329

The accompanying notes 1 to 16 are an integral part of these financial statements.

statement of income FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003, PRESENTED COMPARATIVELY WITH THE SAME PERIOD THE PRIOR YEAR

		06/30/03		06/30/02
Net sales (including VAT benefits amounting to 5,449,972 and 6,339,831) – Note 5(e)		42,732,341		47,686,205
Cost of goods sold		(40,254,232)		(44,458,249)
GROSS REVENUES		2,478,109		3,227,956
Administrative expenses		(3,652,624)		(4,384,147)
Selling expenses		(866,068)		(985,186)
Other (expense) / income – Note 2		(1,254,396)		331,866
Financial income (expense) and holding gains (losses)
From assets – Note 4		(4,896,700)		15,006,415
From liabilities – Note 4		4,476,861		(19,063,206)
Ordinary income (loss) from long-term investments		356,394		(4,255,122)
NET (LOSS) INCOME FOR THE PERIOD		(3,358,424)		(10,121,424)
NET (LOSS) EARNINGS PER SHARE – NOTE 14
BASIC ORDINARY		(0.1679)		(0.5061)
DILUTED ORDINARY		(0.1679)		(0.5061)

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003, PRESENTED COMPARATIVELY WITH THE SAME PERIOD THE PRIOR YEAR

		06/30/03																						06/30/02
														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		46,855,986		60,610,549		73,453,228
Balance modification-Note 15																				(1,928,327)		(1,928,327)
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		44,927,659		58,682,222		73,453,228
																				(3,358,424)		(3,358,424)		(10,121,424)
Balances as of June 30, 2003		2,000,000		4,156,057		497		717		5,243,562		11,400,712		2,280,143		73,708		2,353,851		41,569,235		55,323,798
Balances as of June 30, 2002		2,000,000		4,156,057		972		121		5,243,562		11,400,712		2,280,143		73,708		2,353,851		49,577,242				63,331,804

(*) See note 3(b)

statement of cash flows for the SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year

		06/30/03		06/30/02
CHANGES IN CASH
Cash at beginning of year		13,204,957		4,990,963
Cash at end of period		9,610,422		5,093,342
Cash (decrease) increase		(3,594,535)		102,379
SOURCES OF CHANGES IN CASH
OPERATING ACTIVITIES
Ordinary (loss) income for the period		(3,358,424)		(10,121,424)
Interest and foreign exchange difference accrued		(2,138,505)		5,162,742
Adjustments to reach net cash flows deriving from operating activities
PP&E depreciation and intangible assets amortization		2,468,436		2,501,650
Allowance for impairment in value of inventories (net effect)		(990,967)		8,389,728
Loss from long-term investments		(356,394)		4,255,122
Loss from current investments		-		630
Contingency provision		(878,813)		1,959,404
Impairment in value of PP&E advances from exposure to inflation		1,585		625,615
Changes in operating assets and liabilities:
Trade receivables		(2,587,339)		(3,907,058)
Inventories		8,953,561		(25,737,405)
Trade payables		(1,459,508)		6,503,714
Salaries, payroll and other taxes (net of receivables)		298,289		4,060,090
Customer prepayments		382,472		8,531,664
Other		222,124		(1,002,635)
Interest repayment		(1,450,473)		(934,463)
NET CASH FLOW (USED IN) PROVIDED BY OPERATING ACTIVITIES		(893,956)		287,374

statement of cash flows for the SIX-month period ended JUNE 30, 2003, presented comparatively with the same period the prior year Figures stated in pesos – See note 1(a)

		06/30/03		06/30/02
INVESTMENT ACTIVITIES
PP&E acquisition		(165,750)		(219,759)
Revenues from PP&E sales		-		34,764
NET CASH FLOW USED IN INVESTMENT ACTIVITIES		(165,750)		(184,995)
FINANCING ACTIVITIES
Loan repayment		(2,534,829)		-
NET CASH FLOW USED IN FINANCING ACTIVITIES		(2,534,829)		-
Net cash (decrease) increase		(3,594,535)		102,379

NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2003, AND 2002

Figures stated in pesos – See Note 1.a)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

1. Restatement in constant pesos

The financial statements recognize the effects of the changes in the currency purchasing power until February 28, 2003, following the restatement method under FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolution No. 6 through the use of adjustment rates deriving from the domestic wholesale price index (domestic WPI) of the INDEC (Argentine Institute of Statistics and Censuses). Based on Executive Order No. 664/03 and CNV (Argentine Securities Commission) General Resolution No. 441, the Company stopped applying such method and, consequently, it did not recognize the effects of variations in the currency purchasing power occurred as from March 1, 2003. Under professional accounting standards this method is still effective. Accordingly, had the effects of the variations been recognized, (a) the Company’s shareholders’ equity as of June 30, 2003, would have increased by approximately ARS 821,936 and the loss for the six-month period then ended would have increased by approximately ARS 1,125,170; and (b) all the items as of June 30, 2002, and December 31, 2002, presented for comparative purposes, would have been restated to recognize the effects of the currency purchasing power as from March 1, 2003.

Under the abovementioned method, the accounting measurements were restated based on the changes in the purchasing power of the currency through August 31, 1995. As from such date, based on the economic stability conditions prevailing in Argentina and as required by CNV General Resolution No. 272 and accepted by professional accounting standards, the accounting measurements were not restated until December 31, 2001. Under CNV General Resolution No. 415, the restatement method was reinstated for periods as from January 1, 2002, considering the measurements taken before such date as stated in December 31, 2001, currency and, according to CNV Resolution No. 441, it was discontinued as from March 1, 2003.

Below is a summary of balance sheet and income statement data, restated in constant currency according to the method established in F.A.C.P.C.E. Technical Resolution No. 6 and required by the C.P.C.E.C.A.B.A. (Professional Council of Economic Sciences of the City of Buenos Aires).

NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2003, AND 2002 - Continued

Figures stated in pesos – See Note 1.a)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES - Continued

	$
Total Current Assets	53,076,006
Total Noncurrent Assets	39,018,770
Total Assets	92,094,776
Total Current Liabilities	22,282,157
Total Noncurrent Liabilities	15,310,758
Total Liabilities	37,592,915
Shareholders' equity	54,501,861
Total	92,094,776
Net loss for the period	(2,233,254)

The information presented for comparative purposes related to the financial statements as of June 30, 2002, (statements of income, changes in shareholders’ equity and cash flows) has been restated according to the IPIM variation from June 30, 2002, to February 28, 2003. However, the effects of the change in accounting standards have not been considered (see Note 1(b) and (c)).

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

On January 14, 2003, the CNV issued General Resolution No. 434, effective for fiscal years beginning as from January 1, 2003, which adopted, subject to certain exceptions, the new accounting standards issued by the CPCECABA (Professional Council in Economic Sciences of the City of Buenos Aires), which approved FACPCE Technical Resolutions Nos. 16 through 20, as amended by Resolutions CD Nos. 238/01, 243/01, 261/01, 262/01 and 187/02 and CPCECABA Resolution MD No. 32/02.

Such accounting standards introduced changes in the methods to measure the shareholders’ equity and to determine income (loss), as well as new disclosure requirements. The changes that may be more relevant to the Company are: the determination of the current value of its tax credits, income tax quantification through the deferred tax method, restrictions on the recognition of intangible assets and other disclosure aspects, such as earnings per share, as explained in each related item.

NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2003, AND 2002 - Continued

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES - Continued

The effects of the changes in the accounting standards at the beginning of the first year of their application have been retroactively booked, i.e. prior-year income (loss) have been affected, as indicated in note 15.

1. Accounting disclosure methods

As from this period, and as required by FACPCE Technical Resolution No. 8 (amended by F.A.C.P.C.E. Technical Resolution No. 19), the Company changed the presentation of comparative financial statements since, until the prior fiscal year, the comparison was made with the same prior-year period. Now the balance sheet is presented comparatively with that as of the last fiscal year-end (December 31, 2002) and the statements of income, changes in shareholders’ equity and cash flows with those of the same period the prior year (June 30, 2002). Although new professional standards require adjusting the financial statements presented for comparative purposes to the new accounting standards adopted, based on practicality, timeliness, and balance between costs and benefits the Company’s Management decided to disregard such effects as of June 30, 2002. Consequently, the information comparability is affected by such circumstance.

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,as the case may be, which has been determined by calculating the discounted value of cash flows, following the methods under CPCECABA Resolution MD No. 32/02, considering the present economic circumstances due to the current characteristics of the financial market, so the interest rate of Banco Nación Argentina applicable to savings accounts has been 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 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 under CPCECABA Resolution MD No. 32/02, as mentioned in the first paragraph (Cash, Trade Receivables, Other Receivables and Liabilities)

• 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.

• Long-term investments:

Companies subsidiaries and affiliates under Argentine Business Associations Law No. 19,550 section 33: at their equity value as set forth by Technical Resolution No. 5 of the FACPCE, as amended by Technical Resolution No. 19, which was calculated based on Interclima S.A.’s financial statements as of June 30, 2003, audited by Pistrelli, Henry Martin y Asociados S.R.L.on which, a limited review report was issued with except-for qualifications and qualifications for unresolved uncertainties dated August 8, 2003.

On the other hand, the adjustments necessary to adopt the valuation methods used by the subsidiary to those used by the Company, including an increase in the market value of the former PP&E as compared to the books, which was included as investment value, were carried out upon calculating 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.

• 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 six-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.

• 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.
• Provisions:

Contingencies: see note 11.

• Shareholders’ equity accounts:

Restated until 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

Statement of income accounts for the period from January 1 to February 28, 2003, are adjusted up to the latter date. Transactions from March 1 to June 30, 2003, are restated at historical currency.

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.

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)
• 1. 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.

As from this period and as a result of the implementation of the new accounting standards mentioned in paragraph (b) of this note, 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. The effect of such discount on shareholders’ equity as of June 30, 2003, and income (loss) for the six-month period then ended has not been significant with respect to these financial statements, taking into account the comments below.

Considering that the Company carries NOLs for ARS 10,355,369, there is a deferred tax asset of ARS 3,624,378, the value of which has been impaired by 100%, taking into account the difficulties of the current market to guarantee the possibility to recover such assets, with taxable income.

Such deferred taxes expire as follows:

Year of origin	NOL	Deferred tax	Expiration year
1998	59,517	20,830	2003
2000	323,527	113,234	2005
2001	119,008	41,653	2006
2002	9,853,317	3,448,661	2007
Total	10,355,369	3,624,378

During the period ended June 30, 2003, the TOMPI amount was higher than that of income tax. Accordingly, the accrual amounts to ARS 261,184, which was entered with a balancing entry in noncurrent tax credits.

• • 1. Status of the subsidiary ICSA

Interclima S.A. has accrued income tax since it understands that 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.

Should the tax adjustment for inflation not be made, the Company would have determined income tax amounting to about ARS 260,000 (after computing prior-year NOLs) and ARS 103,000 for the current period.

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 363,000) have not been booked in the financial statements as of June 30, 2003; thus, such lower value is not considered in the investment.

• • 1. Statement of cash-flows

Under FACPCE Technical Resolution No. 19, 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 six months).

note 2 – MAIN ACCOUNT BREAKDOWN

		06/30/03		12/31/02
CURRENT ASSETS
Cash
On hand and imprest fund in Argentine currency		16,390		10,236
On hand in foreign currency		49,844		46,551
In banks in Argentine currency		3,849,911		7,789,049
In banks in foreign currency		5,693,317		294,750
		9,609,462		8,140,586
Short-term investments
Securities and shares		587		591
Savings account and other in foreign currency		-		5,063,401
Savings account and in Argentine currency and other		960		967
		1,547		5,064,959
Trade receivables
Trade receivables		10,793,767		8,205,955
Allowance for doubtful accounts		(85,587)		(85,114)
		10,708,180		8,120,841
Taxes receivable
VAT credit		309,806		883,273
Other		2,933		23,530
		312,739		906,803
Other receivables
Notes receivables		700,986		1,513,368
Interest to be accrued		(89,362)		(78,248)
Other		1,020,453		429,204
		1,632,077		1,864,324

note 2 – MAIN ACCOUNT BREAKDOWN - Continued

			06/30/03					12/31/02
Inventories
Manufactured products			7,915,106					11,096,316
Raw material			23,898,979					30,047,273
Raw material in transit			3,546,705					2,915,940
Stock at end of period			35,360,790					44,059,529
Prepayments to vendors in Argentine currency – Note 8			401,517					785,426
Prepayments to vendors in foreign currency			888,354					759,267
Allowance for impairment in value			(5,838,660)					(6,829,627)
			30,812,001					38,774,595
NONCURRENT ASSETS
Taxes receivable
Compulsory savings			7,821						7,879
VAT credit			320,505						321,286
Minimum presumed income tax			1,558,165						1,273,669
Promotional benefits receivable – Note 5(c)			1,004,755						925,103
Other			110,998						115,269
			3,002,244						2,643,206
Other receivables
Reimbursements in Argentine currency receivable – Note 5		919,770					926,583
Notes receivable		2,453,451					3,410,035
Interest to be accrued		(312,767)					(469,490)
		3,060,454					3,867,128
CURRENT LIABILITIES
Payables
Trade payables
In local currency		4,137,533						5,307,147
In foreign currency		4,593,193						4,883,087
		8,730,726						10,190,234

NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2003 AND 2002 - Continued

note 2 – MAIN ACCOUNT BREAKDOWN - Continued

		06/30/03		12/31/02
Salaries, payroll and other taxes
Employee benefits		376,263		468,278
Taxes payable		702,461		547,183
		1,078,724		1,015,461
Loans
Financial loans in local currency		3,872,842		4,948,206
Financial loans in foreign currency		4,879,570		4,509,748
		8,752,412		9,457,954
Other payables
Companies under Section 33, Law No. 19,550 (subsidiaries and affiliates) – Note 8		497,657		1,304,812
Other		144,957		154,602
		642,614		1,459,414
NONCURRENT LIABILITIES
Loans
Financial loans in local currency		2,347,700		2,807,948
Financial loans in foreign currency		9,070,740		14,028,757
		11,418,440		16,836,705

		06/30/03		06/30/02
OTHER EXPENSE / INCOME
Inventory difference		(890,743)		-
Other		(363,653)		331,866
		(1,254,396)		331,866

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.

note 3 –capital structure – SHAREHOLDERS’ equity - Continued

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 structure as of JUNE 30, 2003, and 2002, was:

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

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 – BREAKDOWN OF FINANCIAL INCOME (EXPENSE) AND HOLDING GAINS (LOSSES)

For the periods ended JUNE 30, 2003, and 2002, this account breaks down as follows:

		06/30/03 Provided by				06/30/02 Provided by
		Assets		Liabilities		Assets		Liabilities
		(Expense)/(loss)		(Expense)/(loss)		(Expense)/(loss)		(Expense)/(loss)
		Income/gain		Income/gain		Income/gain		Income/gain
Interest		471,006		(934,535)		33,371		3,313,875
Foreign exchange difference		(960,027)		5,054,960		(2,161,532)		(23,971,041)
Holding gains (losses) - Inventories		(4,912,575)				27,944,979
Allowances / provisions		678,849				(4,141,423)
Gain (loss) on exposure to inflation		(260,408)		356,436		(6,424,444)		1,593,960
Current investments and tax credits – Note 5(c)		86,455				(244,536)
Subtotal		(4,896,700)		4,476,861		15,006,415		(19,063,206)
Total		(419,839)				(4,056,791)

note 5 – tax system

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

• 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:

• 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%).

note 5 – tax system – Continued

1. 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 1,511,787.90 based on the difference of the amount originally booked and that requested on July 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 (2,194,141.37) (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 148,853.37 (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.

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

note 5 – tax system – Continued

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:

	Periods ended
	June 30, 2003	June 30, 2002
Value-added tax	5,449,972	6,339,831
Customs duties and statistical rate (approximate amounts)	3,691,634	3,121,938

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 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.

NOTES TO THE FINANCIAL STATEMENTS AS OF JUNE 30, 2003 AND 2002 - 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 in order to issue an opinion thereon.

• 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:

• Full corporate indebtedness tax exemption;

• Full TOMPI exemption;
• 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) have been effective since August 31, 2001; those in (b) and (c) have been effective since July 1, 2001. In the case of (a) and (b), the benefits will remain in effect through June 30, 2003, while those under (c) ended on November 30, 2001.

note 6 – major customers and license agreements

For the years ended June 30, 2003, and 2002, the Company’s sales to its most important customers were:

		2003		2002
Volkswagen Argentina S.A.		56%		62%
Renault Argentina S.A.		17%		5%
General Motor Argentina		10%		11%
Mercedes Benz		7%		6%
Peugeot Citroen Argentina S.A.		7%		7%

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

note 7 – 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 8 – transactions with companies under law no. 19,550, section 33 (SUBSIDIARIES AND AFFILIATES)

During the course of the fiscal years ended JUNE 30, 2003, and 2002, the Company performed merchandise purchase transactions and other transactions with its subsidiary in the amount of ARS (514.810) and ARS (127.061), respectively.

On August 20, 1998, the Company’s Board of Directors decided to make irrevocable contributions on account of future capital increases totaling 3,000,000 in INTERCLIMA S.A. through part of the receivable from such company.

In addition, on November 29, 1999, the Company’s Board of Directors decided to make another irrevocable contribution on account of future capital increases in the amount of 4,500,000 in INTERCLIMA S.A. through the receivable from such company.

As of June 30, 2003, and December 31, 2002, the balances in favor of MIRGOR and/or INTERCLIMA S.A. amounted to:

		06/30/03		06/30/02
Prepayments to vendors - Current		-		49,476
Other payables – Current		(497,657)		-
Payables to companies under Law No. 19,550, Section 33 – Current		-		(1,304,812)
Total		(497,657)		(1,255,336)

note 9 – 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 10 – stamped and sealed books

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

Journal No.	Stamped and sealed	Period transactions
37	February 21, 2003	07/01/02 to 08/28/02
38	February 21, 2003	08/28/02 to 09/30/02
39	March 11, 2003	10/01/02 to 11/22/02
40	March 11, 2003	11/23/02 to 12/31/02
41	May 6, 2003	01/01/03 to 02/28/03
42	July 1, 2003	02/28/03 to 04/14/03
43	July 1, 2003	04/14/03 to 05/30/03
44	July 23, 2003	05/30/03 to 06/30/03

NOTE 11 – 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). Later, the Federal Government declared the official default on foreign debt payments and, on January 6, 2002, the Argentine Congress approved Public Emergency and Foreign Exchange System Reform Law No. 25,561, which introduced dramatic changes to the economic model implemented until that date and that amended Convertibility Law (the currency board that pegged the Argentine peso at parity with the US dollar) approved in March 1991. The new law empowers the Federal Executive to implement, among other things, additional monetary, financial and foreign exchange measures to overcome the economic crisis in the medium term.

NOTE 11 – RECENT SIGNIFICANT ECONOMIC EVENTS - Continued

Presidential Decree No. 71/2002 and BCRA Communiqué “A” 3,425, as amended, established an “official” foreign exchange system, mainly for exports, certain imports, and bank debts, and a “freely-floating” foreign exchange market for the rest of the transactions. The “official” exchange rate was fixed at ARS 1.4 to USD 1, and the “freely-floating” exchange rate as of the closing of business of the first day the exchange market, which had been suspended since December 23, 2001, reopened (January 11, 2002), ranged from ARS 1.60 to ARS 1.70 to USD 1 (selling rate).

Other regulations were issued subsequently, which further amended the new regulations then in effect, such as: consolidation of exchange markets into a “free” market; de-dollarization of U.S. dollar-denominated deposits with Argentine financial institutions at the ARS 1.40-to-USD 1 exchange rate, and of all U.S. dollar-denominated obligations assumed as of January 6, 2002, in Argentina at the ARS 1-to-USD 1 exchange rate; de-dollarization of utility rates which were formerly agreed upon in US dollars, and subsequent renegotiation thereof on a case-by-case basis; prior authorization from the B.C.R.A. to transfer funds abroad to service the principal and interest of financial loans; suspension of unjustified dismissals, to expire in early 2003; and suspension of dissolution causes due to loss of capital stock and mandatory reduction thereof provided by Argentine Business Associations Law.

Upon preparing the financial statements, Management especially took into account Presidential Decrees Nos. 214/2002, 410/2002 and Resolution (A) 3,561 of the BCRA (amending Resolution (A) 3,507) regarding the currency to settle liabilities in U.S. dollars. However, the abovementioned regulations give rise to different interpretations regarding the method used to determine the liabilities that became subject to the conversion into pesos.

In this regard, as of the issuance date of these financial statements, the Company is documenting (signing final agreements) certain contracts.

Taking into account the comments in the previous paragraphs and considering the development expected for negotiations with financial institutions, the Company’s Management decided to book a reserve for financial contingencies amounting to ARS 164,000, which should not differ significantly from expected final income (loss). Such contingency has been booked in income (loss) for the year 2002 and included in financial income (expense) and holding gains (losses) -actual interest-, with contra to contingency provisions in current liabilities.

NOTE 11 – RECENT SIGNIFICANT ECONOMIC EVENTS - Continued

At the same time, the Company and its subsidiary carry tax credits, reimbursements receivable and other receivables from Government amounting to ARS 8.3 million disclosed in noncurrent assets, the future recoverability of which depends both on the Government’s possibilities to revert the declaration of its payment default and the generation of taxable income, which are affected by the Argentine market uncertainty in general.

NOTE 12 – BANK LOANS – RESTRICTION ON EARNINGS ALLOCATION

The Company was granted a loan by Citibank N.A. amounting to USD 840,000, over a 28-month term. Interest will be paid at LIBOR plus a monthly 6% spread p.a. and from Banco Francés BBVA amounting to USD 1,000,000 to be paid in 14 monthly installments with interest at LIBOR over 30 days plus 500bp. These loans taken by the Company imply that it should meet certain terms and conditions, especially those related to keeping some 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 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 upon the restructuring. Additionally, the Company has assumed certain commitments normal in this kind of restructuring. In the opinion of Management, the Company is meeting with repayment agreements, as referred to above.

NOTE 13 – INCOME TAX

The applicable income tax rate has not varied in the period under analysis.

The reconciliation between income tax expenses applicable to income generated by operating activities before income tax at the statutory rate and the income tax expense at the actual income tax rate for the period ended June 30, 2003, was as follows:

		$
Loss from operating activities before income tax		(3,358,424)
At the income tax statutory rate		1,175,449
Variation of temporary differences
Allowance for impairment in value		(155,560)
Reserve for contingencies		43,157
Deferred foreign exchange difference		(82,866)
Other		(8,258)
Subtotal		(203,527)
Income (loss) not subject to income tax
Permanent differences:
Special customs area activity		(1,354,251)
Income from long-term investments		132,212
Subtotal		(1,222,039)
Assets from recovered NOLs		250,117
Income tax		-

NOTE 14 – 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 15 – CHANGES IN PRIOR-YEAR INCOME (LOSS)

During this period, 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 financial assets and liabilities at the current net value of the amount receivable or payable, as the case may be, and with the recognition of payables to vendors.

NOTE 16 – 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.