Mirgor - Interim / Quarterly Report 2006


Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria	Financial Statements for the period beginning January 1, 2006 and ended June 30, 2006, presented jointly with the Limited Review Report (Translation into English – originally issued in Spanish)

BOARD OF DIRECTORS

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

CHAIRMAN

Lic. Roberto G. Vazquez (*)

VICE-CHAIRMAN

Dr. José Luis Caputo

DIRECTORS

Ing. Jorge Antonio Caputo

Sr. José Fara (*)

Ing. Alejandro Carrera (*)

ALTERNATE DIRECTORS

Dr. Diego García Villanueva

Dr. Mauricio Blacher

Dr. Fabio Rozemblun

Lic. Martín Basaldúa

Dr. Eduardo Garcia Terán

STATUTORY AUDIT COMMITTEE

Statutory Auditors

Dr. Julio Cueto Rua

Dr. Mario Volman

Dr. Matias Romero Zapiola

Alternate Statutory Auditors

Dr. Andrés Mercau Saavedra

Dr. Hugo Kaplan

Dr. Jorge Oyuela

(*) Audit Committee members.

LIMITED REVIEW REPORT ON INTERIM FINANCIAL STATEMENTS

(Translation of the report originally issued in Spanish, except for the omission of certain

disclosures related to formal legal requirements for reporting in Argentina)

To the Chairman and Directors of

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

We have performed a limited review of the balance sheet of MIRGOR S.A.C.I.F.I.A. as of June 30, 2006, and the related statements of income, changes in shareholders’ equity, and cash flows for the six-month period then ended. We have also performed a limited review of the consolidated balance sheet of MIRGOR S.A.C.I.F.I.A. and its subsidiary as of June 30, 2006, and the related consolidated statements of income and cash flows for the six-month period then ended, disclosed below as supplementary information. These financial statements are the responsibility of the Company’s Management.
Our review was performed in accordance with FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolution No. 7 applicable to the limited review of interim financial statements. Under such standards, a limited review consists primarily in applying analytical procedures to the accounting information and making inquiries of the persons in charge of accounting and financial matters. The scope of this review is substantially smaller than an audit on financial statements, which is intended to express an opinion on the financial statements taken as a whole. Therefore, we do not express such an opinion.
As of June 30, 2006, the Company and its subsidiary booked noncurrent minimum presumed income tax and value-added tax credits amounting to ARS 5,750,103, 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.
Based on our review, we have not become aware of any major amendment that should be made on the financial statements mentioned in paragraph 1 for the to be presented in conformity with professional accounting standards effective in he City of Buenos Aires, Argentina, and the applicable provisions of Argentine Business Associations Law and CNV (Argentine securities commission) regulations. This representation should be read considering the uncertainties described above in paragraph 3, the resolution of which may not be determined as of the date of this report.
2 -
In connection with the balance sheet of MIRGOR S.A.C.I.F.I.A. and of MIRGOR S.A.C.I.F.I.A. and its subsidiary as of December 31, 2005, and the statements of income, changes in shareholders’ equity, and cash flows of MIRGOR S.A.C.I.F.I.A. and MIRGOR S.A.C.I.F.I.A. and its subsidiary for the six-month period ended June 30, 2005, presented for comparative purposes, we further report that:
On March 10, 2006, we issued an auditors’ report on the financial statements of MIRGOR S.A.C.I.F.I.A. and of MIRGOR S.A.C.I.F.I.A. and its subsidiary as of December 31, 2005, which included a qualification for unresolved uncertainty related to the recoverability of certain tax credits amounting to ARS 5,745,585. We have not audited any financial statements as of any date for any period subsequent to December 31, 2005.
On August 10, 2005, we issued a limited review report of the financial statements of MIRGOR S.A.C.I.F.I.A. and of MIRGOR S.A.C.I.F.I.A. and its subsidiary for the six-month period ended June 30, 2005, which included a qualification for unresolved uncertainty regarding the recoverability of certain tax credits amounting to ARS 5,540,969.
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.
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.
The information included in points 2, 3 and 5 of the “Summary of events for the six-month period ended June 30, 2006", filed by the Company to meet CNV and BCBA regulations, results from the accompanying financial statements as of June 30, 2006, and as of June 30, 2005, 2004, 2003 and 2002, after being restated in constant pesos through February 28, 2003, as detailed in note 1. b) to the stand-alone financial statements attached hereto, not included in the document attached hereto, on which we have issued our limited review reports on August 10, 2005, August 10, 2004, August 8, 2003 and August 23, 2002, respectively, to which we refer and that should be read jointly with this report. The information for the periods ended June 30, 2002, was not amended by the Company's Management to incorporate the changes in the measurement methods established in the new accounting standards effective as from January 1, 2003.
3 -
As of June 30, 2006, liabilities accrued in employer and employee contributions to the Integrated Pension Fund System resulting from the Company’s accounting books amount to ARS 344,986, none of which was due and payable as of that date.

Buenos Aires,

August 10, 2006

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

C.P.C.E.C.A.B.A. Vol. 1 - Fo. 13

KAREN GRIGORIAN

Partner

Certified Public Accountant UBA

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

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

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: 05/31/2070.

FISCAL YEAR No. 36 BEGINNING JANUARY 1, 2006

SUMMARY OF EVENTS (*)

FOR THE PERIOD ENDED JUNE 30, 2006

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

BRIEF COMMENT ON THE COMPANY'S ACTIVITIES FOR THE PERIOD

Economic activity in Argentina continues to accelerate. The automotive sector is contributing to this significant achievement.

According to the analysts, salary improvements and the sustained consumer confidence are the main factors driving growth.

In the automotive industry, production is growing faster than demand.

When demand composition is analyzed, there is a clearly noticeable drop in the share of imported cars and an increase in the demand for those produced locally. However, local production has not managed to recover the share of total demand it had before the Argentine peso devaluation of 2002.

The fastest-growing car manufacturers are those that have specialized vehicles and have achieved a good balance between the domestic and export markets.

This feature marks a significant difference with the most successful period of the nineties, because exports now represent almost 50% of Argentine production and their destination markets are more diversified.

Brazil has been joined by Mexico and Chile as the largest markets for autos made in Argentina, but there is large number of smaller markets that add significant volume to Argentine exports.

Mirgor’s sales to the automotive market have benefited greatly from this growth, and especially by the launch of the new models Peugeot 307 and Volkswagen Suran, which were recently added to the Company's product line.

The auto manufacturing volumes in the last two months of this quarter were affected by labor disputes arisen during the salary negotiations between SMATA (transportation mechanics’ labor union) and the manufacturers who employ workers enrolled in such labor union.

Automotive industry production grew by 24.5% in the first half of the year. Growth rates were similar in both exports and domestic sales.

Mirgor sales in units increased by 41.6% as a result of a larger market share obtained by the Company thanks to the growth of its new models.

The sales of air quality and temperature control systems for cars with air conditioning increased by 62.7% during Q1 2006, thus increasing their share of the Company’s total sales mix. In this particular period, the Company achieved a record market penetration in this segment with an 83% by volume.

Instrument panels sales fell by 45.5%. Volkswagen has dedicated a substantial proportion of its production capacity to the Suran model in order to supply its networks in Argentina and abroad, given that this model was launched successfully in Argentina, Brazil and Mexico. For this reason, VW cut back the manufacturing of the different versions of the Polo and Caddy models (of high added value for MIRGOR).

The sales of residential air conditioning appliances in the second quarter of the year increased from 1,668 units in the second quarter of the year before to 29,945 in the same period of this year. This improvement in non-automotive activity has taken its proportion of total Company revenues to almost 30%.

CONSOLIDATED BALANCE SHEET STRUCTURE


	06/30/2006	06/30/2005	06/30/2004	06/30/2003	06/30/2002

Current assets	190,937,982	108,486,640	78,136,595	58,364,849	83,324,317
Noncurrent assets	30,659,728	25,746,496	31,773,163	35,736,616	44,775,629
Total assets	221,597,710	134,233,136	109,909,758	94,101,465	128,099,946
Current liabilities	122,124,292	63,311,081	47,003,781	23,463,253	58,033,459
Noncurrent liabilities	2,979,097	3,497,945	6,447,880	15,310,758	6,730,582
Total liabilities	125,103,389	66,809,026	53,451,661	38,774,011	64,764,041
Minority interest	8,875	5,702	4,542	3,656	4,098
Shareholders’ equity	96,485,446	67,418,408	56,453,555	55,323,798	63,331,807
Total liabilities and shareholders' equity	221,597,710	134,233,136	109,909,758	94,101,465	128,099,946

3 -
CONSOLIDATED STATEMENT OF INCOME STRUCTURE


	06/30/2006	06/30/2005	06/30/2004	06/30/2003	06/30/2002

Operating income (loss) from recurring operations	10,881,410	10,085,298	3,668,242	(823,092)	(112,461)
Financial income (expense)	3,363,717	(5,163,207)	(1,824,575)	(955,362)	(9,878,837)
Other (expenses) / revenues	31,229	157,791	(220,758)	(1,579,844)	(131,542)
Income tax	(201,215)	(350,393)	(559,712)	(103,000)	-
Minority interest in income(loss)	(1,559)	(505)	(423)	(126)	1,415
Net income (loss)	14,073,582	4,728,984	1,062,774	(3,461,424)	(10,121,425)

STATISTICAL DATA (1)


Volume of units		06/30/2006		06/30/2005				06/30/2004		06/30/2003		06/30/2002
		Quarter	Accum.		Quarter	Accum.	Quarter		Accum.	Quarter	Accum.		Quarter	Accum.

Production	(2)	126,739	213,784		80,102	141,527	62,647		111,491	46,169	83,979		28,623	51,990

Sales	(3)	99,445	165,895		51,573	98,043	53,626		96,437	41,010	79,280		17,820	26,220
- Local		78,033	134,273		38,505	71,919	32,633		58,526	20,434	34,498		17,820	26,220
Equipment with air conditioning		37,965	65,115		23,332	41,530	18,824		34,330	9,081	14,659		8,135	12,630
Equipment without air conditioning		7,573	15,390		8,827	16,330	8,789		14,988	6,921	11,900		5,600	7,675
Instrument Panels		2,548	7,090		4,678	9,577	5,020		9,208	4,432	7,939		4,085	5,915
Residential air conditioning		29,947	46,678		1,668	4,482
- Exports		21,412	31,622		13,068	26,124	20,993		37,911	20,576	44,782

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


	06/30/2006	06/30/2005	06/30/2004	06/30/2003	06/30/2002

Liquidity	1.56	1.71	1.66	2.49	1.44
Solvency	0.77	1.01	1.06	1.43	0.98
Fixed asset-to-equity capital ratio	0.14	0.19	0.29	0.37	0.35

LISTED PRICE (values per ARS 1 nominal value)


JAN 05	JAN 06	FEB 05	FEB 06	MAR 05	MAR 06

26.3	40.20	28.2	48.90	28.00	53.00

APR 05	APR 06	MAY 05	MAY 06	JUN 05	JUN 06

29.00	59.50	29.25	59.00	28.5	52.00

4 -
PROSPECTS

The Company’s activity is growing at a healthy rate, in step with the industry.

Based on the projects disclosed by our customers, parameters will remain similar in the rest of the year.

There is still an open question as regards the impact of the price-control measures that are being taken in the domestic market while facing rising costs, especially strong salary increases. It is hoped that this rise in domestic costs will not affect Argentina’s future competitiveness.

Buenos Aires, August 10, 2006

Lic. Roberto G. Vazquez

Chairman

(*) Information not covered by the limited review report on interim financial statement, except for 2, 3
and 5.

FINANCIAL STATEMENTS RELATED TO FISCAL YEAR No. 36,

FOR THE SIX-MONTH PERIOD BEGINNING JANUARY 1 AND ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

AND WITH THE SAME PERIOD OF THE PRIOR YEAR

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

Main business: Manufacturing 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: 05/31/2070.

Parent company: See 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

CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2006

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

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


	06/30/2006	12/31/2005

ASSETS

CURRENT ASSETS

Cash - Note 2	12,707,350	19,024,378
Trade receivables - Note 2	74,609,863	78,911,844
Tax credits - Note 2	2,128,024	2,736,541
Other receivables - Note 2	870,307	309,326
Inventories - Note 2	100,622,438	61,997,660
Total current assets	190,937,982	162,979,749

NONCURRENT ASSETS

Tax credits - Note 2	6,292,847	6,298,910
Other receivables - Note 2	675,943	460,037
Intangible assets - Note 1(f)b	114,982	195,345
Property & equipment - Note 1(f)a	23,575,956	17,908,861
Total noncurrent assets	30,659,728	24,863,153
Total assets	221,597,710	187,842,902

Notes 1 through 4, and exhibit H to the consolidated financial statements and notes 1 through 13,

and exhibit C to the individual financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of these

consolidated financial statements and should be read jointly therewith.

CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2006

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

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


	06/30/2006	12/31/2005

LIABILITIES

CURRENT LIABILITIES

Trade payables - Note 2	97,757,207	82,364,442
Salaries, payroll taxes and taxes payable - Note 2	8,013,175	7,947,172
Customer advances - Note 2	1,989	8,697,347
Loans - Note 2	14,659,471	2,422,084
Other liabilities	1,692,450	891,678
Total current liabilities	122,124,292	102,322,723

NONCURRENT LIABILITIES

Loans - Note 2	1,052,939	3,100,800
Taxes payable - Note 2	676,158	-
Other liabilities	1,250,000	-
Total noncurrent liabilities	2,979,097	3,100,800
Total liabilities	125,103,389	105,423,523

MINORITY INTEREST IN SUBSIDIARIES	8,875	7,315

SHAREHOLDERS’ EQUITY	96,485,446	82,412,064
Total liabilities, minority interest and Shareholders’ equity	221,597,710	187,842,902

Notes 1 through 4, and exhibit H to the consolidated financial statements and notes 1 through 13,

and exhibit C to the individual financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of these

consolidated financial statements and should be read jointly therewith.

CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2006

PRESENTED COMPARATIVELY WITH THE SAME PERIOD OF THE PRIOR YEAR

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


	06/30/2006	06/30/2005

Net sales (including VAT benefits amounting to
30,959,131 and 15,097,875, respectively)	197,617,261	103,819,982
Cost of goods sold	(168,399,634)	(85,941,023)
Gross Income	29,217,627	17,878,959

Administrative expenses (Exhibit H)	(10,440,529)	(4,753,924)
Selling expenses (Exhibit H)	(7,895,888)	(3,039,737)
Financial income (expense) and holding gains (losses) from assets:
Interest	928,916	100,768
Foreign exchange difference	96,116	(266,590)
Inventories holding gains (losses)	2,505,370	(2,270,595)
Allowance for doubtful accounts	-	(621,133)
Allowance for impairment in value of property and equipment	-	140,846
Allowance for impairment in value of tax credits	841,010	(240,017)
Allowance for obsolescence and impairment in value of inventories	1,597,509	(1,777,508)
(Loss)/gain from bondholdings	-	(67,435)
Financial income (expense) and holding gains (losses) from liabilities:
Interest	(1,886,307)	(1,147,312)
Foreign exchange difference	(718,897)	985,769
Other income, net	31,229	157,791
Earnings before income tax	14,276,156	5,079,882
Income tax	(201,215)	(350,393)
Income after income tax	14,074,941	4,729,489
Minority interest in subsidiaries	(1,559)	(505)
Net income for the period	14,073,382	4,728,984

Notes 1 through 4, and exhibit H to the consolidated financial statements and notes 1 through 13,

and exhibit C to the individual financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of these

consolidated financial statements and should be read jointly therewith.

CONSOLIDATED STATEMENT OF CASH FLOWS (1)

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006

PRESENTED COMPARATIVELY WITH THE SAME PERIOD OF THE PRIOR YEAR

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


	06/30/2006	06/30/2005
CHANGES IN CASH
Cash at beginning of year	19,024,378	17,674,115
Cash at end of period	12,707,350	11,496,146
(Decrease) in cash, net	(6,317,028)	(6,177,969)
CAUSES OF CHANGES IN CASH
OPERATING ACTIVITIES
Net income for the period	14,073,382	4,728,984
Interest and foreign exchange difference accrued	718,383	291,040
Income tax	201,215	350,393
Adjustments to arrive at net cash flows (used in) provided by operating activities
P&E depreciation and intangible assets amortization	1,512,596	2,207,846
Gain from the sale of P&E	(29,506)	-
Minority interest	1,559	505
(Decrease) increase in allowance for impairment in value and obsolescence of inventories	(1,597,509)	1,777,508
Increase in the allowance for trade receivables	-	621,133
(Decrease) in the allowance for P&E impairment in value	-	(140,846)
(Decrease) increase in the allowance for impairment in value of tax credits	(841,010)	240,017
(Decrease) in the allowance for warranties and increased costs	-	(255,821)
Changes in operating assets and liabilities
Decrease in trade receivables	4,301,980	3,253,315
(Increase) in inventories	(37,027,269)	(20,759,149)
(Increase) Decrease in other receivables	(776,887)	73,714
Increase in trade payables	15,392,765	3,793,337
Increase in salaries, payroll taxes and other taxes payable (net of tax credits)	1,656,536	751,044
Increase (decrease) in customer advances	(8,695,358)	5,515,789
Increase in other liabilities	2,050,773	30,909
Interest paid	(377,030)	(513,828)
NET CASH FLOW (USED IN) PROVIDED BY OPERATING ACTIVITIES	(9,435,380)	1,965,890

INVESTING ACTIVITIES
P&E additions	(7,099,328)	(1,191,300)
P&E sales	29,506	-
NET CASH FLOW (USED IN) INVESTING ACTIVITIES	(7,069,822)	(1,191,300)

FINANCING ACTIVITIES
Loan repayment	(9,128,000)	(12,952,559)
Inflows from loans	19,316,174	6,000,000
NET CASH FLOW (USED IN) INVESTING ACTIVITIES	10,188,174	(6,952,559)

(DECRESE) IN CASH, NET	(6,317,028)	(6,177,969)

(1) Cash comprises cash on hand and cash in banks

Notes 1 through 4, and exhibit H to the consolidated financial statements and notes 1 through 13,

and exhibit C to the individual financial statements of MIRGOR S.A.C.I.F.I.A. are an integral part of these

consolidated financial statements and should be read jointly therewith.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE SAME PERIOD OF THE PRIOR 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 preceding the issuer’s individual financial statements. This regulation only implies a change in the place of consolidated information, and it does not modify the fact that individual 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, the correct interpretation of these consolidated financial statements requires that they be read together with the individual financial statements.

1. Restatement into constant pesos

Professional accounting standards establish that the financial statements should be stated in constant pesos. In a monetary stability context, the face and constant value of Argentine pesos is the same, but, in an inflationary or deflationary context, the financial statements should be stated in pesos reflecting the purchasing power as of their closing date by recognizing the changes in the domestic WPI published by the INDEC (Argentine Institute of Statistics and Censuses), in accordance with the restatement method set by FACPCE (Argentine Federation of Professional Council in Economic Sciences) Technical Resolution 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 individual financial statements, except for the valuation of interests in subsidiaries, which in the current consolidated statements have been incorporated on a line-by-line basis following the method of FACPCE Technical Resolution No. 21, with the applicable eliminations.

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, June 30, 2006, and June 30, 2005, as the case may be, line by line with those of its subsidiary, Interclima Sociedad Anónima, in which it holds the votes necessary to shape corporate will.

The following information reflects the parent-subsidiary relationship:


	Equity interest
Subsidiary	Common and in possible votes as of 06/30/2006, 12/31/2005 and 06/30/05	Period-end – latest financial statements issued

Interclima Sociedad Anónima	99.9667	06/30/2006

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, disclosing any third-party minority interests separately. Receivables and payables, and transactions performed among members of the consolidated group were eliminated from the consolidation. Unrealized intercompany profits and losses contained in period-end assets and liabilities have been fully eliminated.

1. Financial statements used in the consolidation

The consolidated financial statements as of June 30, 2006, December 31, 2005, and June 30, 2005, were prepared using the financial statements of Interclima Sociedad Anónima as of the same dates, which carry auditors' reports dated August 10, 2006, March 10, 2006, and August 10, 2005, respectively, which included an “except for” qualification related to a discrepancy in the quantification of the income tax liability (such adjustment was considered to value the investment and, consequently, in these consolidated financial statements), and with a qualification for unresolved uncertainty related to the recoverability of certain tax credits.

1. Changes in P&E and intangible assets

a) P&E:


	06/30/06	12/31/05

Balance at beginning	17,908,861	19,463,592
Additions	7,099,328	2,291,401
Retirements (net of accumulated depreciation)	-	(40,676)
Decrease in the allowance for impairment in value	-	281,691
Depreciation	(1,432,233)	(4,087,147)
Balance at end	23,575,956	17,908,861

b) Intangible assets:

Balance at beginning	195,345	356,069
Amortization	(80,363)	(160,724)
Balance at period-end	114,982	195,345

MAIN ACCOUNT BREAKDOWN


	06/30/2006	12/31/2005
CURRENT ASSETS
Cash
Cash on hand in Argentine pesos	30,647	26,106
Cash on hand in foreign currency	24,139	21,208
Cash in banks in Argentine pesos	4,911,030	10,601,796
Cash in banks in foreign currency	7,741,534	8,375,268
	12,707,350	19,024,378
Trade receivables
Trade receivables	74,313,305	79,398,361
Trade receivables in foreign currency	1,354,413	571,338
Allowance for doubtful accounts	(1,057,855)	(1,057,855)
	74,609,863	78,911,844
Tax credits
VAT credit balance	1,069,281	1,203,895
Withholdings and additional withholdings	730,195	659,077
Other	328,548	873,569
	2,128,024	2,736,541
Other receivables
Unaccrued insurance	472,332	138,036
Loans to employees	128,456	57,622
Other	269,519	113,668
	870,307	309,326
Inventories
Manufactured products	21,579,345	15,885,451
Raw material	65,373,882	39,527,943
Raw material in transit	19,060,971	13,223,760
Stock at end of year	106,014,198	68,637,154
Prepayments to vendors in Argentine pesos	2,719,757	3,702,391
Prepayments to vendors in foreign currency	2,953,304	2,320,445
Allowance for impairment in value of inventories	(11,064,821)	(12,662,330)
	100,622,438	61,997,660
NONCURRENT ASSETS
Tax credits
VAT credit	3,981,998	3,886,201
Minimum presumed income tax	1,768,105	1,808,441
Rebates receivable in Argentine pesos	1,913,972	2,718,042
Promotional benefits receivable	885,447	885,447
Deferred income tax credit	3,432,273	3,700,344
Allowance for impairment in value of deferred income tax credit	(2,934,313)	(3,194,594)
Other	38,230	128,904
Allowance for impairment in value of tax credits	(2,792,865)	(3,633,875)
	6,292,847	6,298,910


	06/30/2006	12/31/2005
Other receivables
Payables to companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies - Note 3	675,943	460,037
	675,943	460,037
CURRENT LIABILITIES
Trade payables
Suppliers	62,242,181	61,106,400
Vendors in foreign currency	35,515,026	21,214,005
Payables to companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies in foreign currency - Note 3	-	44,037
	97,757,207	82,364,442

Salaries, payroll taxes and other taxes payable
Salaries and payroll taxes	631,861	1,979,167
Annual statutory bonus and vacation accrual	1,655,374	1,050,817
Income tax accrual	31,173	547,954
Health and safety assessment	471,324	300,774
Turnover tax payable	705,022	55,009
Withholdings and additional withholdings	441,457	245,907
Other taxes payable	4,076,964	3,767,544
	8,013,175	7,947,172
Customer advances
In foreign currency	1,989	8,697,347
	1,989	8,697,347
Loans
Financial loans in Argentine pesos	11,039,332	-
Financial loans in foreign currency	3,620,139	2,422,084
	14,659,471	2,422,084
Other liabilities
Directors' fees accrual	1,255,162	-
Royalties payable	436,073	372,175
Other	1,215	519,503
	1,692,450	891,678
NONCURRENT LIABILITIES
Loans
Financial loans in foreign currency	1,052,939	3,100,800
	1,052,939	3,100,800
Taxes payable
Turnover tax payable	676,158	-
	676,158	-
Other liabilities
Directors' fees accrual	1,250,000	-
	1,250,000	-

INFORMATION ON RELATED PARTIES

The receivables from / payables to related companies and the parent company in connection with the transactions performed during the six-month period ended 06.30.06, and for the year ended 12.31.05, are:


	06/30/2006	12/31/2005

Other receivables (Noncurrent)

IL TEVERE S.A. (2)	675,943	460,037
Total	675,943	460,037

Trade payables

VALEO SECURITE HABITABLE (1)	-	44,037
Total	-	44,037

The transactions with the parent and other related companies during the six-month periods ended June 30, 2006, and 2005, are:


	6/30/2005
	Purchase of merchandise	Sale of merchandise	Services received	Royalties

VALEO SISTEMAS AUTOMOTIVOS LTD (1)	2,201,314	1,829,483	-	-
VALEO CHINA (1)	217,944	-	-	-
VALEO AUTOKLIMATIZACE S.R.O (1)	541,210	-	-	-
VALEO CLIMATIZACION S.A. (EURO) (1)	186,823	-	-	-
VALEO KLIMASYSTEME GMBH (1)	49,112	-	-	-
VALEO COMPONENTES AUTOMOVILES (1)	18,991	-	-	-
VALEO SISTEMAS AUTOMOTIVOS (1)	964,265	-	-	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (1)	119,226	-	-	-
VALEO VYMENIKY TEPLA s.r.o. (1)	2,052,997	-	-	-
VALEO SECURITE HABITACLE (1)	541,478	-	-	-
VALEO THERMIQUE FRANCIA (1)	368,884	-	74,127	-
VALEO THERMIQUE MOTEUR (1)	2,393,176	-	-	-
VALEO ZARAGOZA (1)	3,014,202	-	-	-
VCC UP ECHANGEURS (1)	1,770,725	-	-	473,146
	14,440,347	1,829,483	74,127	473,146

(1) Related company until September 27, 2005 (See (2)).

(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 of its 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 its subsidiary operate in the automotive and residential air quality and temperature control business segments. The valuation standards applicable 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)	121,681,360	44,976,770	166,658,130
Tax benefit	21,570,709	9,388,422	30,959,131
Total	143,252,069	54,365,192	197,617,261

BALANCE-SHEET INFORMATION

Allocated assets	192,000,986	29,596,724	221,597,710
Additions	7,033,352	65,976	7,099,328

EXHIBIT H

INFORMATION REQUIRED UNDER section 64(I)b, LAW No. 19,550 FOR THE six-

MONTH PERIOD ENDED JUNE 30, 2006, PRESENTED COMPARATIVELY WITH THE

SAME PERIOD THE PRIOR YEAR

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


	06/30/2006				06/30/2005
Accounts	Operating costs	Administrative expenses	Selling expenses	Total	Total

Salaries & wages	8,666,517	2,486,939	343,143	11,496,599	6,179,119
Contributions and employee benefits	2,678,842	1,041,080	123,961	3,843,883	1,443,903
Insurance	610,838	53,592	4,517	668,947	233,862
Training fees and expenses	721,612	3,114,444	3,023	3,839,079	776,405
Taxes, rates and assessments	1,627,560	450,330	2,643,958	4,721,848	1,589,573
Maintenance	423,709	299,355	-	723,064	449,826
P&E depreciation	843,232	574,098	14,903	1,432,233	2,127,483
Intangible assets amortization	7,833	72,530	-	80,363	80,363
Leases and rentals	784,920	-	-	784,920	340,777
Customs clearing and dispatch expenses	3,139,093	-	-	3,139,093	2,757,023
Royalties	-	-	1,008,412	1,008,412	915,551
Other	1,061,461	800,404	651,393	2,513,258	1,075,722
Transportation, shipping and handling	12,750,004	-	3,102,578	15,852,582	7,551,284
Bank expenses	-	1,368,303	-	1,368,303	583,626
Electric power	200,004	-	-	200,004	148,935
Traveling expenses	-	179,454	-	179,454	114,573
Total as of 06-30-2006	33,515,625	10,440,529	7,895,888	51,852,042
Total as of 06-30-2005	18,604,364	4,753,924	3,039,737		26,368,025

BALANCE SHEET AS OF June 30, 2006

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

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


	06/30/2006	12/31/2005
ASSETS

CURRENT ASSETS

Cash - Note 2	12,494,706	17,137,992
Trade receivables - Note 2	36,562,622	17,421,944
Tax credits - Note 2	1,277,459	1,510,281
Other receivables - Note 2	548,020	294,859
Inventories - Note 2	85,831,708	54,133,149
Total current assets	136,714,515	90,498,225


NONCURRENT ASSETS

Long-term investments in companies - Exhibit C	22,673,869	18,293,834
Tax credits - Note 2	1,869,409	1,952,865
Other receivables - Note 2	675,943	460,037
P&E	19,195,036	15,087,079
Intangible assets	96,706	169,236
Total noncurrent assets	44,510,963	35,963,051
Total assets	181,225,478	126,461,276

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

BALANCE SHEET AS OF June 30, 2006

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

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


	06/30/2006	12/31/2005
LIABILITIES

CURRENT LIABILITIES

Trade payables - Note 2	55,457,950	30,855,735
Salaries, payroll taxes and taxes payable - Note 2	3,247,467	2,981,397
Loans - Note 2	14,659,471	2,422,084
Other payables - Note 2	8,708,755	4,689,196
Total current liabilities	82,073,643	40,948,412


NONCURRENT LIABILITIES

Taxes payable - Note 2	363,450	-
Loans - Note 2	1,052,939	3,100,800
Other payables - Note 2	1,250,000	-
Total noncurrent liabilities	2,666,389	3,100,800
Total liabilities	84,740,032	44,049,212

SHAREHOLDERS' EQUITY (As per respective statement)	96,485,446	82,412,064
Total liabilities and Shareholders' equity	181,225,478	126,461,276

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

STATEMENT OF INCOME FOR THE six-MONTH PERIOD ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE SAME PERIOD THE PRIOR YEAR

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


	06/30/2006	06/30/2005

Net sales (including VAT benefits amounting to 21,570,709 and 14,324,184, respectively) - Note 4(e)
	138,127,740	96,062,884
Cost of goods sold	(116,940,484)	(81,858,902)
Gross income	21,187,256	14,203,982

Administrative expenses	(9,288,194)	(4,465,914)

Selling expenses	(5,152,954)	(2,517,802)

Income (loss) from long-term investments - Note 1	4,380,035	855,417

Financial income (expense) and holding gains (losses) from assets:

Interest	418,911	141,296
Foreign exchange difference	128,342	(206,298)
Inventories holding gains(losses)	2,218,864	(2,039,061)
Allowance for doubtful accounts	-	(621,133)
Allowance for obsolescence and impairment in value of inventories	1,440,238	(1,252,887)
(Loss)/gain from bond holdings	-	(67,435)

Financial income (expense) and holding gains (losses) from liabilities:

Interest	(919,881)	(1,019,156)
Foreign exchange difference	(991,188)	961,178

Other income, net - Note 2	651,953	756,797

Net income for the period	14,073,382	4,728,984

EARNINGS PER SHARE - NOTE 11

BASIC - ORDINARY	0,7037	0,2364

DILUTED - ORDINARY	0,7037	0,2364

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE SAME PERIOD THE PRIOR FISCAL YEAR

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


	06/30/2006
	Owners' contributions
Breakdown	Capital stock	Adjustment to capital stock	Premium on capital stock	Subtotal

Balances at beginning of year	2,000,000	4,155,936	5,243,562	11,399,498

Reimbursement of irrevocable contributions

Net income for the period
Balances as of June 30, 2006	2,000,000	4,155,936	5,243,562	11,399,498

Balances as of June 30, 2005	2,000,000	4,155,936	5,243,562	11,399,498


	06/30/2006					06/30/2005
	Retained earnings / Accumulated losses
	Appropriated retained earnings
Breakdown	Legal reserve	*Other reserves ()**	Total	Unappropriated retained earnings (accumulated losses)	Total	Total

Balances at beginning of year	2,280,143	73,708	2,353,851	68,658,715	82,412,064	62,690,638

Reimbursement of irrevocable contributions						(1,214)

Net income for the period				14,073,382	14,073,382	4,728,984
Balances as of June 30, 2006	2,280,143	73,708	2,353,851	82,732,097	96,485,446

Balances as of June 30, 2005	2,280,143	73,708	2,353,851	53,665,059		67,418,408

(*) See note 3(b)

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

STATEMENT OF CASH FLOWS (1) FOR THE SIX-MONTH PERIOD ENDED

JUNE 30, 2006, PRESENTED COMPARATIVELY WITH THE SAME PERIOD

THE PRIOR FISCAL YEAR

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


	06/30/2006	06/30/2005
CHANGES IN CASH

Cash at beginning of year	17,137,992	17,561,127
Cash at end of period	12,494,706	10,979,820
(Decrease) in cash, net	(4,643,286)	(6,581,307)

CAUSES OF CHANGES IN CASH

OPERATING ACTIVITIES

Net income for the period	14,073,382	4,728,984
Interest and foreign exchange difference accrued	378,383	291,040

Adjustments to reach net cash flows (used in) provided by operating activities

P&E depreciation and intangible assets amortization	1,167,516	1,833,117
Gain from the sale of P&E	(29,506)	-
Increase in the allowance for trade receivables, net	-	621,133
(Decrease) increase in allowance for impairment in value and obsolescence of inventories	(1,440,238)	1,252,887
Income (loss) from long-term investments	(4,380,035)	(855,417)

Changes in operating assets and liabilities

(Increase) in trade receivables	(19,140,678)	(1,251,840)
(Increase) in inventories	(30,258,321)	(16,034,065)
(Increase) decrease in other receivables	(469,067)	81,822
Increase in trade payables	24,602,215	8,569,109
Increase in salaries, payroll taxes and other taxes payable (net of tax credits)	945,798	982,394
(Decrease) in customer prepayments	-	(3,572,244)
Increase in other liabilities	5,269,558	5,018,251
Interest paid	(377,030)	(513,828)
NET CASH FLOW (USED IN) PROVIDED BY OPERATING ACTIVITIES	(9,658,023)	1,151,343

(1) Cash comprises cash on hand and cash in banks

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

STATEMENT OF CASH FLOWS (1) FOR THE SIX-MONTH PERIOD ENDED

JUNE 30, 2006, PRESENTED COMPARATIVELY WITH THE SAME PERIOD

THE PRIOR FISCAL YEAR

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


	06/30/2006	06/30/2005
INVESTING ACTIVITIES

Net P&E acquisitions	(5,202,943)	(780,091)
P&E sale	29,506	-
NET CASH FLOWS (USED IN) INVESTMENT ACTIVITIES	(5,173,437)	(780,091)

FINANCING ACTIVITIES

Loan repayment	(9,128,000)	(12,952,559)
Inflows from loans	19,316,174	6,000,000
NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES	10,188,174	(6,952,559)

(DECREASE) IN CASH, NET	(4,643,286)	(6,581,307)

(1) Cash comprises cash on hand and cash in banks

Notes 1 through 13 and exhibit C are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

AND THE SAME PERIOD THE PRIOR YEAR

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

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

The financial statements of the Company have been prepared in accordance with CNV regulations.

Pursuant to the agreement signed in July 2004 between the FACPCE (Argentine Federation of Professional Councils in Economic Sciences) and the CPCECABA (Buenos Aires City Professional Council in Economic Sciences) with the purpose of unifying professional accounting standards, the FACPCE issued Resolution No. 312/05 dated April 1, 2005 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 dated April 1, 2005) and established that such accounting standards shall become generally effective and mandatory for the full years or interim periods belonging to the fiscal years beginning January 1, 2006, or thereafter, although earlier application is allowed. CPCECABA Resolution CD No. 93/2005 also provided a transition period for certain changes related to the comparison with recoverable values and the disclosure of certain supplementary information regarding income tax booking, which will become mandatory for the fiscal years beginning January 1, 2008, or thereafter.

On December 29, 2005, and January 26, 2006, the CNV (Argentine Securities Commission) issued General Resolutions No. 485 and 487, respectively, which adopted (with certain amendments) and applied, for full fiscal years or interim periods related to the fiscal years beginning as from January 1, 2006, Technical Resolutions Nos. 6, 8, 9, 11, 14, 16, 17, 18, 21 and 22 and Interpretations Nos. 1, 2, 3 and 4 issued by the FACPCE (Argentine Federation of Professional Councils in Economic Sciences) and adopted by the CPCECABA (Professional Council in Economic Sciences of the City of Buenos Aires) through Resolution C.D. No. 93/2005, as mentioned in the previous paragraph. The most significant changes for the Company as a result of CNV General Resolutions Nos. 485 and 487, are as follows:

Comparison with recoverable value, for property & equipment and intangible assets. 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 unit. If information is presented by business segment, the same grouping method should be used.
It is established that the difference between the P&E book value adjusted for inflation (and other nonmonetary assets) and their tax base is a temporary difference that results in the recognition of a deferred liability. However, it is acceptable to continue to consider it as a permanent difference. In the latter case, the financial statements are required to present certain supplementary information regarding the amount and reversal term of the deferred tax liability that the issuer chose not recognize otherwise.
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.

Regarding the changes mentioned in points (a) and (c) above, the Company's Management has analyzed their effects as of the date of these financial statements and has concluded that they do not result in significant changes with respect to the valuation and disclosure methods and criteria applied by the Company until December 31, 2005.

As regards the change mentioned in point (b) above, the total taxation effect of the difference resulting from restating into constant pesos the P&E items and intangible assets as of these financial statements’ closing is 372,271. Had such difference been recognized as temporary, the Company’s shareholders’ equity at the beginning of the year would have decreased by 401,934, and the effect on income for the six-month period ended June 30, 2006, would have been a 29,663 decrease in the income tax charge.

Also, had the abovementioned temporary difference been recognized, the impact on the deferred income tax charge for the coming fiscal years would be reduced as follows:


Terms and amounts
Fiscal year		Amount
remaining 2006		27,542
2007		46,792
2008		27,483
2009		20,671
2010		11,848
2011 and forward		237,935
Total		372,271

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

1. Valuation methods

The main valuation methods used to prepare these financial statements are:

Cash:
In Argentine pesos: at nominal value.
In foreign currency: converted at the exchange rate effective as of each period-end or year-end for the settlement of such transactions. Foreign exchange differences were charged to income for each period.
Receivables and payables:
In Argentine pesos: at the present value of the cash flows they will generate, discounted (only if effects are significant) 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 they will generate, discounted (only if effects are significant) 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 each period-end or year-end for the settlement of the respective types of transactions. Foreign exchange differences were charged to income for each period.
Credit risk: In its usual course of business the Company grants credit to customers, including car manufacturers, that represent about 99% of the Company’s total sales revenues. 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 period ended June 30, 2006; neither did it use any such instruments during the fiscal year ended December 31, 2005, nor 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 the end of each period or year, considering the cash prices for the usual purchase volumes. In addition, imported goods are valued at replacement cost at the foreign exchange rate effective at the end of the period or year.
The products manufactured were valued at cash reproduction cost at the end of each period or year, with the cap of their respective net realization values.
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 period or fiscal year.

The value of inventories, after considering the allowance for impairment in value, 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 June 30, 2006, December 31, 2005, and June 30, 2005, which include a limited review report dated August 10, 2006, and 2005, and an auditor’s report dated March 10, 2006, containing except-for qualifications related to discrepancies in the valuation of income tax payables and a qualification for unresolved uncertainties about the recoverability of 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 not booking certain income tax payables (see “Income tax – Situation in Interclima S.A.”)

Income (loss) from the equity interest in the subsidiary is disclosed in the statement of income under "Income (loss) from long-term investments".

P&E
P&E has been valued at original cost restated as mentioned in note 1(b), net of accumulated depreciation until the end of each period or 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.
The valuation of P&E items is checked for impairment in value whenever there is any indication that their book value could exceed their recoverable value. The losses from impairment in value and related recoveries are recognized in the statement of income under “Financial income (expense) and holding gains (losses)”.
The value of P&E, at 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 period or 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 from impairment in value and related recoveries are recognized in the statement of income under “Financial income (expense) and holding gains (losses)”.
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. Income (loss) from long-term investments was calculated by the equity method applying the Company’s equity interest percentage to the subsidiary’s income (loss) for the same period, deducting unrealized intercompany profits and losses. In addition, this account includes the adjustments necessary to make the valuation methods of the subsidiary consistent with those of the Company and the adjustment for not booking an income-tax payable (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 the replacement costs for each month. 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
Status 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 deferred income tax assets or liabilities when their future reversal decreases or increases the taxes 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 6,132,976 (out of which 5,904,410 may be used until December 31, 2007, and the remainder, until December 31, 2009). As of June 30, 2006, there were deferred income tax assets amounting to 2,934,313, covered by an allowance for impairment in value for the full amount, based on current expectations about the possibility of using them against taxable income and the Company’s tax situation as described in note 4.

The changes in deferred income tax credit and the charge to income for the six-month period ended June 30, 2006, and the fiscal year ended December 31, 2005, were as follows:


	06/30/2006		12/31/2005
	Deferred tax credit	Income tax - Income / (loss)	Deferred tax credit	Income tax - Income / (loss)
Balance at beginning of year, less provision	-	-	-	-
Consumption of NOLs	(217,464)	(217,464)	(1,014,318)	(1,014,318)
(Decrease) Increase in temporary asset differences	116,569	116,569	8,037	8,037
Decrease in temporary liability differences	-	-	599,849	599,849
Change in the allowance for impairment in value of deferred assets	100,895	100,895	406,432	406,432
Cash at end of period / year - less provision	-	-	-	-

The reconciliation between the income tax charge recognized and that resulting from applying to the period book income the 35% rate established by current tax regulations is as follows:


	06/30/2006	06/30/2005

Earnings for the year before income tax	14,073,382	4,728,984
Permanent differences (*)	(13,785,111)	(4,415,424)
Earnings for the year less permanent differences	288,271	313,560
Tax rate	35%	35%
Tax assessed	(100,895)	(109,746)
Increase in the allowance for impairment in value of deferred assets	100,895	109,746
Income-tax book charge	-	-

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

The items included in the deferred tax credits as of June 30, 2006, and December 31, 2005, are shown in detail below:


Temporally differences in assets	06/30/2006	12/31/2005

Nondeductible allowances	750,735	759,546
Diverses	174,761	49,381
NOLs	2,168,203	2,385,667

Deferred tax credit before the allowance	3,093,699	3,194,594
Allowance for impairment in value of deferred assets	(3,093,699)	(3,194,594)
Deferred tax credit at period-end net of the allowance	-	-

The minimum presumed income tax amount assessed for the six-month period ended June 30, 2006, exceeded income tax and amounted to 222,661. Such amount was booked under noncurrent tax credits, the amount of which accumulated to date totals 1,768,105. The Company’s Management, based on the Company’s business plan for the future, understands that 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-purposes 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.’s Management, seeking appropriate jurisdictional protection, filed before the courts a request for an injunction because it believed that section 39, Law No. 24,073 dated 1992, which had set the index applicable to the tax adjustment for inflation at one, should be abrogated due to the high inflation that affected tax year 2002 and because it 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 ruled that the AFIP should 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), to 854,892 for the fiscal year ended December 31, 2003, to 1,279,585 for the fiscal year ended December 31, 2004, and 39,793 for fiscal year ended December 31, 2005, plus the related interest amounting to 1,299,314 calculated through June 30, 2006.

BREAKDOWN OF MAIN ACCOUNTS


	06/30/2006	12/31/2005
CURRENT ASSETS
Cash
Cash in Argentine pesos	18,430	22,731
Cash on hand in foreign currency	24,139	21,208
In banks in Argentine pesos	4,710,603	8,718,785
In banks in foreign currency	7,741,534	8,375,268
	12,494,706	17,137,992
Trade receivables
Trade receivables in Argentine pesos	37,533,486	18,083,720
Trade receivables in foreign currency	86,991	396,079
Allowance for doubtful accounts	(1,057,855)	(1,057,855)
	36,562,622	17,421,944
Tax credits
VAT credit balance	948,911	1,083,525
Withholdings and additional withholdings	328,548	426,756
	1,277,459	1,510,281
Other receivables
Unaccrued insurance	254,725	138,036
Loans to employees	128,456	57,622
Other	164,839	99,201
	548,020	294,859
Inventories
Manufactured products	19,735,403	14,027,738
Raw material	54,825,787	35,165,651
Raw material in transit	16,461,656	12,817,765
Stock at end of period/year	91,022,846	62,011,154
Prepayments to vendors in Argentine pesos	2,205,788	1,123,766
Prepayments to vendors in foreign currency	2,389,278	2,224,671
Allowance for impairment in value of inventories	(9,786,204)	(11,226,442)
	85,831,708	54,133,149

NONCURRENT ASSETS
Tax credits
VAT credit balance - Note 4	93,481	93,481
Minimum presumed income tax - Note 4	1,768,105	1,808,441
Promotional benefits receivable - Note 4	885,447	885,447
Rebates receivable in Argentine pesos - Note 4	1,016,393	1,016,393
Deferred income tax asset	3,093,699	3,194,594
Allowance for impairment in value of deferred income tax asset	(3,093,699)	(3,194,594)
Other	38,209	81,329
Allowance for impairment in value of tax credits	(1,932,226)	(1,932,226)
	1,869,409	1,952,865


	06/30/2006	12/31/2005
Other receivables
Companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies – Note 7	675,943	460,037
	675,943	460,037
CURRENT LIABILITIES
Trade payables
Suppliers	21,181,107	10,443,886
Payables to companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies – Note 7	-	44,037
Financial payables in foreign currency	34,276,843	20,367,812
	55,457,950	30,855,735
Salaries, payroll taxes and other taxes payable
Salaries and payroll taxes	509,872	1,638,250
Annual statutory bonus and vacation accrual	1,409,606	780,236
Health and safety assessment	359,601	208,782
Turnover tax payable	355,524	55,009
Withholdings and additional withholdings	441,457	245,907
Other taxes payable	171,407	53,213
	3,247,467	2,981,397
Loans
Financial loans in Argentine pesos	11,039,332	-
Financial loans in foreign currency	3,620,139	2,422,084
	14,659,471	2,422,084
Other liabilities
Payables to companies under section 33, Law No. 19,550 (subsidiaries and affiliates) and other related companies – Note 7	7,088,901	4,053,228
Royalties payable	363,477	295,479
Directors' fees accrual	1,255,162	-
Other	1,215	340,489
	8,708,755	4,689,196
NONCURRENT LIABILITIES
Taxes payable
Turnover tax payable	363,450	-
	363,450	-
Loans
Financial loans in foreign currency	1,052,939	3,100,800
	1,052,939	3,100,800
Other liabilities
Directors' fees accrual	1,250,000	-
	1,250,000	-
Other income and expenses, net
Leases and rentals	600,000	600,000
Other	51,953	156,797
	651,953	756,797

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 and it 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) vote each	9,600,000
Total		20,000,000

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

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

TAX SITUATION OF THE COMPANY: TAX SYSTEM – TAX CREDITS

The Company enjoys the benefits of the Industrial Promotion System provided by Law No. 19,640 as regards the assets and for the activities performed in the Province of Tierra del Fuego. Accordingly, the Company is entitled to certain tax and customs benefits through 2013, including:

1. 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%). Subsequently, under Presidential Decree 615/97, the Argentine Government reinstated certain tax benefits granted by Industrial Promotion Law introducing amendments effective August 1, 1997, 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.

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

As a result thereof, the Company booked the credit recognized at the listed price effective as of each fiscal period- or year-end which, as of June 30, 2006, and December 31, 2005, amounted to 885,447.

1. 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: Under Law No. 19,640, exports from the continent to Tierra del Fuego enjoy the benefit of these reimbursements.

Owing to the delay in payment by the Federal Government, the Company filed collection requests before Customs Authorities; although such requests have been denied at administrative stages, the Company’s legal counsel and Management understand that the transactions were carried out within the regulatory framework of Law No. 19,640 and, consequently, that the Company is entitled to collect the rebates provided by the legislation and regulations effective at the time.

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.

The benefits accrued during the six-month periods ended June 30 2006, and June 30, 2005, amounted to:


	Periods ended June 30,
	2006	2005

Value-added tax	21,570,709	14,324,184

Customs duties and statistical rate (estimated)	15,085,988	9,351,927

In addition and considering the tax system to which the Company is subject, as indicated above, as of June 30, 2006, the Company carried minimum presumed income tax credits in the amount of 1.7 million and the Company and its subsidiary carried VAT credits in the amount of 3.7 million disclosed in noncurrent assets. The recoverability of such credits totaling 5.4 million in the consolidated financial statements and 1.7 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.

MAJOR CUSTOMERS

For the six-month periods ended June 30, 2006, and June 30, 2005, sales to the Company’s most significant customers were as follows:


	06/30/2006	06/30/2005

VOLKSWAGEN ARGENTINA S.A.	30%	38%
RENAULT ARGENTINA S.A.	23%	21%
PEUGEOT CITRÖEN ARGENTINA S.A.	19%	8%
GENERAL MOTORS ARGENTINA	17%	23%
MERCEDES BENZ	8%	8%
OTHERS	3%	2%

PARENT COMPANY

Parent company: II Tevere S.A.

Registered office: Paseo Colon 221, Piso 2 – Buenos Aires City

Main business: holding company.

Voting rights: 76.47%

Shareholding percentage: 52%

Effective July 15, 1996, a 40% shareholding in Il Tevere S.A.’s was transferred in favor of Valeo Climatisation (afterwards, Valeo Systemes Thermique), which thus became indirect holder of 20.8% of the capital stock and 30.59% of the voting rights in MIRGOR S.A.C.I.F.I.A. A further 10% shareholding in Il Tevere S.A. was transferred on March 6, 1998; thus the interest in MIRGOR S.A.C.I.F.I.A. was increased to 26%. On September 27, 2005, the local shareholders of Il Tevere S.A., the parent company of Mirgor S.A.C.I.F.I.A. in which it holds a 52% equity interest, acquired Valeo Systemes Thermique’s equity interest in Il Tevere S.A.

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

INFORMATION ON RELATED PARTIES

For the six month period ended June 30, 2006, and 2005, and for the fiscal year ended December 31, 2005, the Company was engaged in transactions with its subsidiary, parent, and other related companies, being the receivable and payable amounts as follows:


	06/30/2006	12/31/2005
Other receivables
IL TEVERE S.A. (3)	675,943	460,037
Total	675,943	460,037

Trade payables
VALEO SECURITE HABITACLE (2)	-	44,037
Total	-	44,037

Other liabilities
INTERCLIMA S.A. (1)	7,088,901	4,053,228
Total	7,088,901	4,053,228

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


	06/30/2006 (See 3.)
	Purchase of merchandise	Services received	Royalties	Loans	Other Services

INTERCLIMA S.A. (1)	2,512,255	-	-	3,035,673	600,000
IL TEVERE S.A. (3)	-	-	-	215,906	-
	2,512,255	-	-	3,251,579	600,000

	06/30/2005
	Purchase of merchandise	Services received	Royalties	Loans	Other Services

VALEO SISTEMAS AUTOMOTIVOS LTD (2)	1,559,243	-	-	-	-
VALEO CHINA (2)	217,944	-	-	-	-
VALEO AUTOKLIMATIZACE S.R.O (2)	541,210	-	-	-	-
VALEO CLIMATIZACION S.A.(EURO) (2)	186,823	-	-	-	-
VALEO KLIMASYSTEME GMBH (2)	49,112	-	-	-	-
VALEO COMPONENTES AUTOMOVILES (2)	18,991	-	-	-	-
VALEO SISTEMAS AUTOMOTIVOS (2)	964,265	-	-	-	-
VALEO AUTOSYSTEMIY SP. Z.O.O. (2)	119,226	-	-	-	-
VALEO VYMENIKY TEPLA s.r.o. (2)	1,285,513	-	-	-	-
VALEO SECURITE HABITACLE (2)	541,478	-	-	-	-
VALEO THERMIQUE FRANCIA (2)	368,884	74,127	-	-	-
VALEO THERMIQUE MOTEUR (2)	2,393,176	-	-	-	-
VALEO ZARAGOZA (2)	3,014,202	-	-	-	-
VCC UP ECHANGEURS (2)	1,770,725	-	473,146	-	-
INTERCLIMA S.A. (1)	7,123,811	-	-	5,066,941	600,000
IL TEVERE S.A. (3)	-	-	-	459,359	-
	20,154,603	74,127	473,146	5,526,300	600,000

- 1. Subsidiary.
- Related company until September 27, 2005 (See (3)).
- 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 Il Tevere S.A. Consequently, after such date, Valeo and its group of companies are no longer part of the group of companies to which Mirgor S.A.C.I.F.I.A. belongs.
INCOME TAX WITHHOLDING ON DIVIDENDS

When dividends are paid in excess of taxable income as provided for in Income Tax Law, such excess shall be subject to a 35% withholding, as single and definitive payment. 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	Transaction for the period

57	01-Feb-05	12/15/04 to 02/02/05
59	04-May-05	03/17/05 to 05/01/05
60	04-May-05	05/01/05 to 05/04/05
61	08-Jul-05	06/07/05 to 07/08/05
63	28-Sep-05	08/30/05 to 09/28/05
64	31-Oct-05	10/04/05 to 10/31/05
65	02-Dec-05	11/14/05 to 12/02/05

BANK LOANS – RESTRICTION ON EARNINGS DISTRIBUTION

The borrowing and renegotiation of these loans binds the Company to comply with certain conditions and requirements, which it has fulfilled to date, especially those related to meeting certain ratios in its quarterly financial statements, the most significant of which measure the relation between certain liabilities and interest paid, 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 year reported through the issuance of these financial statements.

FOREIGN INVESTOR INFORMATION REGULATIONS

These financial statements have been prepared in accordance with the foreign investors information regulations established by the CNV (Argentine Securities Commission) in Resolution No. 368, as amended, Chapter XXIII, Exhibit III. Therefore, these financial statements are in accordance with professional accounting standards effective in Argentina. The effects of differences between professional accounting standards effective in Argentina and those effective in other countries where these financial statements may be used have not been quantified.

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

SHARES, DEBENTURES, OTHER SECURITIES ISSUED IN SERIES, AND INTEREST

IN ANOTHER COMPANY FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006,

PRESENTED COMPARATIVELY WITH THE PRIOR FISCAL YEAR

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


	2006
Securities name and characteristics	Face value	Amounts	Cost value	Value obtained by the equity method	Book value

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

INTERCLIMA S.A.	1	11,996	8,815,917	22,673,869	22,673,869
Total noncurrent investments					22,673,869


	2006						2005
	Information on the issuer
		Last financial statements issued
Securities name and characteristics	Main business activity	Date	Capital	Income (loss) for the year	Shareholders' equity	Equity interest %	Book value

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

INTERCLIMA S.A.	Manufacturing of autoparts and exchangers for air conditioning and heating systems	06/30/06	12,000	4,682,581	26,650,878	1	18,293,834
Total noncurrent investments							18,293,834

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