Edgar Filing: IRSA INVESTMENTS & REPRESENTATIONS INC

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IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Financial Statements as of December 31, 2018 and for the six and three-month period ended as of that date, presented comparatively

Legal information

Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.

Fiscal year N°: 76, beginning on July 1st, 2018.

Legal address: 108 Bolívar St., 1st floor, Autonomous City of Buenos Aires, Argentina.

Company activity: Real estate investment and development.

Date of registration of the by-laws in the Public Registry of Commerce: June 23, 1943.

Date of registration of last amendment of the by-laws in the Public Registry of Commerce: August 7, 2017.

Expiration of the Company’s by-laws: April 5, 2043.

Registration number with the Superintendence: 213,036.

Capital: 578,676,460 shares of common stock.

Common Stock subscribed, issued and paid up nominal value (in millions of Ps.): 579.

Parent Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria

(Cresud S.A.C.I.F. y A.).

Legal Address: 877 Moreno St., 23rd. floor, Autonomous City of Buenos Aires, Argentina.

Main activity: Real estate, agricultural, commercial and financial activities.

Direct and indirect interest of the Parent Company in the capital stock: 366,788,251 common shares.

Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 63.74% (1).

Type of stock	CAPITAL STATUS
Type of stock	Shares authorized for Public Offering (2)	Subscribed, issued and paid up nominal value (in millions of Pesos)
Common stock with a par value of Ps. 1 per share and entitled to 1 vote each	578,676,460	579

(1) For computation purposes, treasury shares have been subtracted.

(2) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.

Index

Glossary ....	1
Unaudited Condensed Interim Consolidated Statements of Financial Position	2
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income	3
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	4
Unaudited Condensed Interim Consolidated Statements of Cash Flows	6
Notes to the Unaudited Condensed Interim Consolidated Financial Statements:
Note 1 – The Group’s business and general information	7
Note 2 – Summary of significant accounting policies	7
Note 3 – Seasonal effects on operations	10
Note 4 – Acquisitions and disposals	11
Note 5 – Financial risk management and fair value estimates	12
Note 6 – Segment information	13
Note 7 – Investments in associates and joint ventures	15
Note 8 – Investment properties	17
Note 9 – Property, plant and equipment	18
Note 10 – Trading properties	18
Note 11 – Intangible assets	19
Note 12 – Financial instruments by category	19
Note 13 – Trade and other receivables	22
Note 14 – Cash flow information	22
Note 15 – Trade and other payables	23
Note 16 – Borrowings	23
Note 17 – Provisions	24
Note 18 – Taxes	24
Note 19 – Revenues	25
Note 20 – Expenses by nature	25
Note 21 – Cost of goods sold and services provided	25
Note 22 – Other operating results, net	26
Note 23 – Financial results, net	26
Note 24 – Related party transactions	26
Note 25 – CNV General Resolution N° 622	28
Note 26 – Foreign currency assets and liabilities	29
Note 27 – Groups of assets and liabilities held-for-sale	30
Note 28 – Results from discontinued operations	30
Note 29 – Other significant events of the period	30
Note 30 – Subsequent Events	32

Glossary

The following are not technical definitions, but help the reader to understand certain terms used in the wording of the notes to the Group´s Financial Statements.

Terms		Definitions
BACS		Banco de Crédito y Securitización S.A.
BCRA		Central Bank of the Argentine Republic
BHSA		Banco Hipotecario S.A.
Cellcom		Cellcom Israel Ltd.
Clal		Clal Holdings Insurance Enterprises Ltd.
CNV		Argentine Securities Commission
CODM		Chief operating decision maker
CPF		Collective Promotion Funds
Condor		Condor Hospitality Trust Inc.
Cresud		Cresud S.A.C.I.F. y A.
DIC		Discount Investment Corporation Ltd.
Efanur		Efanur S.A.
Financial Statements		Unaudited Condensed Interim Consolidated Financial Statements
Annual Financial Statements		Consolidated Financial Statements as of June 30, 2018
HASA		Hoteles Argentinos S.A.
IAS		International Accounting Standards
IASB		International Accounting Standards Board
IDBT		IDB Tourism (2009) Ltd.
IDBD		IDB Development Corporation Ltd.
IFISA		Inversiones Financieras del Sur S.A.
IFRS		International Financial Reporting Standards
IRSA, “The Company”, “Us”, “We”		IRSA Inversiones y Representaciones Sociedad Anónima
IRSA CP		IRSA Propiedades Comerciales S.A.
Israir		Israir Airlines & Tourism Ltd.
LRSA		La Rural S.A.
Metropolitan		Metropolitan 885 Third Avenue Leasehold LLC
MPIT		Minimum presumed income tax
NCN		Non-convertible Notes
New Lipstick		New Lipstick LLC
NIS		New Israeli Shekel
PBC		Property & Building Corporation Ltd.
PBEL		PBEL Real Estate LTD
Quality		Quality Invest S.A.
Shufersal		Shufersal Ltd.
Tarshop		Tarshop S.A.
Tyrus		Tyrus S.A.

IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Statements of Financial Position

as of December 31, 2018 and June 30, 2018

(All amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

	Note	12.31.2018	06.30.2018
ASSETS
Non-current assets
Investment properties	8	205,674	207,497
Property, plant and equipment	9	18,322	18,111
Trading properties	10, 21	4,483	8,477
Intangible assets	11	15,375	15,805
Other assets		50	241
Investments in associates and joint ventures	7	28,268	33,039
Deferred income tax assets	18	350	456
Income tax and MPIT credit		437	529
Restricted assets	12	3,824	2,606
Trade and other receivables	13	10,634	10,379
Investments in financial assets	12	2,089	2,186
Financial assets held for sale	12	8,927	9,928
Total non-current assets		298,433	309,254
Current assets
Trading properties	10, 21	2,871	4,175
Inventories	21	757	803
Restricted assets	12	3,966	5,411
Income tax and MPIT credit		404	507
Group of assets held for sale	27	7,800	6,618
Trade and other receivables	13	18,878	19,057
Investments in financial assets	12	34,005	32,494
Financial assets held for sale	12	7,206	5,693
Derivative financial instruments	12	85	111
Cash and cash equivalents	12	53,216	47,569
Total current assets		129,188	122,438
TOTAL ASSETS		427,621	431,692
SHAREHOLDERS’ EQUITY
Shareholders' equity attributable to equity holders of the parent (according to corresponding statement)		42,324	50,259
Non-controlling interest		48,871	47,671
TOTAL SHAREHOLDERS’ EQUITY		91,195	97,930
LIABILITIES
Non-current liabilities
Borrowings	16	230,686	230,784
Deferred income tax liabilities	18	31,504	33,836
Trade and other payables	15	2,164	4,608
Income tax and MPIT liabilities		1	-
Provisions	17	5,047	4,524
Employee benefits		131	140
Derivative financial instruments	12	367	31
Salaries and social security liabilities		83	85
Total non-current liabilities		269,983	274,008
Current liabilities
Trade and other payables	15	14,188	18,786
Borrowings	16	43,892	32,616
Provisions	17	1,346	1,342
Group of liabilities held for sale	27	4,589	4,134
Salaries and social security liabilities		1,761	1,978
Income tax and MPIT liabilities		484	667
Derivative financial instruments	12	183	231
Total current liabilities		66,443	59,754
TOTAL LIABILITIES		336,426	333,762
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES		427,621	431,692

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statemets.

__________________________

Alejandro G. Elsztain

Vice President II

Acting as President

IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income

for the six and three-month periods ended December 31, 2018 and 2017

(All amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

		Six month		Three month
	Note	12.31.2018	12.31.2017	12.31.2018	12.31.2017
Revenues	19	27,879	23,732	15,009	12,436
Costs	20, 21	(16,283)	(13,421)	(8,404)	(7,081)
Gross profit		11,596	10,311	6,605	5,355
Net (loss) / gain from fair value adjustment of investment properties	8	(5,451)	10,206	(13,619)	8,141
General and administrative expenses	20	(3,189)	(2,739)	(1,659)	(1,432)
Selling expenses	20	(3,474)	(3,288)	(1,704)	(1,681)
Other operating results, net	22	347	1,079	97	914
(Loss) / profit from operations		(171)	15,569	(10,280)	11,297
Share of loss of associates and joint ventures	7	(705)	101	(475)	(561)
(Loss) / profit before financial results and income tax		(876)	15,670	(10,755)	10,736
Finance income	23	1,037	618	(466)	286
Finance costs	23	(9,031)	(9,663)	2,682	(3,471)
Other financial results	23	1,213	1,024	(7,109)	550
Inflation adjustment		(387)	(186)	15	142
Financial results, net		(7,168)	(8,207)	(4,878)	(2,493)
(Loss) / profit before income tax		(8,044)	7,463	(15,633)	8,243
Income tax expense	18	1,880	3,366	4,040	5,031
(Loss) / profit for the period from continuing operations		(6,164)	10,829	(11,593)	13,274
Profit for the period from discontinued operations	28	717	1,291	772	731
(Loss) / profit for the period		(5,447)	12,120	(10,821)	14,005
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustment		200	(4,742)	(10,347)	(1,077)
Change in the fair value of hedging instruments net of income taxes		28	-	27	-
Items that may not be reclassified subsequently to profit or loss, net of income tax:
Actuarial profit from defined contribution plans		-	(72)	-	(50)
Other comprehensive income / (loss) for the period from continuing operations		228	(4,814)	(10,320)	(1,127)
Other comprehensive income for the period from discontinued operations		16	399	(420)	115
Total other comprehensive income / (loss) for the period		244	(4,415)	(10,740)	(1,012)
Total comprehensive (loss) / income for the period		(5,203)	7,705	(21,561)	12,993
Total comprehensive (loss) / income from continuing operations		(5,936)	6,015	(21,913)	12,147
Total comprehensive income from discontinued operations		733	1,690	352	846
Total comprehensive (loss) / income for the period		(5,203)	7,705	(21,561)	12,993
(Loss) / profit for the period attributable to:
Equity holders of the parent		(5,271)	9,762	(6,402)	2,943
Non-controlling interest		(176)	2,358	(4,419)	11,062
(Loss) / profit from continuing operations attributable to:
Equity holders of the parent		(6,005)	9,088	(5,612)	3,325
Non-controlling interest		(159)	1,741	(5,981)	9,949
Total comprehensive (Loss) / income attributable to:
Equity holders of the parent		(5,458)	8,110	(8,765)	2,928
Non-controlling interest		255	(405)	(12,796)	10,065
Total comprehensive (Loss) / income from continuing operations attributable to:
Equity holders of the parent		(6,208)	7,168	(8,955)	2,471
Non-controlling interest		272	(1,153)	(12,958)	9,676
(Loss) / profit per share attributable to equity holders of the parent:
Basic		(9.17)	16.98	(11.13)	5.12
Diluted		(9.17)	16.86	(11.13)	5.08
(Loss) / profit per share from continuing operations attributable to equity holders of the parent:
Basic		(10.44)	15.81	(9.76)	5.78
Diluted		(10.44)	15.70	(9.76)	5.74

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

_________________________.

Alejandro G. Elsztain

Vice President II

Acting as President

IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

for the six-month period ended December 31, 2018

(All amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

	Attributable to equity holders of the parent
	Share capital	Treasury shares	Inflation adjustment of share capital and treasury shares (1)	Share premium	Additional paid-in capital from treasury shares	Legal reserve	Special reserve Resolution CNV 609/12 (2)	Other reserves (3)	Retained earnings	Subtotal	Non-controlling interest	Total Shareholders’ equity
Balance as of July 1, 2018	575	4	7,512	8,336	45	278	5,390	2,812	25,307	50,259	47,671	97,930
Adjustments previous periods (IFRS 9 and 15) (Note 2.2)	-	-	-	-	-	-	-	-	(188)	(188)	(3)	(191)
Restated balance as of July 1, 2018	575	4	7,512	8,336	45	278	5,390	2,812	25,119	50,071	47,668	97,739
Loss for the period	-	-	-	-	-	-	-	-	(5,271)	(5,271)	(176)	(5,447)
Other comprehensive (loss) / income for the period	-	-	-	-	-	-	-	(187)	-	(187)	431	244
Total profit and other comprehensive (loss) / income for the period	-	-	-	-	-	-	-	(187)	(5,271)	(5,458)	255	(5,203)
Incorporation by biussness combination	-	-	-	-	-	-	-	-	-	-	(9)	(9)
Appropriation of retained earnings approved by Shareholders’ meeting held on 10.29.18	-	-	-	-	-	-	-	37,521	(37,521)	-	-	-
Share-based compensation	-	-	-	-	-	-	-	-	-	-	19	19
Capitalization of shareholders' contributions	-	-	-	-	-	-	-	-	-	-	(6)	(6)
Dividends distribution to non-controlling interest in subsidiaries	-	-	-	-	-	-	-	-	(1,496)	(1,496)	(365)	(1,861)
Changes in non-controlling interest	-	-	-	-	-	-	-	(793)	-	(793)	1,309	516
Balance as of December 31, 2018	575	4	7,512	8,336	45	278	5,390	39,353	(19,169)	42,324	48,871	91,195

(1)

Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.

(2)

Related to CNV General Resolution N° 609/12.

(3)

Group´s other reserves for the period ended December 31, 2018 are comprised as follows:

	Cost of treasury stock	Changes in non-controlling interest	Reserve for share-based payments	Reserve for future dividends	Currency translation adjustment reserve	Hedging instruments	Revaluation surplus	Special reserve	Reserve for defined contribution plans	Other reserves from subsidiaries	Total Other reserves
Balance as of July 1, 2018	(105)	(2,240)	129	970	621	60	60	3,434	(178)	61	2,812
Other comprehensive loss for the period	-	-	-	-	(157)	(30)	-	-	-	-	(187)
Total comprehensive loss for the period	-	-	-	-	(157)	(30)	-	-	-	-	(187)
Appropriation of retained earnings approved by Shareholders’ meeting held on 10.29.18	-	-	-	-	-	-	-	37,521	-	-	37,521
Share-based compensation	1	-	(1)	-	-	-	-	-	-	-	-
Changes in non-controlling interest	-	(793)	-	-	-	-	-	-	-	-	(793)
Balance as of December 31, 2018	(104)	(3,033)	128	970	464	30	60	40,955	(178)	61	39,353

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

_________________________

Alejandro G. Elsztain

Vice President II

Acting as President

IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

for the six-month period ended December 31, 2017

(All amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

	Attributable to equity holders of the parent
	Share capital	Treasury shares	Inflation adjustment of share capital and treasury shares (1)	Share premium	Additional paid-in capital from treasury shares	Legal reserve	Special reserve Resolution CNV 609/12 (2)	Other reserves (3)	Retained earnings	Subtotal	Non-controlling interest	Total Shareholders’ equity
Balance as of July 1, 2017	575	4	7,509	8,336	43	278	5,390	3,865	18,743	44,743	36,645	81,388
Profit for the period	-	-	-	-	-	-	-	-	9,762	9,762	2,358	12,120
Other comprehensive loss for the period	-	-	-	-	-	-	-	(1,652)	-	(1,652)	(2,763)	(4,415)
Total profit / (loss) and other comprehensive income for the period	-	-	-	-	-	-	-	(1,652)	9,762	8,110	(405)	7,705
Appropriation of retained earnings approved by Shareholders’ meeting held on 10.31.17	-	-	-	-	-	-	-	3,435	(3,435)	-	-	-
Distribution to legal reserve	-	-	-	-	-	-	-	-	-	-	-	-
Share-based compensation	-	-	-	-	-	-	-	2	-	2	52	54
Issuance of capital	-	-	-	-	-	-	-	-	-	-	3	3
Changes in non-controlling interest	-	-	-	-	-	-	-	(3,100)	-	(3,100)	4,449	1,349
Capitalization of contributions	-	-	-	-	-	-	-	-	(2,164)	(2,164)	-	(2,164)
Dividends distribution to non-controlling interest in subsidiaries	-	-	-	-	-	-	-	-	-	-	(156)	(156)
Balance as of December 31, 2017	575	4	7,509	8,336	43	278	5,390	2,550	22,906	47,591	40,588	88,179

(1) Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.

(2) Related to CNV General Resolution N° 609/12.

(3) Group’s other reserves for the period ended December 31, 2017 are comprised as follows:

	Cost of treasury stock	Changes in non-controlling interest	Reserve for share-based payments	Reserve for future dividends	Currency translation adjustment reserve	Hedging instruments	Special reserve	Reserve for defined contribution plans	Other reserves from subsidiaries	Total Other reserves
Balance as of July 1, 2017	(108)	306	132	970	2,498	30	-	(24)	61	3,865
Other comprehensive loss for the period	-	-	-	-	(1,534)	(19)	-	(99)	-	(1,652)
Total comprehensive loss for the period	-	-	-	-	(1,534)	(19)	-	(99)	-	(1,652)
Appropriation of retained earnings approved by Shareholders’ meeting held on 10.31.17	-	-	-	-	-	-	3,435	-	-	3,435
Share-based compensation	-	-	2	-	-	-	-	-	-	2
Changes in non-controlling interest	-	(3,100)	-	-	-	-	-	-	-	(3,100)
Balance as of December 31, 2017	(108)	(2,794)	134	970	964	11	3,435	(123)	61	2,550

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

_________________________

Alejandro G. Elsztain

Vice President II

Acting as President

IRSA Inversiones y Representaciones Sociedad Anónima

Unaudited Condensed Interim Consolidated Statements of Cash Flows

for the six-month periods ended December 31, 2018 and 2017

(All amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

	Note	12.31.2018	12.31.2017
Operating activities:
Net cash generated from continuing operating activities before income tax paid	14	6,712	7,750
Income tax and MPIT paid		(498)	(265)
Net cash generated from continuing operating activities		6,214	7,485
Net cash generated from discontinued operating activities		678	4,230
Net cash generated from operating activities		6,892	11,715
Investing activities:
(Increase) / Decrease of interest in associates and joint ventures		(12)	46
Acquisition, improvements and advance payments for the development of investment properties		(2,571)	(1,901)
Decrease in cash due to deconsolidation of subsidiary		(6)	-
Proceeds from sales of investment properties		17	390
Acquisitions and improvements of property, plant and equipment		(1,521)	(1,450)
Advanced payments		-	(229)
Acquisitions of intangible assets		(1,064)	(540)
Proceeds from sales of property, plant and equipment		9	-
Acquisitions of subsidiaries, net of cash acquired		(39)	-
Net increase of restricted deposits		(414)	(964)
Dividends collected from associates and joint ventures		160	-
Proceeds from sales of interest held in associates and joint ventures		4,746	-
Proceeds from loans granted		68	846
Payment of acquisition of non controlling interest		(227)	-
Acquisitions of investments in financial assets		(14,892)	(20,415)
Proceeds from disposal of investments in financial assets		15,451	11,484
Interest received from financial assets		448	246
Dividends received		43	117
Loans granted to related parties		(8)	(541)
Loans granted		-	(141)
Net cash generated from / (used in) continuing investing activities		188	(13,052)
Net cash used in discontinued investing activities		(22)	(1,343)
Net cash generated from / (used in) investing activities		166	(14,395)
Financing activities:
Borrowings and issuance of non-convertible notes		24,561	20,560
Payment of borrowings and non-convertible notes		(14,800)	(9,489)
(Payment) / collections of short term loans, net		(706)	30
Interests paid		(5,604)	(4,124)
Repurchase of non-convertible notes		(1,441)	-
Capital contributions from non-controlling interest in subsidiaries		94	247
Acquisition of non-controlling interest in subsidiaries		(1,120)	-
Proceeds from sales of non-controlling interest in subsidiaries		5	5,010
Loans received from associates and joint ventures, net		50	-
Payment of borrowings to related parties		(1)	-
Dividends paid		(79)	-
Dividends paid to non-controlling interest in subsidiaries		(299)	(141)
Proceeds from derivative financial instruments, net		192	167
Net cash generated from continuing financing activities		852	12,260
Net cash generated from /(used in) discontinued financing activities		(28)	2,231
Net cash generated from financing activities		824	14,491
Net increase in cash and cash equivalents from continuing activities		7,254	6,693
Net increase in cash and cash equivalents from discontinued activities		628	5,118
Net increase in cash and cash equivalents		7,882	11,811
Cash and cash equivalents at beginning of period	13	47,569	41,017
Cash and cash equivalents reclassified as held-for-sale		(634)	(104)
Foreign exchange gain on cash and changes in fair value of cash equivalents		(1,582)	(5,724)
Inflation adjustment		(19)	-
Cash and cash equivalents at end of period	13	53,216	47,000

The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.

___________________________

Alejandro G. Elsztain

Vice President II

Acting as President

IRSA Inversiones y Representaciones Sociedad Anónima

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(Amounts in millions, except otherwise indicated)

Free translation from the original prepared in Spanish for publication in Argentina

The Group’s business and general information

These Financial Statements have been approved for issuance by the Board of Directors, on February 28, 2019.

IRSA was founded in 1943, and it is engaged in a diversified range of real estate activities in Argentina since 1991. IRSA and its subsidiaries are collectively referred to hereinafter as “the Group”. Cresud is our direct parent company and IFIS Limited is our ultimate parent company.

The Group has established two Operations Centers, Argentina and Israel, to manage its global business, mainly through the following companies:

(*) See note 4.G. to the Annual Financial Statements for more information about the changes within the Operations Center in Israe

Summary of significant accounting policies

2.1.

Basis of preparation

The CNV, in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of the Technical Resolution No. 26 (RT 26) of the FACPCE and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its stock or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime.

For the preparation of these financial statements, the Group has made use of the option provided by IAS 34, and has prepared them in condensed form. Therefore, these financial statements do not include all the information required in a complete set of annual financial statements and, consequently, their reading is recommended together with the annual audited financial statements as of June 30, 2018.

The management of the Group has prepared these financial statements in accordance with the accounting principles established by the CNV, which are based on the application of IFRS, in particular of IAS 34.

Additionally, the information required by the CNV indicated in article 1, Chapter III, Title IV of General Resolution N° 622/13 has been included. This information is included in a note to these financial statements.

IRSA Inversiones y Representaciones Sociedad Anónima

IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated by non-monetary items. This requirement also includes the comparative information of the financial statements.

In order to conclude on whether an economy is categorized as high inflation in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that is approximate or exceeds 100%. Accumulated inflation in Argentina in three years is over 100%. It is for this reason that, in accordance with IAS 29, Argentina is considered a high inflation economy starting July 1, 2018.

In addition, Law No. 27,468 (published in the Official Gazette on December 4, 2018), amended Section 10 of Law No. 23,928, as amended, and established that the derogation of all the laws or regulations imposing or authorizing price indexation, monetary restatement, cost variation or any other method for strengthening debts, taxes, prices or rates of goods, works or services, does not extend to financial statements, as to which the provisions of Section 62 in in line with the General Companies Law No. 19,550 (1984 revision), as amended, shall continue to apply. Moreover, the referred law repealed Decree No. 1269/2002 dated July 16, 2002, as amended, and delegated to the Argentine Executive Branch the power to establish, through its controlling agencies, the effective date of the referred provisions in connection with the financial statements filed with it. Therefore, under General Resolution 777/2018 (published in the Official Gazette on December 28, 2018) the CNV ordered that issuers subject to its supervision shall apply the inflation adjustment to present the financial statements in terms of the current measuring unit set forth in IAS 29 in their annual, interim and special financial statements closed on or after December 31, 2018.

Pursuant to IAS 29, the financial statements of an entity whose functional currency is that of a high inflationary economy should be reported in terms of the measuring unit current as of the date of the financial statements. All the amounts included in the statement of financial position which are not stated in terms of the measuring unit current as of the date of the financial statements should be restated applying the general price index. All items in the statement of income should be stated in terms of the measuring unit current as of the date of the financial statements, applying the changes in the general price index recorded from the date on which the revenues and expenses were originally recognized in the financial statements.

Adjustment for inflation in the initial balances has been calculated considering the indexes reported by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) based on the price indexes published by the Argentine Institute of Statistics and Census (INDEC).

The principal inflation adjustment procedures are the following:

Monetary assets and liabilities that are recorded in the current currency as of the balance sheet’s closing date are not restated because they are already stated in terms of the currency unit current as of the date of the financial statements.

Non-monetary assets and liabilities are recorded at cost as of the balance sheet date, and equity components are restated applying the relevant adjustment ratios.

All items in the statement of income are restated applying the relevant conversion factors.

The effect of inflation in the Company’s net monetary position is included in the statement of income under Financial results, nets, in the item “Inflation adjustment”.

Comparative figures have been adjusted for inflation following the procedure explained in the previous paragraphs.

Upon initially applying inflation adjustment, the equity accounts were restated as follows:

Capital was restated as from the date of subscription or the date of the most recent inflation adjustment for accounting purposes, whichever is later. The resulting amount was included in the “Capital adjustment” account.

The translation differences was restated to reflect the real terms.

Other comprehensive income / (loss) was restated as from each accounting allocation.

The other reserves in the statement of income were not restated as of the initial application date, i.e., June 30, 2016.

IRSA Inversiones y Representaciones Sociedad Anónima

2.2.

Significant accounting policies

The accounting policies applied in the presentation of these Unaudited Condensed Interim Consolidated Financial Statements are consistent with those applied in the preparation of the Annual Financial Statements, as described in Note 2 the Annual Financial Statements except for what is mentioned in Note 2.1 to these Unaudited Condensed Interim Consolidated Financial Statements.

As described in Note 2.2 to the Annual Financial Statements, the Group adopted IFRS 15 “Revenues from contracts with customers” and IFRS 9 “Financial instruments” in the present fiscal year using the cumulative effect approach, so that the cumulative impact of the adoption was recognized in retained earnings at the beginning of the period, and the comparative figures have not been modified due to this adoption.

The main changes are the following:

IFRS 15: Revenues from contracts with customers

The standard introduces a new five-step model for recognizing revenue from contracts with customers:

Identifying the contract with the customer.

Identifying separate performance obligations in the contract.

Determining the transaction price.

Allocating the transaction price to separate performance obligations.

Recognizing revenue when the performance obligations are satisfied.

IFRS 9: Financial instruments

The new standard includes a new model of "expected credit loss" for receivables or other assets not measured at fair value. The new model presents a dual measurement approach for impairment: if the credit risk of a financial asset has not increased significantly since its initial recognition, an allowance for impairment will be recorded in the amount of expected credit losses resulting from the possible non- compliance events within a certain period. If the credit risk has increased significantly, in most cases the allowance will increase and the amount of the expected losses should be recorded.

In accordance with the new standard, in cases where a change in terms or exchange of financial liabilities is immaterial and does not lead, at the time of analysis, to the reduction of the previous liability and recognition of the new liability, the new cash flows must be discounted at the original effective interest rate, recording the impact of the difference between the present value of the financial liability that has the new terms and the present value of the original financial liability in net income.

The effect on the income statement for the six-month period ended December 31, 2018 for the first implementation of IFRS 15 is as follows:

	Six month
	12.31.2018
	According to previous standards	Implementation of IFRS 15	Current statement of income
Revenues	28,128	(249)	27,879
Costs	(16,485)	202	(16,283)
Gross profit	11,643	(47)	11,596
Net gain from fair value adjustment of investment properties	(5,451)	-	(5,451)
General and administrative expenses	(3,189)	-	(3,189)
Selling expenses	(3,987)	513	(3,474)
Other operating results, net	347	-	347
Profit from operations	(637)	466	(171)
Share of profit of associates and joint ventures	(775)	70	(705)
Profit before financial results and income tax	(1,412)	536	(876)
Finance income	1,037	-	1,037
Finance costs	(9,048)	17	(9,031)
Other financial results	1,213	-	1,213
Inflation adjustment	(387)		(387)
Financial results, net	(7,185)	17	(7,168)
Income before income tax	(8,597)	553	(8,044)
Income tax expense	1,993	(113)	1,880
Income for the period from continuing operations	(6,604)	440	(6,164)
Loss for the period from discontinued operations	717	-	717
Profit for the period	(5,887)	440	(5,447)

IRSA Inversiones y Representaciones Sociedad Anónima

The effect on retained earnings as of July 1, 2018 for the first implementation of IFRS 9 and 15 is as follows:

	07.01.2018
	Implementation of IFRS 15	Implementation of IFRS 9	Total
ASSETS
Non- Current Assets
Trading properties	(3,869)	-	(3,869)
Investments in associates and joint ventures	142	(232)	(90)
Deferred income tax assets	(205)	-	(205)
Trade and other receivables	634	(90)	544
Total Non-Current Assets	(3,298)	(322)	(3,620)
Current Assets
Trading properties	(935)	-	(935)
Trade and other receivables	372	58	430
Total Current Assets	(563)	58	(505)
TOTAL ASSETS	(3,861)	(264)	(4,125)
SHAREHOLDERS’ EQUITY
Capital and reserves attributable to equity holders of the parent
Retained earnings	127	(315)	(188)
Total capital and reserves attributable to equity holders of the parent	127	(315)	(188)
Non-controlling interest	166	(169)	(3)
TOTAL SHAREHOLDERS’ EQUITY	293	(484)	(191)
LIABILITIES
Non-Current Liabilities
Trade and other payables	(1,719)	-	(1,719)
Borrowings	-	251	251
Deferred income tax liabilities	(51)	(101)	(152)
Total Non-Current Liabilities	(1,770)	150	(1,620)
Current Liabilities
Trade and other payables	(2,384)	-	(2,384)
Borrowings	-	70	70
Total Current Liabilities	(2,384)	70	(2,314)
TOTAL LIABILITIES	(4,154)	220	(3,934)
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES	(3,861)	(264)	(4,125)

2.3.

Comparability of information

Balance sheet items as of June 30, 2018 and December 31, 2017 presented in these Unaudited Condensed Interim Consolidated Financial Statements for comparative purposes arise from the financial statements as of and for such periods restated according to IAS 29. Certain items from prior periods have been reclassified for consistency purposes regarding the loss of control in Shufersal. See note 4.G. to the Annual Financial Statements.

2.4.

Use of estimates

The preparation of financial statements at a certain date requires Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these interim financial statements. In the preparation of these interim financial statements, the significant judgments made by Management in applying the Group’s accounting policies and the main sources of uncertainty were the same as the ones applied by the Group in the preparation of the Annual Financial Statements described in Note 3 to those Annual Financial Statements.

Seasonal effects on operations

Operations Center in Argentina

The operations of the Group’s shopping malls are subject to seasonal effects, which affect the level of sales recorded by lessees. During summer time in Argentina (January and February), the lessees of shopping malls experience the lowest sales levels in comparison with the winter holidays (July) and Christmas and year-end holidays celebrated in December, when they tend to record peaks sales revenue. Apparel stores generally change their collections during the spring and the fall, which impacts positively on shopping mall sales. Sale discounts at the end of each season also affect the business. As a consequence, for shopping mall operations, a higher level of business activity is expected in the period ranging between July and December, compared to the period between January and June.

IRSA Inversiones y Representaciones Sociedad Anónima

Operations Center in Israel

The results of operations of telecommunications and tourism are usually affected by seasonality in summer months in Israel and by the Jewish New Year, given a higher consumption due to internal and external tourism.

Acquisitions and disposals

Significant acquisitions and disposals for the six-month period ended December 31, 2018 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2018, are detailed in Note 4 to the Annual Financial Statements.

Operations Center in Argentina

Dividend distribution

On October 29, 2018, the Shareholders’ meeting was held, whereby the distribution of a dividend in kind for an equivalent of Ps. 1,412 payable in shares of IRSA CP was resolved. For the distribution, the value of IRSA CP share was taken as of October 26, 2018, which was Ps. 220 per share. The number of shares distributed amounted to 6,418,182. This transaction was accounted for as an equity transaction generating a decrease in the equity attributable to holders of the parent for Ps. 709, restated as of the date of these interim financial statements.

Operations Center in Israel

Possible sale of a subsidiary of IDB Tourism

On August 14, 2018, the Board of Directors of IDB Tourism approved its engagement in a memorandum of understanding for the sale of 50% of the issued share capital of a company which manages the incoming tourism operation which is held by Israir for a total consideration of NIS 26 million (approximately Ps. 260 as of the date of the transaction). This transaction does not change the intentions of selling the whole investment in IDBT, which the management of the company expects to complete before June 2019.

Partial sale of Clal

On August 30, 2018, continuing with the instructions given by the Commissioner of Capital Markets, Insurance and Savings of Israel, IDBD has sold 5% of its stake in Clal through a swap transaction on the same conditions that applied to the swap transactions performed in the months of May and August 2017, and January and May 2018 described in Note 4 to the Annual Financial Statements. The consideration was set at an amount of approximately NIS 173 million (equivalent to approximately Ps. 1,766 as of the transaction date). After the completion of the transaction, IDBD’s interest in Clal was reduced to 29.8% of its share capital.

Agreement to sell plot of land in USA

In August 2018, a subsidiary of IDBG signed an agreement to sell a plot of land next to the Tivoli project in Las Vegas for a consideration of US$ 18 (approximately Ps. 739 as of the date of issuance of these interim financial statements).

Interest increase in DIC

On July 5, 2018, Tyrus acquired 2,062,000 of DIC’s shares in open market purchases for a total price of NIS 20 (equivalent to Ps. 227 as of that date), which represent 1.35% of DIC’s outstanding shares at such date. As a result of this transaction, the Group’s equity interest in DIC increased from 76.57% to 77.92%. This transaction was accounted for as an equity transaction generating an increase in the net equity attributable to the controlling shareholders by Ps. 13, restated as of the date of these interim financial statements.

IRSA Inversiones y Representaciones Sociedad Anónima

Sale of Shufersal shares

On November 27, 2018, DIC sold 7.5% of its shares of Shufersal to institutional investors for a consideration of NIS 416 (approximately Ps. 4,166 as of the date of the transaction). After this transaction, the Group’s holding of Shufersal’s shares went down to 26% approximately.

Sale of real estate

In October 2018, a subsidiary of Ispro signed an agreement for the sale of all of its rights in real estate area of approximately 29 dunams (equivalent to 1 hectare), in which there are 12,700 square meters in the northern industrial zone in Yavneh for NIS 86 million.

Increase in participation in PBC

In December 2018, DIC acquired an additional 3% of PBC’s shares in open market purchases for NIS 55 (equivalent to Ps. 554 as of that date). This transaction was accounted for as an equity transaction generating an increase in the equity attributable to holders of the parent for Ps. 52, restated as of the date of these interim financial statements.

Repurchase of own shares by DIC

In December 2018, DIC's Board of Directors approved a plan to buy back DIC shares, for a period of one year, until December 2019 amounting up to NIS 120 million (approximately Ps.1,203 as of the date of these financial statements). Acquisition of securities shall be carried out in accordance with market opportunities, dates, prices and quantities, as determined by the management of DIC, in such a way that in any event, the public holdings shall be, at any time, at least 10.1% of the total issued share capital of DIC.

In December 2018, DIC acquired 2.1 million of its shares for a total amount of NIS 19 (approximately Ps. 200 as of that date). Additionally, in December 2018, minority shareholders of DIC exercised DIC Series 6 options for an amount of NIS 9 (approximately Ps. 100 as of that date).

As a result of the operations described above, the participation of Dolphin IL in DIC increased by 0.35%. The present transactions were accounted for as an equity transaction generating a decrease in the equity attributable to holders of the parent of Ps. 31, restated as of the date of these financial statements.

Increase in participation in Cellcom

In December 2018, DIC exercised 1.5 million options (Series 1) of Cellcom held by it at an exercise price of NIS 31 million (approximately Ps. 302 as of that date). In addition, in December 2018, DIC purchased approximately 0.6 million shares of Cellcom at a cost of NIS 15 million (approximately Ps. 151 as of that date). As a result of the exercise of the options and the acquisition, the share of DIC in Cellcom increased by 0.7%. The present transactions were accounted for as an equity transaction generating a decrease in the equity attributable to holders of the parent of

Ps. 93, restated as of the date of these financial statements.

Increase in participation in Elron

In November and December 2018, DIC acquired an additional 9.2% of the shares of Elron in open market purchases for NIS 31 (equivalent to Ps. 311 as of that date). This transaction was accounted for as an equity transaction generating a decrease in the equity attributable to holders of the parent of Ps. 23, restated as of the date of these financial statements.

Financial risk management and fair value estimates

These Financial Statements do not include all the information and disclosures on financial risk management; therefore, they should be read along with Note 5 to the Annual Financial Statements. There have been no changes in risk management or risk management policies applied by the Group since fiscal year-end June 30, 2018.

IRSA Inversiones y Representaciones Sociedad Anónima

Since June 30, 2018 and up to the date of issuance of these Financial Statements, there have been no significant changes in business or economic circumstances affecting the fair value of the Group's assets or liabilities (either measured at fair value or amortized cost). Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Group’s financial instruments.

Segment information

As explained in Note 6 to the Annual Financial Statements, the Group reports its financial performance separately in two Operations Centers. Since fiscal year 2018 the CODM reviews certain corporate expenses associated with each operation center in an aggregate manner and separately from each of the segments. Such expenses have been disclosed in the "Corporate" segment of each operation center. Additionally, since fiscal year 2018, the CODM also reviews the office business as a single segment and the entertainment business in an aggregate and separate manner from offices, including that concept in the "Others" segment. Also, as described in Note 4.G. to the Annual Financial Statements, the Group lost control of Shufersal as of June 30, 2018 and has reclassified its results to discontinued operations. Segment information for the period ended December 31, 2017 has been recast for the purposes of comparability with the present period.

Below is a summary of the Group’s business units and a reconciliation between the operating income according to segment information and the operating income of the statement of income and other comprehensive income of the Group for the periods ended December 31, 2018 and 2017:

	Six months ended December 31, 2018
	Operations Center in Argentina	Operations Center in Israel	Total	Joint ventures (1)	Expensesand collectivepromotion funds	Elimination of inter-segment transactions and non-reportable assets / liabilities (2)	Total as per statement of income / statement of financial position
Revenues	4,624	22,149	26,773	(29)	1,142	(7)	27,879
Costs	(803)	(14,305)	(15,108)	18	(1,193)	-	(16,283)
Gross profit / (loss)	3,821	7,844	11,665	(11)	(51)	(7)	11,596
Net (loss) / gain from fair value adjustment of investment properties	(6,232)	780	(5,452)	1	-	-	(5,451)
General and administrative expenses	(854)	(2,352)	(3,206)	7	-	10	(3,189)
Selling expenses	(326)	(3,149)	(3,475)	1	-	-	(3,474)
Other operating results, net	(269)	511	242	108	-	(3)	347
(Loss) / profit from operations	(3,860)	3,634	(226)	106	(51)	-	(171)
Share of (loss) of associates and joint ventures	(259)	(321)	(580)	(125)	-	-	(705)
Segment (loss) / profit	(4,119)	3,313	(806)	(19)	(51)	-	(876)
Reportable assets	82,810	327,989	410,799	(512)	-	17,334	427,621
Reportable liabilities	-	(281,370)	(281,370)	-	-	(55,056)	(336,426)
Net reportable assets	82,810	46,619	129,429	(512)	-	(37,722)	91,195

	Six Monts ended December 31, 2017
	Operations Center in Argentina	Operations Center in Israel	Total	Joint ventures (1)	Expensesand collectivepromotion funds	Elimination of inter-segment transactions and non-reportable assets / liabilities (2)	Total as per statement of income / statement of financial position
Revenues	4,136	18,312	22,448	(45)	1,336	(7)	23,732
Costs	(852)	(11,229)	(12,081)	22	(1,362)	-	(13,421)
Gross profit / (loss)	3,284	7,083	10,367	(23)	(26)	(7)	10,311
Net gain from fair value adjustment of investment properties	8,505	1,747	10,252	(46)	-	-	10,206
General and administrative expenses	(629)	(2,139)	(2,768)	23	-	6	(2,739)
Selling expenses	(305)	(2,985)	(3,290)	2	-	-	(3,288)
Other operating results, net	(68)	1,129	1,061	21	-	(3)	1,079
Profit / (loss) from operations	10,787	4,835	15,622	(23)	(26)	(4)	15,569
Share of profit / (loss) of associates and joint ventures	333	(367)	(34)	135	-	-	101
Segment profit / (loss)	11,120	4,468	15,588	112	(26)	(4)	15,670
Reportable assets	86,821	288,005	374,826	1,399	-	12,906	389,131
Reportable liabilities	-	(252,987)	(252,987)	-	-	-	(252,987)
Net reportable assets	86,821	35,018	121,839	1,399	-	12,906	136,144

(1)

Represents the equity value of joint ventures that were proportionately consolidated for the segment information.

IRSA Inversiones y Representaciones Sociedad Anónima

(2)

Includes deferred income tax assets, income tax and MPIT credits, trade and other receivables, investment in financial assets, cash and cash equivalents and intangible assets except for rights to receive future units under barter arrangement net of investments in associates with negative equity which are included in provisions in the amount of Ps. 3,434 as of December 31, 2018.

Below is a summarized analysis of the business unit of the Group’s Operations Center in Argentina for the six month periods ended December 31, 2018 and 2017:

	Six months ended December 31, 2018
	Operations Center in Argentina
	Shopping Malls	Offices	Sales and developments	Hotels	International	Corporate	Others	Total
Revenues	2,741	546	61	947	279	-	50	4,624
Costs	(207)	(29)	(32)	(467)	(14)	-	(54)	(803)
Gross profit / (loss)	2,534	517	29	480	265	-	(4)	3,821
Net (loss) / gain from fair value adjustment of investment properties	(8,898)	2,516	128	-	2	-	20	(6,232)
General and administrative expenses	(296)	(68)	(61)	(148)	(35)	(212)	(34)	(854)
Selling expenses	(175)	(34)	(13)	(99)	-	-	(5)	(326)
Other operating results, net	(41)	(12)	(124)	26	2	-	(120)	(269)
(Loss) / profit from operations	(6,876)	2,919	(41)	259	234	(212)	(143)	(3,860)
Share of profit of associates and joint ventures	-	-	(14)	-	(195)	-	(50)	(259)
Segment (loss) / profit	(6,876)	2,919	(55)	259	39	(212)	(193)	(4,119)

Investment properties and trading properties	43,007	19,944	15,181	-	60	-	756	78,948
Investment in associates and joint ventures	1	-	244	-	(2,501)	-	4,352	2,096
Other operating assets	149	99	106	1,142	113	-	157	1,766
Operating assets	43,157	20,043	15,531	1,142	(2,328)	-	5,265	82,810

For the six-month period ended December 31, 2018, the net loss from the fair value adjustment of investment property amounted to Ps. (6,232), and it was generated by:

1. Shopping Malls Segment

The net result of shopping malls was affected by:

a) an increase of 55 basis points in the discount rate, generating a decrease of Ps. 3,040 in the value of shopping Malls;

b) an increase in the projected cash flows generated by the update of the projected inflation rates, generating an increase of Ps. 3,030 in the value of shopping malls;

c) a net increase of Ps. 2,239, generated by the updating of the future exchange rates used for the conversion to dollars of the projected cash flows (Ps. 6,642 - Loss) and by the conversion of the present value of the projected cash flows at the current exchange rate at the end of the period (Ps. 8,881 - Profit) (depreciation of the Argentine peso of 30% against the dollar).

2. “Offices", "Sales and developments" and "Others" segments.

The net result of the properties included in the present segments was mainly generated by the depreciation of 31% of the Argentine peso during this six-month period.

3. Additionally, due to the impact of the inflation adjustment, Ps. 16,930 was reclassified to “inflation adjustment”, leaving a loss in changes in fair value of investment property of Ps. 6,232.

	Six months ended December 31, 2017
	Operations Center in Argentina
	Shopping Malls	Offices	Sales and developments	Hotels	International	Corporate	Others	Total
Revenues	2,939	382	86	725	-	-	4	4,136
Costs	(272)	(27)	(47)	(503)	-	-	(3)	(852)
Gross profit	2,667	355	39	222	-	-	1	3,284
Net gain / (loss) from fair value adjustment of investment properties	8,443	(19)	93	-	-	-	(12)	8,505
General and administrative expenses	(210)	(52)	(67)	(135)	(47)	(106)	(12)	(629)
Selling expenses	(167)	(30)	(15)	(90)	-	-	(3)	(305)
Other operating results, net	(41)	1	(35)	(3)	(7)	-	17	(68)
Profit / (loss) from operations	10,692	255	15	(6)	(54)	(106)	(9)	10,787
Share of profit of associates and joint ventures	-	35	(15)	-	71	-	242	333
Segment profit / (loss)	10,692	290	-	(6)	17	(106)	233	11,120

Investment properties and trading properties	56,165	12,621	9,657	-	-	-	410	78,853
Investment in associates and joint ventures	-	-	240	-	992	-	4,983	6,215
Other operating assets	177	123	102	1,204	83	-	64	1,753
Operating assets	56,342	12,744	9,999	1,204	1,075	-	5,457	86,821

For the six-month period ended December 31, 2017, the net gain from the fair value adjustment of investment property amounted to Ps. 8,505, and it was generated by:

1. Shopping Malls Segment

The net result of shopping malls was affected by:

a) an increase of Ps. 4,440 generated by the decrease of the Income Tax Rate used in the discounted cash flow;

b) a decrease of 25 basis points in the discount rate, representing an increase of Ps. 1,217 in the value of shopping Malls;

c) a decrease in the projected cash flows generated by the update of the projected inflation rates, representing a decrease of Ps. 768 in the value of the shopping malls;

d) a net increase of Ps. 4,586, generated by the updating of the future exchange rates used for the conversion in dollars of the projected cash flows (Ps. 1,008 - profit) and by the conversion of the present value of the projected cash flows at the rate of the current exchange rate at the end of this period (Ps. 3,578 - Profit)

2. “Offices", "Sales and developments" and "Others" segments

The net result of the properties included in the present segments was mainly generated by the depreciation of the Argentine peso during this six-month period.

3. Additionally due to the impact of the inflation adjustment Ps. 6,852 were reclassified to “inflation adjustment”, leaving a profit in changes in fair value of investment property of Ps. 8,505.

Below is a summarized analysis of the business unit of the Group’s Operations Center in Israel for the six month periods ended December 31, 2018 and 2017:

IRSA Inversiones y Representaciones Sociedad Anónima

	Six months ended December 31, 2018
	Operations Center in Israel
	Real Estate	Supermarkets	Telecommunications	Insurance	Corporate	Others	Total
Revenues	6,020	-	15,641	-	-	488	22,149
Costs	(2,657)	-	(11,389)	-	-	(259)	(14,305)
Gross profit	3,363	-	4,252	-	-	229	7,844
Net gain from fair value adjustment of investment properties	780	-	-	-	-	-	780
General and administrative expenses	(301)	-	(1,377)	-	(275)	(399)	(2,352)
Selling expenses	(92)	-	(2,966)	-	-	(91)	(3,149)
Other operating results, net	-	-	-	-	269	242	511
Profit / (loss) from operations	3,750	-	(91)	-	(6)	(19)	3,634
Share of (loss) / profit of associates and joint ventures	(222)	164	-	-	-	(263)	(321)
Segment profit / (loss)	3,528	164	(91)	-	(6)	(282)	3,313

Operating assets	176,637	13,758	67,232	16,133	35,432	18,797	327,989
Operating liabilities	(137,278)	-	(52,133)	-	(82,227)	(9,732)	(281,370)
Operating assets (liabilities), net	39,359	13,758	15,099	16,133	(46,795)	9,065	46,619

	Six months ended December 31, 2017
	Operations Center in Israel
	Real Estate	Supermarkets	Telecommunications	Insurance	Corporate	Others	Total
Revenues	3,723	-	14,088	-	-	501	18,312
Costs	(1,092)	-	(9,912)	-	-	(225)	(11,229)
Gross profit	2,631	-	4,176	-	-	276	7,083
Net gain from fair value adjustment of investment properties	1,747	-	-	-	-	-	1,747
General and administrative expenses	(266)	-	(1,317)	-	(244)	(312)	(2,139)
Selling expenses	(79)	-	(2,777)	-	-	(129)	(2,985)
Other operating results, net	35	-	232	-	614	248	1,129
Profit from operations	4,068	-	314	-	370	83	4,835
Share of profit of associates and joint ventures	(238)	-	-	-	-	(129)	(367)
Segment profit	3,830	-	314	-	370	(46)	4,468

Operating assets	131,140	62,439	46,023	13,563	26,702	8,138	288,005
Operating liabilities	(103,912)	(45,029)	(36,160)	-	(67,507)	(379)	(252,987)
Operating assets (liabilities), net	27,228	17,410	9,863	13,563	(40,805)	7,759	35,018

Investments in associates and joint ventures

Changes in the Group’s investments in associates and joint ventures for the six month period ended December 31, 2018 and for the year ended June 30, 2018 were as follows:

	December 31, 2018	June 30, 2018
Beginning of the period / year	29,913	14,400
Adjustment previous periods (IFRS 9 and 15)	(90)	-
Increase in equity interest in associates and joint ventures	216	470
Issuance of capital and contributions	19	229
Capital reduction	(218)	(421)
Decrease of interest in associate	(4,139)	(431)
Share of profit / (loss)	(705)	(2,002)
Transfer to borrowings to associates	-	(270)
Currency translation adjustment	(2)	1,730
Incorporation of deconsolidated subsidiary, net	-	16,782
Dividends (i)	(160)	(434)
Distribution for associate liquidation	-	(92)
Reclassification to held-for-sale	-	(70)
Others	-	22
End of the period / year (ii)	24,834	29,913

(i) See Note 24.

(ii) As of December 31, 2018 and June 30, 2018, includes Ps. (3,422) of New Lipstick and Ps. (12) of Puerto Retiro and Ps. (3,126) of New Lipstick, respectively, reflecting interests in companies with negative equity, which were disclosed in “Provisions” (see Note 17).

IRSA Inversiones y Representaciones Sociedad Anónima

Name of the entity	% ownership interest		Value of Group's interest in equity		Group's interest in comprehensive income / (loss)
Name of the entity	December 31, 2018	June 30, 2018	December 31, 2018	June 30, 2018	December 31, 2018	December 31, 2017
Associates
New Lipstick (1)	49.90%	49.90%	(3,422)	(3,126)	(296)	83
Tarshop	20.00%	20.00%	4	158	28	(7)
BHSA	29.91%	29.91%	3,919	4,181	(79)	309
Condor	18.89%	18.90%	900	888	51	(9)
PBEL	45.00%	45.00%	1,228	1,337	(1)	(120)
Shufersal	26.02%	33.56%	13,758	16,782	286	-
Other associates	N/A	N/A	2,124	2,711	(223)	(452)
Joint ventures
Quality	50.00%	50.00%	1,405	1,364	21	102
La Rural SA	50.00%	50.00%	241	223	17	35
Mehadrin	45.41%	45.41%	2,446	2,896	(395)	(361)
Other joint ventures	N/A	N/A	2,231	2,499	(116)	(80)
Total associates and joint ventures			24,834	29,913	(707)	(500)

(1) Metropolitan, a subsidiary of New Lipstick, has renegotiated its non-recourse debt with IRSA, which amounted to US$ 113.1, and obtained a debt reduction of US$ 20 by the lending bank, an extension of maturityto April 30, 2020 and an interest rate reduction from LIBOR + 4 b.p. to LIBOR + 2 b.p. upon payment of US$ 40 in cash (US$ 20 in September 2017 and US$ 20 in October 2017), of which IRSA has contributed US$ 20. Following the renegotiation, Metropolitan’s debt amounts to US$ 53.1. Additionally, Metropolitan has exercised on January 16, 2019 the purchase option on part of the land where the property is built with a deposit the sum of US$ 5.2 corresponding to 1% of the purchase price. Furthermore, Metropolitan has agreed to cause IRSA and other shareholders to furnish the lender, on or before February 1, 2020, with a payment guarantee with financial ratios acceptable to the lender for the outstanding balance of the purchase price, or a letter of credit in relation to the loan balance then outstanding.

Below is additional information about the Group’s investments in associates and joint ventures:

Name of the entity

Place of business / Country of incorporation

Main activity

Common shares 1 vote

Latest financial statements issued

Share capital (nominal value)

Profit / (loss) for the period

Shareholders’ equity

Associates

New Lipstick

U.S.

Real estate

N/A

(*) (16)

(*) (194)

Tarshop

Argentina

Financing

48,759,288

599

101

601

BHSA

Argentina

Financial

448,689,072

(***) 1,500

(***) 2,238

(***) 8,719

Condor

U.S.

Hotel

2,245,100

N/A

(*) 3

(*) 110

PBEL

India

Real estate

450

(**) 1

(**) (9)

(**) (498)

Shufersal

Israel

Retail

79,282,087

(**) 242

(**) 149

(**) 1,907

Other associates

N/A

Joint ventures

Quality

Argentina

Real estate

120,827,022

280

2,775

La Rural SA

Argentina

Organization of events

714,498

195

Mehadrin

Israel

Agriculture

1,509,889

(**) 3

(**) (73)

(**) 507

Other joint ventures

N/A

(*) Amounts in millions of US Dollars under US GAAP. Condor’s year-end falls on December 31, so the Group estimates their interest with a three-month lag, including material adjustments, if any.

(**) Amounts in millions of NIS.

(***) Information as of December 31, 2018, according to BCRA's standards.

Puerto Retiro (joint venture):

At present, this 8.3 hectare plot of land, which is located in one of the most privileged areas of the city, near Catalinas, Puerto Madero and Retiro and is the only privately owned waterfront property facing directly to Río de la Plata, is affected by a zoning regulation defined as U.P. which prevents the property from being used for any purposes other than strictly port activities.

The Company was involved in a judicial bankruptcy action brought by the National Government, to which this Board of Directors is not party. Management and legal counsel of the Company believe that there are sufficient legal and technical arguments to consider that the petition for continuation of the bankruptcy case will be dismissed by the court. However, in view of the current status of the action, its result cannot be predicted.

IRSA Inversiones y Representaciones Sociedad Anónima

Moreover, Tandanor filed a civil action against Puerto Retiro S.A. and the other defendants in the criminal case for violation of Section 174 (5) based on Section 173 (7) of the Criminal Code of Argentina. Such action seeks -on the basis of the nullity of the decree that approved the bidding process involving the Dársena Norte property- the restitution of the property and a reimbursement in favor of Tandanor for all such amounts it has allegedly lost as a result of a suspected fraudulent transaction involving the sale of the property. Puerto Retiro has presented the allegation on the merit of the evidence, highlighting that the current shareholders of Puerto Retiro did not participate in any of the suspected acts in the criminal case since they acquired the shares for consideration and in good faith several years after the facts told in the process. Likewise, it was emphasized that the company Puerto Retiro is foreign to the bidding / privatization carried out for the sale of Tandanor shares. The dictation of the sentence is expected.

On September 7, 2018, the Oral Federal Criminal Court No. 5 rendered a decision. According to the sentence read by the president of the Court, Puerto Retiro won the preliminary objection of limitation filed in the civil action. However, in the criminal case, where Puerto Retiro is not a party, it was ordered, among other issues, the confiscation (“decomiso”) of the property owned by Puerto Retiro known as Planta I. The grounds of the Court`s judgement will be read on November 11, 2018. From that moment, all the parties will be able to file the appeals. Although there are solid arguments to try to refute the disposed seizure, this can be affirmed with a greater degree of certainty after the publications of the fundamentals of the ruling, at this time only the resolute part of this ruling is known.

In the criminal action, the claimant reported the violation by Puerto Retiro of the injunction ordered by the criminal court consisting in an order to stay (“prohibición de innovar”) and not to contract with respect to the property disputed in the civil action. As a result of such report, the Oral Federal Court (Tribunal Oral Federal) No. 5 started interlocutory proceedings, and on June 8, 2017, it ordered and carried out a foreclosure of the property that was subject to lease agreements with Los Cipreses S.A. and Flight Express S.A. with the aim of enforcing the referred order. As a result, the proceedings were forwarded to the Criminal Court for it to appoint the court that will investigate the alleged commission of the crime of contempt.

Faced with the evolution of the legal cases that affect it and based on the reports of its legal advisors, Puerto Retiro Management has decided to register an allowance equivalent to 100% of the book value of its investment property, without prejudice to reverse it when a favorable ruling is obtained in the interposed actions.

Investment properties

Changes in the Group’s investment properties for the six-month period ended December 31, 2018 and for the year ended June 30, 2018 were as follows:

	Six months ended December 31, 2018				Year ended June 30, 2018
	Rental properties	Undeveloped parcels of land	Properties under development	Total	Total
Fair value at the beginning of the period / year	180,740	15,997	10,760	207,497	164,947
Additions	504	296	1,612	2,412	4,722
Capitalized finance costs	-	-	27	27	110
Capitalized leasing costs	4	-	-	4	29
Amortization of capitalized leasing costs (i)	(4)	-	-	(4)	(6)
Transfers	742	(476)	(266)	-	-
Transfers to / from property, plant and equipment	-	-	-	-	2,217
Transfers to / from trading properties	-	(62)	(493)	(555)	325
Transfers to assets held-for-sale	-	-	-	-	(664)
Assets incorporated by business combination	-	-	-	-	152
Deconsolidation
Disposals	(10)	-	-	(10)	(702)
Currency translation adjustment	1,431	23	300	1,754	28,136
Net gain from fair value adjustment	(8,291)	639	2,201	(5,451)	14,155
Fair value at the end of the period / year	175,116	16,417	14,141	205,674	207,497

(i)

Amortization charges of capitalized leasing costs were included in “Costs” in the Statements of Income (Note 20).

The following amounts have been recognized in the statements of income for the six months ended December 31. 2018 and 2017:

	12.31.2018	12.31.2017
Rental and services income	8,672	8,094
Direct operating expenses	(2,304)	(2,226)
Development expenditures	(1,846)	(528)
Net realized gain from fair value adjustment of investment properties	326	1,671
Net unrealized gain from fair value adjustment of investment properties	(5,777)	8,605

IRSA Inversiones y Representaciones Sociedad Anónima

Valuation techniques are described in Note 9 to the Annual Financial Statements. There were no changes to such techniques during the period. The Company has reassessed the assumptions at the end of the period, incorporating the effect of the variation in the exchange rate in other assets denominated in US Dollars.

Property, plant and equipment

Changes in the Group’s property, plant and equipment for the six-month period ended December 31, 2018 and for the year ended June 30, 2018 were as follows:

	Six month ended December 31, 2018					Year ended June 30, 2018
	Buildings and facilities	Machinery and equipment	Communication networks	Others	Total	Total
Costs	5,944	1,330	50,055	5,852	63,181	89,050
Accumulated depreciation	(3,552)	(894)	(37,798)	(2,826)	(45,070)	(43,226)
Net book amount at the beginning of the period / year	2,392	436	12,257	3,026	18,111	45,824
Additions	59	14	1,095	656	1,824	5,778
Disposals	-	(1)	(16)	-	(17)	(210)
Deconsolidation	-	-	-	-	-	(36,968)
Impairment / recovery	-	-	-	-	-	(101)
Assets incorporated by business combinations	-	-	-	-	-	(836)
Currency translation adjustment	(3)	-	15	62	74	11,870
Transfers from / to investment properties	-	-	-	-	-	(2,043)
Depreciation charges (i)	(124)	(17)	(1,053)	(476)	(1,670)	(5,203)
Balances at the end of the period / year	2,324	432	12,298	3,268	18,322	18,111
Costs	5,965	1,343	51,188	6,121	64,617	63,181
Accumulated depreciation	(3,641)	(911)	(38,890)	(2,853)	(46,295)	(45,070)
Net book amount at the end of the period / year	2,324	432	12,298	3,268	18,322	18,111

(i)

As of December 31, 2018, depreciation charges of property, plant and equipment were recognized as follows: Ps. 1,479 in "Costs", Ps. 156 in "General and administrative expenses" and Ps. 35 in "Selling expenses", respectively in the Statement of Income (Note 20).

10.

Trading properties

Changes in the Group’s trading properties for the six-month period ended December 31, 2018 and for the year ended June 30, 2018 were as follows:

	Six month ended December 31, 2018				Year ended June 30, 2018
	Completed properties	Properties under development	Undeveloped sites	Total	Total
Beginning of the period / year	3,354	7,032	2,266	12,652	10,088
Adjustment previous periods (IFRS 15)	(893)	(3,911)	-	(4,804)	-
Additions	-	1,407	8	1,415	2,784
Assets incorporated by business combinations	-	-	-	-	-
Currency translation adjustment	(316)	(121)	(83)	(520)	2,512
Transfers	1,051	(754)	(297)	-	-
Transfers from intangible assets	-	-	-	-	23
Transfers to investment properties	-	555	-	555	(325)
Capitalized finance costs	-	28	-	28	14
Disposals	(1,823)	(149)	-	(1,972)	(2,444)
End of the period / year	1,373	4,087	1,894	7,354	12,652
Non-current				4,483	8,477
Current				2,871	4,175
Total				7,354	12,652

IRSA Inversiones y Representaciones Sociedad Anónima

11.

Intangible assets

Changes in the Group’s intangible assets for the six-month period ended December 31, 2018 and for the year ended June 30, 2018 were as follows:

	Six month ended December 31, 2018							Year ended June 30, 2018
	Goodwill	Trademarks	Licenses	Customer relations	Information systems and software	Contracts and others	Total	Total
Costs	3,972	4,164	5,572	8,824	3,976	3,683	30,191	29,331
Accumulated amortization	-	(241)	(4,073)	(5,894)	(1,851)	(2,327)	(14,386)